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Imagine pulling out of a car lot in your brand new SUV. Or casually shopping at your local department store and spontaneously picking up a luxurious leather sectional for your living room. Or even going to an open house in one of your favorite neighborhoods on a whim and making a purchase offer on the spot.
 
While it might feel great to be in the moment and pick up any of these items spontaneously, they all require a huge chunk of cash. And unless you are great at managing your finances, you may not have that kind of money burning a hole in your pocket just waiting to be spent tomorrow.
 
If you’re thinking about some big-ticket purchases in the next year, you can make them happen faster with a little careful planning. Here are five tips to save for a big ticket purchase effortlessly.
 
Business man pressing mortgage button
Source: istockphoto
 
Take stock of where your money goes
According to a Gallup Poll, Americans reported that they spend around $91 per day in August 2016. The poll asks participants what they spent “yesterday” in stores, gas stations, restaurants or online—not including homes, car purchases or monthly expenses.
 
All of this spending is on little luxuries—the ‘nice to have’ items that make us feel like we’re leading a rich life in the moment. Some of these matter to us, and some are not at all important.
 
How do you spend your extra cash? If you think that there’s no extra because you have too much month at the end of your money, it’s time to look a little harder. You need to know where your money is going.  
 
The best way understand your spending is to track your spending for at least a few weeks. You can do this easily by charging all expenses outside of your monthly fixed costs to one credit card. When you get your monthly statement, the company will either put your spending into categories, or allow you to categorize your purchases. This will give you a clear picture of your spending so you know if you’re being wise with your money.
 
Clean up your credit to finance a big ticket purchase
If you’re trying to buy a home or a car, you will likely be financing your purchase instead of buying it outright with cash. In order to qualify for a loan, you will need to have a decent credit score. If you have a great credit score, you may be able to get a loan with a lower interest rate. That can mean thousands of dollars in savings over the life of the loan.
 
If you need to clean up your credit, you may have to wait a few months to make your big-ticket purchase. This will also give you time to save for your down payment or first installment.
 
Mortgage tech
 
Bucket your money for better savings and investing
When you divide your money into categories—and physically divide it into specific checking, savings, and investment accounts—you can learn how to save better and spend money on things that matter most to you.
 
The first accounts you will need will be for your monthly expenses and investing. Since you already know how much you spend on your monthly rent or mortgage, your utilities, groceries, and other necessities, you can automatically pull that money out of your paycheck into a specific ‘necessities’ bank account.
 
If you have a full-time job that offers a 401(K) or other type of retirement account, it’s best to set it up to automatically take out a certain percentage of your salary into that account. If your company offers any sort of financial matching to your contributions, you should plan on contributing more to this account. You can double your long-term savings with a match. And because your contributions are taken out of your check before taxes, your income will be taxed at a lower rate.
 
If you work on commission or you do not have full-time employment with a company, you will need to set up your own retirement account. Your tax advisor can help you determine which type of retirement account makes sense for you and your savings goals.
 
Once you have set up these two important accounts, you can clearly see how much you actually have available to spend on luxuries and big ticket items.
 
Cut unnecessary spending to save smarter for your big ticket purchase
You haven’t started saving for your big purchase, which you say is important to you. Is your money going to things that you care about or value? You can trim the fat by being more strategic about your splurges.
 
Maybe you know that you value experiences over material goods. But your monthly statement shows you spent $500 on clothing and nothing on travel. Did you really need those outfits and shoes? Or were they spontaneous splurges?
 
You look at your monthly statement and see that you spent twice as much money on restaurant meals and entertainment as you did on groceries. Is it necessary to spend so much of your monthly cash on going out? While you had a few great times, you’re stuck with a large bill at the end of the month.
 
You may have to shift your habits to cooking at home, enjoying movies on Netflix, or inviting friends over for the evening to cut your expenses back. By doing this, you’ll start to find money that you didn’t know that you had available to you.
 
Fund your big ticket purchase account
How much per week can you start putting toward your big-ticket purchase?  
 
Let’s say, for example, you found an extra $1,000 from cutting back on unnecessary expenses. You also have around $3,000 in credit card debt. You need about $20,000 for your big ticket purchase.
 
If your credit card has a monthly financing interest rate of around 25%, it makes sense to pay off that card before saving money toward your big-ticket purchase. You can pay that off in about 4-5 months.
 
And with an extra $1,000 per month available for your big-ticket purchase, you’ll have the savings you need for that purchase in a little more than two years.
 
Bonus Tip: Increase your big ticket purchase savings faster
What if you want to have your big ticket purchase sooner? You may need to find other sources of income outside of what you already have coming in each month.
 
If you work on commission or as a consultant or entrepreneur, could you increase your productivity and work toward making more sales? Do you have more time in your schedule to take on additional work?
 
If you are an employee, could you get a raise? Maybe you could volunteer to take on additional projects, or help in another department that’s not directly related to what your job responsibilities. When you take initiative to help improve your organization, management will take notice, and your manager is more likely to give you the raise when you ask.
 
If you need help getting clear on your spending habits and learning to manage your money more effectively, WealthyWellthy is offering an online class and mastermind called Mindful Money: 28 Days to a Richer Life.
 
Are you saving for a big ticket purchase such as a new home? Let us know in the comments.
 
If you need help with a home purchase—whether you’re looking for your starter home or upgrading your current residence—get in touch with your trusted real estate professional.


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