Saving money for the big purchases in life, such as a house, a car, or starting a family, can seem overwhelming. If you’ve been having trouble saving $1,000 for an emergency fund, how in the world are you supposed to save $10,000 or more?
There’s a few tips you can follow to make it easier.
Take it One Step at a Time
If saving so much money seems a little crazy to you, take a deep breath, and then take a step back. You’re not meant to save for the biggest purchases in life overnight. It might take months or years before you’re ready to pull the trigger!
That’s okay. Everyone moves at their own pace because everyone’s financial situation is different. The best way to approach saving for the big things is to take it in baby steps. How can you do it?
First, you need to determine what you’re saving for. Next, figure out how much money you need. You can estimate here if you’re not entirely sure what your car, family, travel, or house budget looks like right now. If these events will happen years into the future, things can change!
Let’s say you’ve determined you need $20,000 for a car and you want to be ready to buy it, in cash, in 4 years. To make that happen, you need to save around $416 per month. Before you say it’s impossible to save that much, remember you can earn more throughout the year.
If you get bonuses from work, birthday/holiday money, or get a large tax refund, you might be able to put $1,000 to $3,000 toward your goal each year just from that. For example, if you receive a $2,000 tax refund all 4 of those years, and can put it all toward your savings, that’s $8,000 you’ve saved right there!
That means you have $12,000 left to save, and over the course of 48 months, that’s only $250 per month. Much more manageable!
Consider Alternative Ways to Earn More
We’re not exactly huge fans of cutting back when you’re trying to enjoy life. We recommend living it up responsibly while paying off debt. Why? Because saving and debt fatigue are real issues that most of us face on our financial journeys. It does us no good to completely deprive ourselves as that can cause a financial misstep.
If you’re also not a big fan of cutting back, then you need to consider ways to earn more money. Side hustling is a fantastic idea for anyone looking to pick up more work and make an extra few hundred a month.
Going back to our example – if you can earn $250 per month just through freelancing, you don’t have to make any changes to your current spending plan. You can continue on, and completely fund your savings goal with freelance income.
Or you can take the “easier road” and ask for a raise or more overtime at your job. This only applies if you’re actually in a position to ask for a raise. If you have a review coming up and have proven over the last few months that you’re an asset to your company, show them and don’t be afraid to ask!
If You’re Okay With It, Cut Back
On the other hand, some people find it a lot easier to cut back their expenses, and they’re fine with living simply. If that’s you, go through each of your budget categories line-by-line to see where you’re willing to cut back.
Remember, in both cases – whether you’re earning more or spending less – your situation is temporary. Each time you think you’re depriving yourself, or working too much, keep that in mind. It can help keep you balanced and focused.
Getting back to living with less – it’s important to evaluate your expenses critically. What exactly are you getting out of each? Are you paying for a premium cable package that doesn’t get used more than once a week? Is your cell phone bill ridiculously high? Do you have a gym membership you never use? Do you go out to eat too often?
Only you have the answers, and it pays to be honest with yourself here. As long as you’re spending according to your values, you’ll be golden.
We really like the idea of automating your savings, this way, you’re never tempted to spend it – the money goes straight to your savings account instead. This means paying yourself first and ensuring your savings is accounted for in your budget.
If you know you need $250 per month, set up an automatic transfer between your checking and savings account for that amount. If $250 all at once is too much for you to part with, consider doing weekly transfers of $62.50 to manage your cash flow better.
You’ll be able to save without even thinking about it. Check in with your account on a monthly basis to make sure your progress is on the right track. Tools like Mint.com allow you to set up savings goals and you can receive alerts when you’re close to meeting them.
Pay Off Debt
This might seem counter-intuitive, but if you’re drowning in debt payments, it might be wise to get out of debt (or at least improve your situation) before getting serious about saving so much money.
Why? If too much of your income is going toward debt, then it’s probably time to focus on paying it down. Your money is getting tied up in those monthly payments. By paying off your debt, you’re freeing up more of your money to go toward saving.
Just Keep Saving
As long as you’re moving in the right direction, you’ll reach your goal eventually. Earning more will accelerate your progress greatly, which is why we recommend looking into one or two side hustles you can pick up alongside your day job.
Again – all the work you’re putting in is just temporary! It’s important not to lose sight of that, otherwise you might get too caught up in the present effort you’re expending to have a better future. It’s worth it, but you won’t realize that in the moment when you’re getting 5 hours of sleep because you’re trying to meet a deadline.
The key is staying motivated and consistent. Keep your end goal in mind so you can refer back to it in those moments of weakness. You’ll be able to save money for big purchases in life, so long as you don’t try and rush it.
How have you saved money for some of the bigger expenses in life? Are you more of a fan of cutting back and being frugal, or earning more?