Big purchases an unavoidable part of life. Whether it’s a car, piece of furniture, or wedding, there’s no getting away from them. And most of the time, if you’re not prepared, big spikes in your expenses can drain your bank account bone dry and even force you to lean on your credit cards.
Considering how high the interest rates on credit card debt can be, this is a less than ideal way of handling big purchases. Thankfully, there is a better way. If you take the time to prepare correctly, big purchases don't need to disrupt your normal budget very much.
Here are the 3 best strategies we’ve found for prepping for big purchases.
A lot of banks offer the ability to open a second savings account for free. You should definitely take advantage of this when you’re saving up for a big purchase. Mentally, it’s difficult to try and keep straight what money you’re saving for big purchases when it’s mixed in with all the rest of your money.
With a separate savings account it’ll be easier to see how close you are to your goal, and how much more you have to go. You can even automate the process of putting money into the account with direct deposit to make painless saving even easier.
After paying off all of the essentials for the month like food and bills, you should put a portion of the remaining money into the savings account you dedicated to saving for the next big purchase you are anticipating. Don’t wait until the end of the month to do this. When the money sits in your main account there’s too much of a temptation to spend it on non-essentials and other creature comforts.
Because the money is in a savings account, you can always put it towards monthly expenses if you have to, or if there’s an emergency. Any bonuses you receive should also go into your dedicated savings account as soon as you get them.
If you’ve followed the last two steps, you should have most of the money you need saved up. If you still need to bridge the last little gap, a signature loan could be the right choice for you. Signature loans fittingly require only your signature as the collateral. While you shouldn’t take a loan out for the full amount of any purchase, a signature loan can be a useful alternative to using a credit card for that last little bit you need.
Another option if you find you suddenly need money for a big purchase is to use an installment loan. We can connect you with a variety of licensed installment loan lenders. Just fill out our quick online form to get started and get as much as $2,600 in cash.