How to Save for Big Purchases: Tips and Strategies
July 29, 2024
There's a saying that the art is not in making money, but keeping it. With the rapid rise of H.E.N.R.Y (High Earners, Not Rich Yet), the statement holds true for many. Most of us, irrespective of our income, think twice before making a big ticket purchase. And we all could agree that the lack of disciplined saving has been one of the major contributors to this pain point.
Taking a note of this problem, we thought of penning a blog that could help you save for big purchases. A word of caution before we move ahead - the tips provided are generic and may vary across individuals.
Tips on How to Save for Big Purchases
1. Open a Savings Account
The first step towards a healthy financial life starts with a Savings Account. Such accounts offer financial stability by allowing you to save for future goals. The interest earned on Savings Account balance helps your money grow. Additionally, a Savings Account lets you track your finances and encourages discipline and responsible money management skills. You can easily book a Digital Savings Account from the comfort of your couch and start saving for your big-ticket purchase.
2. Open a Recurring Deposit Account
Recurring Deposits or RDs instill financial discipline. You can select an amount and tenure for monthly RD investments and earn higher interest on them. Point to note: the amount and tenure you choose should be aligned to your investment goals.
3. Avoid Spending on Unnecessary Items
Let's assume your goal is to buy a new car. Your daily financial habits should reflect your efforts to achieve this goal. At times, we end up overspending on items that don't matter. Of course, luxury is important but it shouldn't hinder your goals.
4. Maintain a Tracker
Let's take the same example, but with numbers. Assume the car you want to buy costs ₹10 lakhs. Your monthly income is ₹70,000. The timeframe is 10 months (you want to buy the car within this timeline). You have decided to pay more than 60% as down payment. The rest of the amount will be covered by vehicle loan. Assuming that your fixed monthly expenses is ₹30,000, here’s how your tracker may look like.
| Month | Monthly Income (₹) | Monthly Expenses (₹) | Cumulative Amount Saved (₹) | Balance Towards Car Purchase (₹) |
|---|---|---|---|---|
| 1 | 70,000 | 30,000 | 40,000 | 9,60,000 |
| 2 | 70,000 | 30,000 | 80,000 | 8,80,000 |
| 3 | 70,000 | 30,000 | 1,20,000 | 8,00,000 |
| 4 | 70,000 | 30,000 | 1,60,000 | 7,20,000 |
| 5 | 70,000 | 30,000 | 2,00,000 | 6,40,000 |
| 6 | 70,000 | 30,000 | 2,40,000 | 5,60,000 |
| 7 | 70,000 | 30,000 | 2,80,000 | 4,80,000 |
| 8 | 70,000 | 30,000 | 3,20,000 | 4,00,000 |
| 9 | 70,000 | 30,000 | 3,60,000 | 3,20,000 |
| 10 | 70,000 | 30,000 | 4,00,000 | 2,4000 |
Note: This calculation is done on fixed monthly savings of ₹30,000. You can adjust Columns A and B based on your actual financial situation for accurate tracking.
Disclaimer:
The table is for educational purposes only. Ujjivan SFB doesn't take the responsibility of the information provided.That being said, to stick to your plan, you need to keep your monthly expenses restricted to ₹30,000 or below every month. To maximise your savings, which is ₹40,000, you can invest in short-term FDs or other liquid investment instruments.
5. Transact Smartly
Use your cards wisely so you can save on your purchases. For instance, you can use Debit Cards to avail discounts and offers on your transactions.
6. Keep your Monthly Budget Higher than Regular Expenses
Ideally, your fixed monthly budget should be slightly higher than your regular monthly expenses. This acts as a buffer amount, which could help you sail through additional expenses that may come your way.
7. Build a Fund to Meet your Goals
Set up a separate fund only to meet your short-term or long-term goals. Your Savings Account, RD or FD could work wonders as a goal-specific fund.
Simultaneously, set up an emergency fund for unforeseen events. Aim to save 3 to 6 times your monthly expenses to create a financial safety net.
8. Make Good Use of Extra Income
Utilise your additional income (bonus, income from rent, etc.) to invest in Fixed Deposits, Recurring Deposits or other investment instruments. Consider factors like liquidity, risk and interest rates before investing.
9. Establish Your Financial Priorities
To effectively save for big purchases, it's important to identify your financial priorities. Determine your short-term, mid-term, and long-term goals, such as buying a car, taking a vacation, or saving for retirement. This clarity allows you to allocate funds accordingly and stay motivated.
10. Involve Your Family
Saving money becomes easier when everyone in the family is on board. Involve your family members in the savings habit by discussing financial goals and encouraging them to contribute towards shared objectives. You can even turn it into a fun competition to see who saves the most each month.
11. Set Savings Goals
Setting specific savings goals helps you stay focused and motivated. Whether it's saving for a down payment on a house or funding your child's education, break down your goals into achievable milestones. This allows you to track your progress.
Final Thoughts
Saving for big purchases requires discipline, budgeting, and commitment. You may consider tips and strategies to build a strong financial foundation and achieve your goals. However, it's always better to consult a certified financial planner to make informed financial decisions.
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Disclaimer:
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