The most expensive things you’ll ever buy in life can turn out to be major blessings — or major bummers. But you can avoid the post-checkout blues by working hard and saving money for big purchases.
Maybe you want to buy a house. Maybe you need to replace a car. Perhaps you want to take the family on vacation, buy a new TV or spend some money on a hobby. In the past, you might have borrowed money to buy those things. But from now on, I want you to finance big purchases by saving for them in advance.
Just like all the other saving you do, saving money for big purchases is made possible by having a surplus in your monthly budget. If you’re already out of debt and have a solid emergency fund in place, you can begin using this surplus cash to save up for the important things you want to buy.
The process is pretty simple: You can set up an automatic bank transfer to send some of the surplus from your checking account to your special savings account. Then, once you’ve saved the money you need for the special purchase, you can spend it worry-free.
Don’t let the simplicity of this plan fool, you though. The hard part is sticking to it. Because if you really want something, you might be tempted to take shortcuts it.
But as you probably know, shortcuts are dangerous, especially in your financial life. And if you take shortcuts to buy what you want instead of saving money for big purchases, you can find yourself in trouble.
Unfortunately, this kind of trouble is all too common. So we’re going to work on avoiding it by steering clear of the biggest mistakes people make in this area.
But first, I want to tell you about Stress-Free Finance, a free program we have created to help you make sense of your overwhelming financial life. This five-part video series has short, simple lessons to help you solve money problems so you can stop worrying and build a better future.
Here’s a preview of the free video series:
Now, back to the topic at hand:
When you’re saving up for a special purchase, you need to avoid three big mistakes. Let’s examine them one by one.
Mistake #1: Starting too early
If you haven’t paid off all your debt or built a solid emergency fund yet, you need to put your dreams of big-ticket purchases on hold. Getting out of debt and saving for emergencies should be your chief priorities right now. All your other financial goals can wait.
Saving for special purchases while you’re still in debt or under-protected from emergencies will only slow down your journey to freedom. Hold off on special savings until you’ve paid your debt and completed your emergency savings.
Mistake #2: Using emergency funds
The money in your emergency savings can look really tempting, and you might have the urge to use that money for special purchases. But resist this temptation. Spending emergency funds on non-emergencies compromises your financial freedom.
Mistake #3: Borrowing the difference
If you’re able to keep your hands off your emergency savings, you still need to avoid one final pitfall: borrowing money to buy what you want. You might be able to talk yourself into a small loan to make your special purchase sooner. But borrowing money will put you right back into the financial slavery you’re working so hard to escape.
Patience is the most difficult part of saving money for big purchases. But if you’re committed to financial freedom, it’s the only way to go.