In an ideal situation, everyone would have enough money in savings to cover 3-6 months’ living expenses in the event of an emergency. However, the reality is almost 40% of adults in the United States don’t have enough money on hand for a $400 emergency, let alone 6 months’ rent.
Whether you fall within this percentage, or you don’t budget money as well as you’d like, you might not have enough money for a large purchase such as a car, a house, or simply an upgraded television.
But you don’t have to accept this as a fixed truth. It’s all about knowledge. All you need are a few tips on budgeting and saving money and you’ll find that it’s not as difficult as you once thought.
And we’re here to give you just that! Outlined below is everything you need to know about making a budget and boosting your savings so that you have more than enough for any purchase you want to make. Keep reading to learn more.
Set a Savings Goal
When you’re trying to reach any new goal in life, it’s important to ensure that it’s a SMART goal. Now, what does this mean? Your goal should be specific, measurable, achievable, relevant, and time-sensitive.
Instead of saying, “I want to save money,” your goal should be something like, “I want to save $5,000 in 5 months.” This is a small adjustment that will make a huge difference. You’re much more likely to stick to the changes necessary to attain your goal and reach it because of that.
Once you have your SMART goal, write it down. Make it your phone background, write it in your planner every morning, write it on the bathroom mirror if you need to. It should be somewhere you see every day, so you’re reminded of your goal and feel that renewed sense of inspiration to reach it.
It’s wise to do some research into whatever item you plan to purchase before setting your goal to determine the exact amount you need to save. You never know, you might need less than you need, or you might be able to find a deal that you hadn’t considered before.
For example, let’s say you’re saving for a new laptop. While a new laptop costs $1,300, that same laptop refurbished might only cost $1,000. Explore your options and choose the best route for you before committing to an exact number.
Set a Deadline
As we mentioned above, a necessary aspect of a goal is that it’s time-sensitive. You need a deadline. Otherwise, you won’t feel the urgency necessary to achieve your goal and you’ll inadvertently place it in the “maybe someday” category in your mind and never reach it.
Remember, though, that your goal should also be realistic. Don’t give yourself a month to save $5,000 if that’s your total monthly income. It can be tempting to tell yourself that you’re going to eat ramen noodles every night and keep the lights off in your apartment until you have enough money, but this isn’t realistic.
Be kind to both your present and future self by setting a deadline that you can actually hit without making yourself uncomfortable. On the flip side, keep in mind that prices change, and certain items become unavailable over time. So if you have your eye on a new laptop, your deadline shouldn’t be years in the future.
Open a Savings Account
Even if you already have a savings account, it’s a good idea to have one specifically for your large purchase. It’s far too easy to open your banking app, see the money sitting there that should be for your purchase, and spend it on clothes or take out instead.
Label the savings account created for your purchase accordingly. By labeling it “car savings” or “house savings”, you’re reminded of your goal every time you look at your bank account and are less likely to touch the money there.
If you feel that this won’t be enough to deter you from spending, consider opening a savings account with a different bank altogether. This will keep the money out of sight until you have enough to make your purchase.
Make Deposits Automatic
When you’re budgeting for a large purchase, you need to know exactly how much you can afford to put toward it every week. After rent, utilities, paying down credit cards and student loans, and buying groceries, you have a number left over.
If possible, take this number and set your bank account to automatically transfer it to your savings each week or with each paycheck. This will take the pressure off you in terms of remembering to do so but will also ensure that you don’t accidentally spend it.
Put Your Credit Cards Away
Did you know that the average person spends up to 83% more when they swipe a card rather than paying with cash? If you’re serious about saving money, one of the best things you can do is either put a hold on your credit cards until you reach your goal, or tuck your cards away in a safe place so that you don’t use them.
Cutting down on your credit card debt will also do wonders for your credit score, so it’s worth considering for more reasons than one.
Instead of using your credit cards, try out the envelope budgeting system. Using this system, you’ll give yourself an envelope of cash each week to use for your daily expenses. It might seem odd at first, but you’ll be amazed by how much less you spend!
Deposit All Unexpected Funds
Did you get a birthday check from your grandmother? A bonus at work? A tax refund? Put it in your savings account created for your large purchase.
Any money that you weren’t expecting (i.e. money outside of your regular income) should be put toward your purchase rather than spent on a whim. Sure, it would be fun to take yourself out to a nice dinner with your tax refund, but wouldn’t you rather have that new car or entertainment system?
The same goes for a raise. If you should get a raise at work while you’re saving for your large purchase, increase the amount of money you put into that savings account every week and freeze your spending everywhere else.
Boost Your Earnings or Savings
Take a look at your expenses each month, is there anything that you could cut to boost your savings? This is a great way to rid yourself of unnecessary expenses even when you aren’t saving. With all the automated payment services available today, you might be paying for eight different subscription services you had completely forgotten about.
After you’ve done this, think of ways that you could increase your earnings, even by a few hundred dollars a month. If negotiating a raise with your boss isn’t an option and you aren’t interested in looking for a higher-paying job, you could start a side hustle.
Driving for a rideshare service, delivering groceries, or freelance writing are all things that you can do in the evenings for extra cash. You could also take it a step further and start a blog or other side hustle that has the potential to grow into a full-time business.
Consider a Personal Loan
A word of caution: a personal loan should never be your first choice when you want to make a large purchase. As with any loan, personal loans come with interest, meaning that you’re going to spend more in the long run. Because of this, it’s almost always better to save up the money yourself over time.
However, if you can afford to make payments and you don’t have a great deal of debt in other areas, it’s an option worth considering. A personal loan can be used for anything from home repairs to moving costs to funeral expenses.
Just be sure to examine your options carefully before making your decision. Know the total cost of the loan, including interest rates and fees, as well as the monthly payments.
Learn How to Budget Money to Make Any Purchase Easier
As you can see, saving isn’t as tough as it seems. More often than not, it comes down to the small choices you make throughout the day.
When you’re trying to budget money for a large purchase, you have to keep your goal in mind at all times.
Would you rather order take out for the third time this week or put that money toward your new house? Stay focused and you’ll reach your goals before you know it.
Interested in learning more about saving money and spending wisely? Take a look at our blog!