Do you need to upgrade your car in the near future? What about finally getting started on that home renovation project you’ve been procrastinating on? Or are you trying to save up for an international vacation next summer or need to save for a big purchase?
How to save for a big purchase
Regardless of what big-ticket item you’re currently saving for, there are a few useful ways to speed up your progress towards your savings goals (and countless ways you may be inadvertently hindering that progress without realizing it). Rather than eliminating everything fun from your budget and living a stingy lifestyle until you meet your goals, here are some realistic strategies for saving up for a big purchase:
Create a Separate Savings Account for Your Goal
Before you even start setting money aside and crunching numbers, being organized is absolutely essential. While you may feel comfortable with managing everything in a personal finance app or spreadsheet, one of the easiest ways to keep your savings and regular money separate is by setting up another savings account dedicated entirely to your goal (unless your bank charges account management fees for new accounts, of course).
This way, you won’t be tempted to dip into your savings fund because of the extra obstacles in your way (accessing the account, initiating the transfer or withdrawing cash, recalculating your savings plan, etc.). Keeping everything separate is proven to be effective in other money management strategies (e.g., envelope method of budgeting), so give it a try for your next big savings goal to see how it influences your ability and motivation to regularly save money.
Set Boundaries and Deadlines
Another organizational trick to help you stay on track to meeting your goal as quickly as possible: set up clear boundaries for yourself and establish a deadline for meeting that savings goal. Boundaries may include: what you’re willing (or not willing) to do to meet your goal, what “fun” expenses you shouldn’t cut for the sake of meeting your goal if they provide substantial value to your happiness and/or well-being, and trade-offs you’re willing to make to achieve your savings objectives.
Setting deadlines is also a powerful, psychology-driven tactic for staying on track to meet goals within a specified timeframe. Do your research beforehand and settle on a realistic, yet expedited timeframe to ensure you’re not setting yourself up for failure while also putting more pressure on yourself to meet your target.
Optimize Your Budget
Your next step should be reevaluating your budget to determine what areas you can trim and what areas you shouldn’t touch. Essential, fixed expenses like utilities and rent/mortgage payments are difficult to adjust, but there’s almost always room to slash an entertainment/dining out budget if you’re willing to cut back in the short-term in exchange for long-term benefits.
Assess Your Financial Priorities
Are you currently saving for multiple goals? Perhaps a new car, exotic vacation, early loan payoff, and early retirement are all important savings goals for you. However, maintaining a steady trickle of funds into various accounts is far less effective than flooding one of your goals with funds then moving onto the next goal once you’ve achieved the #1 priority.
For example, imagine you want a new car and a family trip to Mexico. You may not need another car anytime soon (especially if your current car functions just fine and is fully paid off), but you may have a limited window of opportunity to take a trip with your family due to various schedule conflicts. This means you should probably funnel most of your savings into the Mexico vacation fund instead of splitting your savings efforts 50/50 because one is more time-sensitive than the other.
In a nutshell, assessing your financial priorities involves looking at the different savings goals vying for your attention (and funds) and determining which one is most important, most time-sensitive and most achievable.
A subtle yet highly effective strategy for speeding up your savings progress is by automating the process entirely. This may involve setting up automatic deductions from checking to savings (e.g., $50 per paycheck is diverted to your dedicated savings goal account) and/or initiating automatic reinvestments (for investment-based savings accounts like Acorns or Betterment).
If you use rewards credit cards for everyday purchases, then consider diverting your cash-back rewards to your savings account(s) as an effortless way to achieve your goal more quickly.
Get a Side Hustle
In many cases, cutting your expenses by efficiently organizing your finances and optimizing your budget simply won’t be enough to speed up your savings goals. If you’ve cut as much as you can realistically cut from your budget, then it may be time to look into selling some stuff and/or taking on a side hustle in addition to your regular job.
You can apply to be an independent contractor or freelancer through a variety of job boards and work-for-hire sites (such as Fiverr), drive for a rideshare company, deliver food through Postmates or Door Dash, pet sit through Rover or Wag, take online surveys, tutor local students, or any number of other side hustle opportunities that exist in today’s “gig economy.”
There’s no get-rich-quick strategy for rapidly earning enough money to cover a large purchase, and taking out a loan or putting the purchase on a credit card should be avoided, too. However, by implementing and persisting with these realistic, proven savings strategies, save for a big purchase, you’ll be on track to meeting your goal in no time.