People who have their finances in order are happier than those who don’t, according to a Northwestern Mutual study. The average American has between $3,240 and $6,400 in savings, depending on their age. But this isn’t much cash if you want to treat yourself or a loved one to a big ticket item or have a lavish occasion, such as a vacation, to pay for. So, let’s find out how to budget for purchases like this so you don’t have to miss out.
Thoroughly Research How Much It Will Cost
Let’s imagine that you want to buy a new car. You search and find out that the average cost of a new car is just under $50,000, so you set that as your savings goal. But you won’t be able to afford to buy the car of your dreams when you get to the dealer because you’ve failed to include the cost of dealer fees and car add-ons when saving. Dealer fees can add another 8 to 10% onto the price of a new set of wheels, while car add-ons range from a few hundred dollars to thousands. Always thoroughly do your research on the total cost of any item you want to buy and add up every little expense, including things, such as insurance and delivery. You can then set an accurate savings goal.
Lock Your Money Away
A recent Forbes survey found that two-thirds of Americans dip into their savings to pay for everyday items. You’ll find it very hard to reach your savings goal if you keep doing this. You can avoid the temptation by locking your savings away. The best way to do this is via a certificate of deposit (CD). The terms of a CD are that you must keep your cash in it for a set period or pay a penalty. A CD also has a fixed interest rate which makes it easier to budget. A CD could be a good option if you plan to propose in the future. This will give you time to design the perfect engagement ring for your partner. A handcrafted design can be any shape you like and you can choose a diamond and carat to suit your budget.
Automate Your Savings
If you’re on a low income or have a tight budget, automating your savings is a good way to budget for something lavish, such as a vacation, according to research. Automation is also good if you’re one of the 42% of people who say they waste money on impulse purchases. Less cash in your checking account means there’s less for you to spend on pointless items. Automating your savings is an easy thing to do. Simply set up a monthly standing order or use a money-saving app. Some will automatically move spare change over to your savings too.
Being able to splash out on big ticket items, vacations, and special occasions is nice but costly. Follow these tips to ensure your budget is as healthy as it can be for items like these.