When we are faced with making a large purchase, most of the time it ends up being a process rather than an instant buy. Most of us do not have large sums of money laying around to go out at a moment’s notice and make monumental purchases. In fact, 61 percent of Americans have approximately $1,000 or less in savings to cover emergencies. Whether it is a planned purchase such as a house deposit, a few efficiency upgrades to your existing home or an impromptu one such as a new dishwasher or broiler, it can set you back a pretty penny. As such, it will take time, thought and some planning (more specifically budgeting), as you try to fit your impending purchase into your financial obligations. If you are looking to make a sizeable purchase in the near future, check out these handy tips to help you in budgeting for it.
Set A Goal
One of the first things you should do is to set an official goal including a timeframe. Do your research and set an amount you aim to pay for the item and once this is done, you can create your budget around this by looking at your income and expenses. Perhaps you can save $40 each month after cutting expenses in the bid to purchase a new washing machine costing $300. Based on this level of savings, you would be looking at approximately 7 and half months of savings. However if it is needed in the immediate future, you may want to look at other options for purchases including increasing savings and the combination of other financial options.
For some, credit plays a large part in these purchases. Therefore when setting your goal and planning your path to that goal, it is important that you stay on top of your credit health. Approximately 25 percent of younger Americans are unaware of credit scores and what they mean. Knowing your credit score and history puts you in the driver’s seat, allowing you to approach your purchase armed with full knowledge. When it comes to getting your credit in good shape before that large purchase, be sure to keep your credit utilization low and stick to regular payments, including any old accounts you may have fallen behind on. A great way to do this is to negotiate an automatic monthly payment with your creditor.
Give It A Dedicated Space
Most times, we aim to save every month but can end up using elsewhere. A great tip for individuals looking to save is to set up a dedicated savings account and make saving automatic each month by either setting up a standing order or including it as a bill in their budget. Of course, the amount set is only finalized after having a look at your current income and expenses. With your money saved away in a separate account, the chances of you impulsively spending it are considerably less. Finally, having a dedicated space or account set is a great way to tracking your progress towards your goal.
Consider all Routes
Unfortunately, in some cases, it is not feasible to save the entire amount or perhaps the item is needed. In these cases, it is always wise to consider all other financing routes available to you including payment by credit, layaway plans offered (appliance related) or loans. In a 2016 survey, it was found that credit cards were favored for big buys. However,these forms of financing also come with various costs; a key element for you to consider. Can your current budget accommodate those costs including any interest payments?
There comes a time in our lives where we will be looking to make that large purchase.Whether it is buying a new car or getting on the property ladder, these decisions call for a bit of planning and with a few handy tips, you can be sure to achieve your goal without compromising your credit or clearing your savings accounts. Have a look and get started today finding the right combination for you.