This week, we are talking all about how to save toward a large savings goal. Whether you are saving for a home, a car, an investment property, a college education, a vacation, a business, etc., whatever it is, a plan needs to be set in place in order to work toward the goal in an efficient way.
Today, I am sharing 5 tips that you can follow as you save toward a large savings goal.
1. Determine the need
This tip may sound obvious. However, it is so important to clearly define your savings goals! For example, if you are saving for a home, figure out when you would like to move, how large of a home you want, what the location is, what the cost will be, etc.
Putting a deadline and a price tag on the goal is crucial! A simple way to remember this is by asking yourself: Where, when, and how much?
2. Determine your down payment and your loan options
Once you have determined the need, it’s important to figure out the financing behind the goal. Now, some large savings goals will not need financing. You may pay some of your large savings goals fully in cash.
But, if you do have a savings goal that needs some financing, it’s important to do some research about what kind of loan you want to get, how much it will be for, what the term will be, how much the rate is, and how large the payment is.
Another important part of this processes is to assess your budget to see how much of a payment you can afford. Are there areas in your budget you can cut? Are there certain expenses that you can purchase at a less expensive price?
Making sure that you have the ability to afford another payment is a very important step to take before you take the next step on financing. Getting locked up in a series of payments that you can’t afford can set you back and will keep you from achieving your financial goals in an efficient way.
3. Develop a system of saving and budgeting toward your goal
If you do decide to finance and you can afford another payment in your budget, it’s time to restructure your budget to account for this payment. Take a moment to determine how your savings goals may change.
If you recently put a large amount of money down for a down payment, you may have a new savings goal to build up that savings cushion again. Perhaps you will need to reduce how much money you can spend on variable expenses each month in order to keep saving now that you have another payment in your budget.
It may feel difficult and also not really that fun to spend less on the fun purchases, but it is worth it in the long run. Due to this large purchase, you may have to limit how much you eat out and shop online. When these money decisions do become difficult (and they will), remind yourself what you have gained in life from investing in this large savings goal.
If you purchased a car, remind yourself how grateful you are that your car is safe and reliable. If you purchased a home, remind yourself that you now own an appreciating asset that creates more space for your family.
Whatever large savings goal you have invested in, remind yourself of the positives. This will help you as your start restructuring your budget. However, if you find it difficult to find the positives of your large purchase and you feel regret or resentment, this may be a signal to you. Maybe you didn’t make the right decision and you may want to sell the product (if it’s a tangible item) and downsize to meet your budget goals.
Sometimes, you don’t have clarity about a decision until a decision is made and you can react to it. Although it is not always the wisest decision to make a large savings goal and then try to reverse it, there are many steps that can be taken to get you to a comfortable financial spot.
Don’t ever feel like you have been defeated and have no other options. There are always other options and other follow-up choices that can be made to help your financial life.
4. Ask yourself how you can modify your investment allocations to help you meet your goal
If you want to spend a longer amount of time saving for a large financial goal, you may have enough time to invest your money in a certain way to let it grow over a handful of years so that you can make your saved money work for you.
While a savings account makes barely any interest, an investment account can offer some return over a meaningful period of time. It also can help your money grow to simply keep up with inflation, especially if your savings goal is 5 to 10 years out.
Work with your financial advisor to develop a game plan of how long you want to invest your money for your savings goal, what risk level you would feel comfortable with, and how much you would like the investment to grow. Utilizing compounding interest from your investments is a great savings strategy.
5. When you finally make the purchase, live in the moment and enjoy it
I think that this step is one of the most important parts of saving for a large purchase. We only get to live this life once. With time being so precious, we need to make sure to enjoy it. Much of our days are filled up with working hard, paying bills, running errands, etc.
We spend so much time creating and consuming, but how often are we still? How often do we simply enjoy the moment? After you have fully finished the large savings goal process and you have purchased your ideal item, take time to enjoy it!
If you recently purchased a home, spend time with your family and friends in it. Play hide and seek with your kids. Host a party with friends. If you recently purchased a safer and more reliable car, take a family road trip or make the drive across the country to meet up with an old friend.
Putting time into your calendar to use the items that you saved a long time for will help you feel more satisfied with your decision and will give you more memories. When you work hard for a goal and take time to enjoy it, you can truly start to live life to the fullest.
If you have a large savings goal that you would like some guidance with, please reach out to us! We would be more than happy to set up an intro phone call with you. Please reach out to us at www.desertwealth.net/contact
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.