How to Save Money for an Expensive Purchase

Written by , April 5, 2012

How to Save Money for an Expensive PurchaseIn thinking about personal finance, it’s clear that much of the discussion usually relates to how your spending and saving decisions affect the future. Many times the “future” tends to deal with long-term goals such as retirement, becoming debt-free or saving for a child’s college education. But financial planning can also apply to things that would strike most people as being a little bit more “fun.”

For example, you can use general personal finance principles to help you save for an expensive purchase. What the item is doesn’t matter nearly as much as how you go about saving for it.

Here is some banking advice and guidance for helping you to save in order to afford that expensive purchase.

  • Identify Your Goal. It’s important to identify your goal with specificity. Trying to come up with a plan to save for a “new home entertainment system” will be difficult unless you know what those products are, and how much they cost. On the other hand, if you know that you want to buy a 50 inch flat screen, Blu-ray player and stereo system — and that all these things together will cost roughly $1500 — then you’ll be able to take the next step.
  • Develop a Plan. Once you’ve identified your goal, it’s time to make a plan to achieve it. Since you are looking to save up enough money to pay cash for the purchase, you know approximately how much you need to save (keeping in mind, of course, that the price might increase or decrease over time). You will need to identify the desired timeframe for your purchase. For example, maybe you want to buy your new home entertainment system before the next Super Bowl or Olympics. Use the timeframe to determine how much you need to save each month in order to reach your goal.
  • Identify Your Source of Savings. In order to include this new savings item in your budget, you’ll either need to generate more income for yourself, or cut back in other areas. If you can simply work a few more hours each week to make the money to reach your goal, then that might be the easiest solution. If you need to reallocate funds within your budget, make sure that you aren’t cutting back on retirement savings or other important items just for the sake of making your expensive purchase.
  • Be Smart With Your Plan. Once you have your plan in place, stick with it. But do so smartly. This means that while you should try to stick to your plan, you shouldn’t do so if it means failing to appropriately address other unexpected costs that may arise. In order to be smart you are going to have to be honest in evaluating whether the item you’re saving for is more of a “need” or a “want.” If it’s a “want,” then don’t be afraid to deviate from the plan if it makes sense to do so. For example, if you’re hit with an unexpected medical expense or auto repair bill, then you probably don’t want to put that charge on your credit card just so that you have cash available to continue saving up for your big-screen television.
  • If you’re honest with your situation and stick to your more important long-term financial goals, then you should be able to save up enough to make that expensive purchase.

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