how to save up for your next big purchase
3 minutesDoes your wish list include “big” purchases? You know, ones that’ll cost more than what you’ve saved? They could include a new gaming computer, a family vacation or making over a room in your home.
So, the title of this lesson probably gave it away, but a smart way to make a big purchase is by saving up for it instead of doing buy now, pay later. 1 We even put together a quick-and-easy plan to help you. Answer 2 questions, do some simple math, and you’ll know exactly how much to save each month to turn your number 1 item on your wish list into reality.
question 1 – how much money will you need?
The answer to this will give you a target to work toward. Plus, a specific amount will make the goal feel real and help you track your progress.2
If the number 1 thing on your wish list is a physical item like a gaming computer, start with the price, then add taxes, shipping or delivery, and any installation fees to get your total cost.
For a vacation, estimate how much transportation and lodging will be, plus what you’ll need for meals, entertainment, souvenirs and other expenses, and add it all together.
For a home project, figure out how much your materials will cost, plus any tools or supplies you may have to buy and add them together. If you want to hire a pro to do the work or will need a permit, add that too.
question 2 – how long will it take you to save the money?
Give yourself a deadline once you know how much you’ll need to save. Choosing a specific date is much better than “this winter” or “next year.” Plus, there’s just something about circling a date on the calendar or writing it on a piece of paper and putting it on the fridge or the bathroom mirror to keep you motivated. A deadline will also help you figure out how many months you have to reach your goal.3 Once you know that, you’re ready to do the simple math we mentioned earlier. Divide your answer to question 1 by the number of months from question 2. That’ll tell you exactly how much you’ll need to save every month. Once you cross the number 1 item off your wish list, you can start working on the next one.
bonus section: 4 wish-list savings tips
1. include the monthly amount you want to save in your budget
Savings should be a priority just like your other expenses.
2. use a separate savings account
Look for one that doesn’t have a minimum balance requirement or a lot of fees.
3. set up an automatic transfer
You can do this from your paycheck or checking account.
4. look for ways to save on regular expenses
Shop around for insurance, look for cable TV alternatives, carpool, etc.
- 1 Planning for life events and large purchases tool (consumerfinance.gov)
- 2 How to Use Sinking Funds to Save Toward Your Goals - Experian
- 3 How to Set Quarterly Financial Goals - Experian