You will need another car someday. Maybe it will be 6 years from now. Are you saving enough each month to pay cash for that new ride? And how about the Holidays, insurance, and vacations? Are you saving enough each month for those items? Creating a plan to save up for multiple big-ticket items can be intimidating. How do you start? It’s actually fairly simple and straight forward. Let’s take just one item, car replacement, and create a plan.
- Decide how much a new car will cost. For this example we will say $8,000.
- Decided how many months from now you will need to replace your car. For this example we will say 72 months (6 years).
- Divide the cost of the car by the months until purchase. $8000 / 72 Mo = $111 per month.
- Create a line on your monthly budget labeled ‘car replacement’.
- Save $111 each month.
- In 72 months, pay cash for that sweet new ride!
Repeat this for each major purchase you will make in the next 10 years. Include yearly purchases like Vacations, Holidays, Insurance, Medical, Housing, and Clothing. How about a new computer or a washer/dryer set? If you don’t have it already, include cash savings of 4 months of expenses and an emergency fund. Add up each item for a total amount to save each month. (Download the goals savings excel file below)
And there you have it. A simple plan that works. $111 a month is far cheaper than a car payment plus interest.
Do you have a plan in place to save for major items? Tell us about it in the comments section below.
You are a pro! Happy Budgeting.
-Derek
In 2010, I was trucking along in life, earning a steady, decent-sized paycheck and had managed to save up a small pile of beans. My net worth was approaching six figures and I was only 30. Debt free and loving it I had a comfortable and reliable financial buffer between myself and the Bad Things in Life. As if there is such a thing as a financial buffer between ones self and the bad things in life.