Last summer my husband and I bought a log cabin. We got what looked like an amazing deal on the surface but we went into the home buying process knowing that 1) taking care of a log home is more costly than owning many other types of residences and 2) our “deal” was going to need some work sooner rather than later.
The two big problems with the house were that the roof needed replaced and the house had logs that needed repaired and refinished. We promptly got a new roof and then started saving our pennies for the more costly log repair.
Our repair estimate came in at a whopping $17,000 – more than I had thought it would be. Since we are both against unprofitable debt (except for the mortgage) we knew that taking out a loan for these repairs wasn’t going to be an option. We both wanted to make the repairs sooner rather than later so we decided to save cash. This month we’ve officially saved for the expense plus a little extra just in case.
Here’s how we saved cash for such a large purchase.
I Made Sure Our Emergency Fund Was In Place First
I firmly take the stance that everyone needs an emergency fund. Without one there’s just too much that could go wrong.
Before we even started saving I made sure our emergency fund was full plus made sure we kept an extra buffer in our checking account. (Yes, I like to have buffers for my buffers!) Spending our emergency fund was out of the question.
My first recommendation when saving cash for a large purchase is to make sure your emergency savings are adequate. Typically 6-8 months of expenses is enough.
I Broke Down The Goal By Month According To My Deadline
I started saving for the repairs as soon as we closed on the house – long before we even got an estimate. By the time we got the estimate I already had more than half of the cash saved and then broke down the goal from there.
I could tell that over the next few months I was going to need to save around $500 per week to hit the deadline I was shooting for. I started paying more attention to my spending and funneling as much extra money to my online savings account as possible.
Had I broke down the goal earlier, and knew what I needed to be saving, I’m sure I would’ve hit my goal sooner. Having those monthly amounts to shoot for was very motivating.
I Automated Our Savings
One of the benefits of me being a freelancer is that I have several different income streams. Rather than only getting one paycheck from one employer I receive income from more than a dozen places each month. While this is a hindrance for some I actually love it.
Having multiple streams of income allows me to choose just a couple to use for regular expenses and funnel all the others to various financial goals. I decided to use a couple of my larger sources of income and automatically have them deposited in my savings.
If you don’t have multiple income streams it doesn’t mean you can’t use this method. In fact, automating your saving is one of the smartest things you can do. It completely removes the need for willpower.
If you’re saving for a large purchase break down your goal and then have the money automatically deducted from your paycheck or checking accounting each month or week. A great free tool to help automate your savings is Digit. Check it out.
I Saved Lump Sums
For me, lump sums of money always seems the easiest to save. For instance, I overpaid my taxes last year and ended up (surprisingly) getting a refund of around $2k. Since I was actually expecting to owe money rather get a refund, sending that cash straight to savings was easy to do.
I’ve also received a few work related lump sums I wasn’t expecting in the past couple of months. These went straight to savings, pushing our account a little bit past what it needed to be to pay for the repairs.
If you come across an unexpected windfall send it straight to your savings account.
Other Tips To Make Your Savings As Easy As Possible
Follow a Budget Until You Reach Your Goal – After I got the estimate for the repairs I knew I had to cut back on some of the frivolous spending I was doing. While I’m not normally one to take extreme frugality measures I did cut my spending back during the last few months of savings, until I hit my goal.
Create a Specific Savings Account for Your Purchase – I love having specific savings accounts for each of my goals. It’s nice to be able to look at an account balance and quickly see how close you are to being fully funded. You can create separate savings accounts (for free) at an online bank like Capital One 360.
Take a Temporary Break from Other Financial Goals – One of the largest financial goals I have is paying off my mortgage early. I’ve made great strides this past year but took a pause to finish saving cash for our repairs. (I kept other more important goals in place like saving for retirement and my kid’s college.)
Pick Up Extra Work – There are thousands of ways to earn extra money. If you want to reach your goal faster consider picking up some more work. Here are over fifty ideas if you don’t already have one.
Have a Firm Deadline – Having a firm deadline is such an enormous help. Without a deadline it’s easy to feel like you’ll be funneling all of your extra cash toward this goal forever, which just isn’t reality. When you have a deadline in place you can look toward that deadline and know how close you are to achieving your goal.
Saving Cash for a Large Purchase Takes Patience and Perseverance, But It’s Worth It
I’ll be the first to admit – saving cash for a large purchase isn’t always fun. There were definitely days where I would’ve rather done something else with my money. In the end I knew it would be worth it to save as quickly as I could so I could get the work done and over with.
On the days when you feel like giving up, keep going anyway. Focus on watching that balance grow and knowing that you’re hard work is going to keep you debt free.
What strategies have you used to save cash for a large purchase?