How to Save Now for Large Expenses Later
Published on July 8, 2022
As prices continue to soar across the country, it can be difficult for many people to put aside funds to cover large or unexpected expenses. According to a survey conducted by Bankrate, fewer than half of Americans have savings to cover a $1,000 expense – making it impossible to pay for unexpected circumstances like car repairs and emergency room visits, or afford extra expenses like holidays and vacations. Lack of savings can lead to excessive credit card use – Experian reports that the average American carries more than $5,000 in credit card debt, which with a minimum monthly payment could take nearly three years to pay off. While the occasional credit card purchase is not a bad thing (it can help you build healthy credit), it’s problematic to hold a large card balance in the long-term. Here are ways you can start saving for large purchases now, so you’re able to afford them later without going into additional debt:
Set a budget
A good first step is to examine your typical spending patterns over the last year to determine what you typically spend each month and how much you need for extra expenses. Remember to consider an influx of spending around the holidays or other times of year when you typically spend more on entertainment, dining out, and vacations. Once you have a monthly budget, you’ll be able to determine how much extra you need to save for additional expenses. This knowledge and understanding makes it easier to stick to a plan throughout the year. For more budgeting tips, visit the Financial Wellness and Education Center on MetroCU.org.
Determine a timeline
Decide when you’d like to reach your savings goal and divide the number into weekly or monthly chunks to reach it on-time. If you start saving on August 1 to reach $1,000 by the end of the year, you will need to put aside $45/week or approximately $200/month. Alternatively, if you wait until November to start saving, you will have to set aside $250/week to reach your $1,000 goal by the end of the year – which can be tougher to balance with other monthly expenses. The sooner you start saving, the better, so check out this easy-to-use Financial Calculator to determine how long it will take you to reach your savings goal.
Choose a strategy and execute
Now that you know how much you need to save each week or month to reach your goal, you need to get started! Identify an existing savings account or open a new one to stash the extra funds. Saving for a goal will be easiest and most successful if you can’t quickly access the money to make an impulse purchase (we’ve all been there). Instead, set up automatic transfers each week or month from your checking account, or work with your employer to arrange a portion of your paycheck to be directly deposited into a savings account. Tailored savings programs like Metro’s Christmas Club and Vacation Club allow you to set up automatic transfers into separate accounts that you can’t access until October 1 or May 1, respectively. Consider exploring these options and start saving today.
By saving for larger expenses now, you are more likely to close out 2022 with less debt and fewer credit card bills so you’ll have more time and energy to enjoy vacations, holidays, and other celebrations with the ones you love.
