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Learn to Be Smart About Saving Up for a Large Purchase

By on June 1, 2017
Learn to Be Smart About Saving Up for a Large Purchase

Whether you are saving up for a new car, a down payment on a house, or some other major expense, you need to be smart about your saving. If you put away too much money you might not have access to it when you need it but, if you don’t put away enough, you could never reach your goal. Keep reading to learn some practical tips for saving up for a large purchase.

Step 1: Determine how much you need to save.

Before you make a major purchase, you should take the time to do your research. Look into all of the various options available and select the item that best suits your needs. Once you’ve decided exactly what you want, do some price-shopping to see how much it is going to cost. If the item has a fixed price, make that your goal – if prices vary, set your goal about 10% higher than the current average price.

Step 2: Set aside a separate account for savings.

If you don’t have a savings account already, open one. If you already have a savings account, think about opening a separate one just to keep things simple. When opening a new savings account, be sure to shop around a little bit and be wary of things like minimum balance requirements and monthly service charges – you don’t want fees to eat away at your savings.

Step 3: Make automatic transfers into your savings account.

To make sure that you are saving toward your goal, set up automatic transfers from your main account into your savings account. It doesn’t have to be a lot – just $25 a week will help you build your savings by $100 per month. Choose an amount you know you can make regularly but make it as high as you comfortably can so you can reach your savings goal faster.

Step 4: Use some of your extra income to add to your savings.

In addition to making weekly or monthly transfers into your savings account, you should make additional contributions as you are able. When you come into some extra income, put some of it into savings and the rest towards investment or paying down debt. Make as many additional payments into your savings account as you can without causing yourself a hardship.

Step 5: Follow a budget to limit spending.

As you contribute a significant amount of your extra income to your savings, you should consider setting and following a budget to limit spending. Depending how high your savings goal is, you may only need to do this for a few months, or you might have to commit to it long-term. It can be challenging to stick to a budget but if you are serious about reaching your savings goal, you’ll find it provides you with the motivation you need.

By following the five steps listed above, you can set a savings goal and work toward it. The key to success lies in doing your research first so you know exactly how much you need to save. Then, all you need to do is work toward that savings goal and don’t make the purchase until you have saved the full amount. It’s as simple as that!

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