How to Save for Big Ticket Items (Free Savings Goal Calculator)

Finally, you have a couple of months where things are going well. The bills get paid on time, and you actually have money at the end of the month. Then POW! Without warning, the water heater bursts, the car breaks down, and the first half of the property tax bill is past due. Suddenly, you’re broke.

 

How can you possibly plan or save for big-ticket items? Many people believe it just can’t be done, that they have no choice but to rely on their credit cards to cover the cost of emergencies—whether it’s something they should have known was coming or not.

There is a way out: Anticipate. You know they’re coming, so get prepared! Divide the price tag on that big-ticket item into small pieces then make it as routine as paying the phone bill.

Define the Goal

The first step is to identify your next big-money obstacle. You may not be aware you have one, but life is what it is, and you have several to choose from. Perhaps a big dental bill coming down the pike. Is your car starting to show its age?

Let’s say your refrigerator is acting up. At 7 years old, you’ll be lucky to get three more years out of it. Knowing this gives you something valuable: time. Time to start researching and saving.

What style and size do you need? About how much will it cost? Are there options you should consider? Brands you should avoid? Look into it now so you’re ready when it

Identify Terms

If you start saving for the refrigerator right now, you’ll have about 36 months. You determine the cost will be about $1,800. Divide that amount by the term of 36 months. The result is about $44. You’ll need to save $44 each month, starting now, so you’ll be able to replace your refrigerator with cash in three years.

 

 

Make it Smaller

Cut your goal into smaller payments that are psychologically easier to handle. Instead of 36 months, divide the cost of the refrigerator by 156 weeks. With this slight change in terms, you need to save only $10.26 each week to reach your goal.

Make it Predictable

View this as a new, regular bill you must pay each month—or week. It will soon become as ordinary and predictable as your mortgage or car payment.

Create an Account

Don’t keep this stash in a drawer or your bank account. That puts the money within easy reach and makes it too available for you to borrow for some other purpose.

Instead, create a savings account specifically for your big-ticket goal. Check out SmartyPig.com, a fabulous online FDIC-insured savings bank that makes saving easy and fun. An account is free, and there are no fees or minimum balance requirements.

Make it Automatic

Set up an automatic savings plan to transfer money from your regular household account to your Smarty Pig regularly.

Visualize the Goal

Stay focused by finding a picture of the item. Post it where you’ll see it often. This will go a long way in motivating you. Get creative and draw a grid over the picture with a pen and ruler so you have the same number of squares as the payments you’ll make. After each payment, fill in a space on the grid with a highlighter.

Give it a Boost

Look for new ways and frugal choices that will result in money you can use to reach your goal even faster. What money did you save on groceries this week? Use it as an extra payment. The loose change in a jar on your dresser? Use that, too.

One Goal at a Time

You’re probably thinking about several savings goals you want to work on simultaneously. I understand your enthusiasm, but I know from experience that it’s best to start slowly. If you have additional funds, use them to reach this goal before starting on another.

In time, as you become adept at managing big money decisions, you’ll be able to handle several at once.

 

 

 

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