Trying to save enough money for a large purchase can seem overwhelming when you are first getting started. One of the biggest purchases you will have in your life will likely be your house. No matter what type of large purchase you are trying to make, you will need to start saving for it. Below, you’ll find advice on saving.
Tip #1: Start Small If Needed
One of the reasons that many people struggle when trying to save for a large purchase is because it seems so out of reach for them. Whether you are trying to save $40,000, or even just $10,000, for a down payment or any big purchase, it can seem overwhelming when you have nothing saved.
Instead of looking at it as that gigantic number that you are saving toward, you should break it down into smaller, doable chunks. If you need to save $10,000, for example, you could break this down into 10 chunks of $1,000 each. You could even break it down further if you would like. The point is that you set up smaller, attainable goals that can be reached. This will make you feel better when you have your first $100 and then your first $1,000 saved.
You can start as small as you need. If you are at a point where you can only afford to put in $100 a month, then that’s all you can do right now. No matter how much you are putting away, just commit to it. Add more when you can. Always be realistic with your goals and base how much you can save on the amount you make and your current monthly expenses.
Tip #2: Pay More Attention to What You’re Spending Now
You might find that one of the main reasons you are having trouble saving is that you are spending more money than you realize each month. You might be spending it on things that you don’t truly need. People often make fun when it’s suggested that those who are trying to save or who are short on cash should refrain from eating out and buying coffee out.
However, those types of expenditures make a major difference in the amount of money you have available. Let’s look at some examples. Let’s say that you are only able to put $100 into your savings toward the big purchase each month.
Examine where you are spending your money. Do you go out to eat for lunch or dinner a lot? Even if you are only going out once a week and you are spending $20 each time, this would be $80 a month that you aren’t able to save. Maybe you are spending just $5 on a coffee from a café once a week. That’s another $20.
When you add the $80 and the $20, you get $100… this is the same amount you were saving each month. Without eating out and getting coffee, you could effectively double the amount you were saving.
Keep in mind that these are conservative estimates. Many people are spending far more money than this on things they don’t need. If you are serious about saving, you could cut back on a few things now and then build up the amount that you have saved. It’s simple, but a lot of people aren’t willing to make those sacrifices.
Tip #3: Don’t Take from Your Emergency Fund
Something else you need to be aware of when you are saving is that you shouldn’t dip into your emergency savings fund to make a large purchase. That fund is there for a reason. It’s for a rainy day and to cover you in the event of an emergency.
If you take from it to pay for a down payment for your house or a car, it means that you won’t have that protection in case something happens. Instead, have your savings for your large purchase separate from your emergency funds.
Tip #4: Get Your Money to Grow
Where are you putting the money that you are trying to save? While you could keep it in a regular savings account, it’s not doing as much as it could there. Instead, you might want to rethink where the money is going. For example, if you aren’t going to need the money for the purchase for a few years, you could contribute the money you are saving now to a mutual fund.
Alternatively, you could add the money to a high-interest savings account that is specifically for your large purchase. This could help you to earn some interest on the money while it’s being saved. You won’t earn a lot, but it’s better to have your money doing something for you rather than just sitting in an account that isn’t earning interest.
Tip #5: Add a Temporary Income Stream
One of the tried and true methods of saving more money is to find a way to make more of it. Consider finding a part-time job or finding another way that you might be able to add some more income to your life. There are all manner of “side hustles” that could help.
You might want to look at some of the items you have and don’t use. Selling some of your belongings rather than continuing to store them could be a good option to save some money for your purchase.
It may take some extra work and sacrifice to get the money you need, and not everyone will be willing to do that. Those who are, however, will find that it’s often possible to save much faster.
Let It Build
Saving takes time. It can feel frustrating when you feel as if you aren’t making enough headway toward that down payment on your home. Every time you put money into the accounts for your big purchase, though, you are getting closer and closer.
If you take a bit longer to save up for your down payment for a house or any other larger purchase, that’s okay. Just make good decisions. Work on getting your credit to be as good as it can be and keep pushing forward. You will reach your goals.