Tips on how to Save for a Major Expense

The urge to acquire large ticket items can be easily succumbed to through the use of easy credit. However, the resultant interest costs associated with credit purchases only serve to increase the cost price of the item purchased, making for a false economy which can leave the purchaser paying for the item long after its allure has worn off.

It is far more satisfying to dispense with unnecessary finance changes and compounded interest by saving towards big expenses and then making cash purchases free of interest, or enabling a substantial deposit towards the cost of a major expense.

Individual wants determine the big expenses embarked on in life. Major purchases, such as a home, cost far less over the long term if a hefty down payment can be made to thus reduce the principal balance borrowed. Vacations are far more enjoyable if saved for and paid for in advance, reducing the post-holiday anxious blues of paying back loans or credit cards which were used to finance the fun. For others, a major expense may be something as simple as providing holiday gifts at Christmas, but here too saving in advance is beneficial and allows the festivities to commence without worry.

The best method of saving towards large ticket items is to identify the cost of the item required and then establish a savings plan to make the purchase a reality. Dedication to one’s saving goal is a vital key allowing one to focus on the end goal. Eliminating unnecessary and frivolous expenditure allows one to redirect the savings made towards the target savings goal.

Saving for a specific purchase is more likely to succeed if a goal is set. Establish the cost of the desired item and work out a realistic monthly sum which can be set aside towards it, thus producing a realistic time frame to achieve the required amount. If the time frame appears endlessly frustrating then consider how much longer it would take to truly acquire the item if credit costs were added, and use this as an incentive. Additional funds can be added above the monthly savings target by siphoning off overtime payments, bonuses or cash gifts into the savings plan.

The most effective way of actually acquiring a solid savings plan is to organise an electronic payment from one’s current account to a savings account each month. The amount set aside will accumulate interest that will help to swell the balance. If possible seek out tax free savings accounts which require notice for withdrawals, in order to minimize the risk of raiding the account for spending spree.

Layaways present an option for the reluctant saver to cope with additional expense of Christmas gifts, particularly for those who may succumb to the temptation to raid the savings plan. Whilst not as effective as a savings method as a dedicated savings account, they allow the disorganized saver to accumulate the necessary funds to prevent a deluge of unwanted New Year bills.

Once a savings habit is established, it is easy to appreciate the benefits and enjoy checking the growing balance. When enough funds have accrued to purchase the desired item or make a down payment, it is prudent to continue the savings pattern towards other big expenses which may crop up.