Are you looking into making a big purchase? This could be a new car, a boat, or even a house. Saving up for a big purchase is extremely important but you need to be smart about it. The way you save depends on your income, existing expenses, and financial situation. Keep reading to learn 5 ways to save for big purchases.
- Define what you’re saving for
Have a savings goal of how much you will need to make your purchase. If you want to save for multiple big purchases, you need to prioritize one goal. Write your goal down on a piece of paper where you can keep track of your savings progress. Having a tangible way to keep up with your savings will make you more likely to complete the goal.
- Pay Yourself
Set up an automatic transfer from your checking to your savings account on payday. With your portion of saved money safely in your savings account, you will not be as easily tempted to spend that money instead of saving it. You could also set up a direct deposit through your employer to have a portion of money from your paycheck deposited directly into your savings account.
- The 50/20/30 Rule
Having a budget is the best way to reach financial success. The 50/20/30 rule means you spend 50% of your income on necessary expenses, such as rent, food, and utilities, 20% on savings & debt reduction payments, and 30% on lifestyle, including gym memberships and streaming subscriptions. This can make your savings grow exponentially over time by setting 20% of your income aside. You can use a budget app to make your budgeting and saving easier to manage.
- Start with small amounts
If 20% seems like too much, start with small amounts such as $50 or $100 each paycheck. Saving something is better than saving nothing. It is also easier to save when setting small and achievable goals. If you can’t commit to 20% of your income going to savings, save the rest of the money you have left after your essentials.
- Have a high-yield savings account and invest
A high yield saving account will maximize your savings. It is smart to have your money start working for you if you are saving a large sum of money. You will want to balance risk and reward when looking for a high-yield savings account that works for you. Using micro saving and investment apps can help your small dollar amounts grow rapidly. Apps such as Acorns take a few cents off of each purchase and invests them into funds of your choosing.This allows you to save a little bit of money every day which can add up easily over time.
It can be difficult changing your budget around to save for a big purchase. If you set realistic goals, work hard, stay focused, and save your money, you will be able to reach your goals. These 5 ways to save for a big purchase are a great way to get started, but if you are looking for expert help, give us a call at Plan A Wealth Management. We are happy to assist you in reaching your savings goals.