You’ve spent months dreaming about those fancy earbuds, an upgraded phone, or high-end furniture. But how do you know when you can afford to make big purchases like these? Planning ahead is the only way to ensure you won’t regret an occasional indulgence.
Use a Budget
If you’ve never created a budget before, it’s not too late to start. Planning your expenditures will allow you to see where your money goes each month. It will also build greater financial awareness. Try these tips to create a budget.
- Spend the first two months tracking what you spend each month. In month three, set targets for yourself, such as spending less on groceries or putting more in savings.
- Determine how much your big purchase will cost and how long you want to save for it. Then, work on putting a set amount of money aside each month to pay for the item.
- Once you’re sure you have all expenses accounted for, commit to sticking within your budget. Before you make a purchase that strays from your budget, take a timeout. Ask yourself if you really need the item. Put yourself on a 24-hour break, and if after that time you still want the item, buy it and rework your budget.
Create an Emergency Fund
Before making large purchases, you should already have an emergency fund in place. Otherwise, if disaster strikes or you lose your job unexpectedly after spending money on a recent big purchase, you won’t have anything to fall back on.
Ideally, you should have enough in your emergency fund to cover your expenses for six months. If you’ve never had an emergency fund, aim to build a two-month cushion to start.
Throughout your savings journey, don’t take any money from your emergency fund unless it’s an emergency. As you get close to making your big purchase, you may feel tempted to grab a little from the fund to get you to your big-purchase goal. Wait the extra month or two instead, and feel good about accomplishing your financial goal.
Consider Your Seasonal Expenses
When you’re planning for a big purchase, you need to take many factors into account. Two of them are what seasonal expenses you’re facing now and what expenses you’ll be facing in the time surrounding your purchase. These seasonal expenses can impact your ability to set money aside for your purchase or rebuild your savings once the purchase is made. For example, in the winter or summer, you pay for heating or air conditioning, respectively, which is usually – though not always – more expensive than keeping your home comfortable in the spring or fall. The winter also brings holiday months. Do you buy presents for friends and family? If so, you may not save much in December. Follow these tips for seasonal expenses.
- Look at last year’s seasonal expenses to get an accurate picture of what you spent and when.
- Put money aside for seasonal expenses in advance. While you may want to save only for your big purchase, you don’t want to steal money from that fund to cover seasonal costs. Bump your big purchase savings contribution down for a couple of months if you have to.
Take Advantage of Seasonal Sales
Black Friday deals and other specials can shave a lot of money off the regular price of your big-ticket item. By waiting patiently until these deals come around, you can get what you want for a lower price. You can even set up alerts to track the price of an item across several sites and get notifications when the price drops.
Being a savvy shopper will save you money. Big-ticket items are often cheaper on Black Friday, during the run-up to Christmas, on Presidents’ Day, and on Labor Day, depending on what you need. Here are some other ways to save:
- Did you know that second-generation TVs, cameras, and other electronics go on sale in January after the holiday rush? Every category has months when purchasing is optimal. Wait to buy your item based on when it’s discounted.
- Stay focused on your savings goal and don’t buy another item just because it’s on sale. If you won’t use an air fryer, don’t buy it, especially if you have your eyes on another higher-priority big purchase.
By following these tips, you can better plan for a big purchase. Learn about additional money management tips on our WalletWorks page.