Because sometimes being spontaneous is a terrible idea.
Saving for a major purchase is a traditional way of setting a personal goal, striving to achieve it and then celebrating when it is reached. The sense of accomplishment and power you’ll feel when you have the money to make your big purchase is priceless.
There are many reasons why saving is an excellent alternative to borrowing or buying on credit:
- Instills the discipline of saving in general. Like anything else in life, habits are hard to break. Once you begin a savings plan with a specific goal, you will tend to continue saving even after the goal is reached.
- Provides an emergency fund if ever needed. In the event of an emergency, your major purchase could be postponed and you could use your saved funds to cover the unexpected expense.
- Encourages wise decision making on purchases. People tend to think more about how much they are spending and what they are spending their money on if they are using “real money” as opposed to a credit card or funds from a loan. No more compromising on quality, price or giving in to any other influences.
- Saves money in the long run and keeps you from getting bogged down in debt. Using your savings to make your big purchase will save you from spending money on interest and other finance charges that you would likely incur from credit cards or loans.
Creating a budget is a great place to start. Once your monthly budget is established, you’ll be able to outline what money you can comfortably set aside for your savings plan. Then, determine how long it will take you to reach your goal, based on the amount you will be saving.
Find additional money to save
If you were hoping to reach your goal sooner, consider what areas you can cut back on each month. While it may seem difficult sometimes just to make ends meet, chances are you have extra money you didn’t even know about. Here are some ways to find it:
- Keep track of everything you spend for a week. You might be surprised what you’re buying and what you can do without.
- Make purchases with cash. This can help you stick to a budget and avoid impulse purchases. Simply decide ahead of time how much you want to spend and then set aside that amount in cash before you go shopping.
- Lower your bills. Many creditors will give borrowers a lower interest rate if they’re asked. Also, conserving electricity and gas can make a big difference.
- Rank your nonessential expenses. Keep the ones you like the best and cut the items on the bottom of the list.
- Pack a lunch or cook more dinners at home. Eating out could be eating up a big portion of your money.
- Use our benefit of spending less calculator to see just how much your budget reductions may be worth.
Make saving a priority
Be vigilant by treating your savings contribution just like any other must-pay expense, such as rent or groceries. Have your bank automatically transfer funds from your checking account to your savings account or ask your employer if a portion of your paycheck can automatically be deposited into your savings account. With a little self-discipline and effort, you’ll reach your savings goal before you know it!