Three Questions to Ask Yourself When Saving for a Large Purchase
Saving for your next large purchase gives you an exciting goal to look forward to, although it isn’t always easy. Just like pursuing any goal, there are trade-offs to consider. Unless you’re expecting to win tomorrow’s lottery, asking yourself these three questions can get you thinking about the aspects of a savings plan to help you achieve your goal.
- What’s my starting point after setting aside an emergency fund?
- Saving for a large purchase requires your commitment. In general, we recommend our Clients set aside three to six months’ worth of take-home pay in cash before considering other financial goals in the event that you experience a change in job or circumstances. Then you can decide how much you can start with. You can learn more about our thoughts on emergency funds and cash flow planning here.
- When do I want to purchase it?
- Your purchase date will help you determine when it will make sense to start saving and will inform the other trade-offs to consider.
- Which saving system works for me?
- Finding a saving system that works for you is key to establishing and maintaining your saving habit. Some people respond well to automated saving techniques such as directing a dollar amount or percentage of your paycheck to a separate savings account each month. Or you may find it easier to direct an upcoming lump sum such as a cash bonus or tax refund. Consider using a cash flow tracker as a tool to help you stick to your saving goal.
What is your next large purchase? Let us know! We’re happy to talk to you about your options and share our recommendations for how you can save for that purchase.