Five steps to saving for big ticket purchases in 2017
Are you planning a housing move, car purchase, landmark family celebration, dream vacation or education toward a better job? Commit to saving small amounts now to make it easier to fit into your spending plan.
Your 2017 New Year’s resolutions might include a large purchase. People often feel they do not have enough money to save or they are too busy struggling to make ends meet. However, thinking about your goals should include thinking about the money you need to achieve them and how long it will take to reach your goal. The expense can throw a budget off, costing extra stress and interest payments on a credit card or loan for many months. Start now to plan for future large purchases. This commitment will make it easier to fit into your spending plan.
If you do not have the money up front, it is important to save for large expenses, according to the Your Money Your Goals toolkit. Consider these five helpful steps:
Determine the cost. To turn your goal into a financial target, you need two pieces of information. Add up a total estimate of how much your large event will cost, including items such as transportation, meals, equipment rental and any other spending. Look at a calendar to determine how many weeks or months you have before the event. Then, break down this number into how much you will need to save each week or month to meet your goal.
Make savings automatic. If you receive a regular paycheck, you can easily build savings through direct deposit into a bank account or onto a payroll card. Your plan builds your own personal safety net one paycheck at a time to reach your goal.
Set SMART Goals. Find ways to turn your vision into reality with concrete steps you can take to achieve it. SMART goals are:
- Specific: What will you achieve or accomplish, and why is it important?
- Measurable: How much? How many? How will I know when it is done? You want to track your progress.
- Able to be reached: Is your goal realistic within the time frame?
- Relevant: Set goals that you really want and are a priority in your life.
- Time bound: Goals should have a clearly defined time frame, including a target or deadline date. This helps you measure and take planned actions to reach your goal.
Build the plan. Define your commitment and the time you have. You may also need more information, tools, assistance from a professional, transportation or other resources. Start with small steps needed to reach your goal.
Revise goals as needed. If the goal has been achieved, it is time to start the process over again with a new goal. If the amount of saving every week or month is more than what is possible for you, ask yourself if you can either change the total amount or the length of time to reach the goal. Make adjustments as needed. If your situation changes, reevaluate your new situation and your goals.
This income tax season, get ahead of your financial goals by splitting part of your refund into your savings. This can be a big step toward meeting your savings goals. Use this helpful fact sheet to help you decide how to save your tax refund.
As you build savings, you can have peace of mind knowing that you have funds, a little at a time, set aside for your planned large purchase. And you will save money by avoiding the interest costs from borrowing on credit. Financial planning takes time, patience and discipline. Find more information about the reasons for and ways to save at MIMoneyHealth.org.