Here's How You Can Afford That Big Dream Purchase
Apr. 11 2023, Published 8:00 a.m. ET
Every person has a different idea of what a “big” dream purchase might be, but the budgeting principles are pretty much the same, whether the price tag is $200 or $20,000. Different tactic might need to be taken for a massive purchase like paying for a house with cash, but otherwise, applying these basic methods can help you get to that dream sooner than later, as long as you’re faithful.
Determine the cost and set a goal.
The first major step toward making that dream purchase is knowing what kind of cost you’re looking at and when you want to buy. Allow yourself enough time to do the research first and find out the true cost of anything. That is, if you’re looking at paying for a major trip, you’ll need to know all the components you’re looking at, from airfare with taxes to accommodations and local restaurant costs. Take your time and do the job well.
Also, make sure you know when you want to buy to help make things realistic as you budget. For example, if you're thinking about putting a down payment on a house six months from now, then you’ll need to know that. If you’re planning to take a cruise to Antarctica, consider the best time of year to make the trip, too. Put the date on the calendar or use your banking or other financial goal app to set the date.
Work with manageable micro-goals.
Instead of having that big number on the brain all the time, divide the costs by the number of workdays, weeks, or months between now and when you plan to purchase. As a freelancer, for example, I determine the number of work days I have between now and when I’ll be laying down the cash and figure out how much income I have to earn each day to hit my goal. If you have a steady salary, set your goals around those pay periods.
If, for example, you get paid every two weeks on a steady salary and you’re aiming to save $10,000 for your wedding and your wedding is in seven months, you’ll need to set aside roughly $715 per pay period or $1429 per month.
Allow flexibility for your goal date.
If, after you do the math, you realize there’s no way you can earn that kind of extra cash, allow yourself to go back to your goal date and have a think. Is another date reasonable? Is there a different way of earning some extra income? Are there items you can cut from the budget to meet your goals in time?
If the big dream purchase is really important to you on the specific date, find other ways to reduce your cost of living to make space in your budget to meet that goal. If the date isn’t as important, consider what is more realistic instead.
Use the 'pay yourself' method.
Other than paying rent, buying food, and dealing with monthly bills, your goal should be your priority when it comes to money. So, after you pay rent, put a certain amount into savings before anything else. Set up automatic transfers if the figure will be the same each period.This well help keep you from spending money on non-necessities like too many nights out or too much junk food. If you do this faithfully, you might even discover you can increase the amount you put in each month to get to your goal faster.
Remember, the period of saving is not forever.
Tightening your belt to save up for a special purchase is sometimes exciting at first and then becomes increasingly intimidating. It may feel like you’re committing to this kind of living forever. But you’re not: you’re just saving this kind of cash until you’re able to make that purchase. Keep the end goal in sight and even try visualizing that result when you’re feeling discouraged or frustrating at not being able to catch all the latest movies or eat at the hottest restaurants while you’re saving. It will definitely be worth it when you get there.