How to plan for big spends

How to plan for big spends

Creating a budget to cover large spends can be overwhelming. But setting money aside for big goals doesn’t need to be daunting.

Whether you’re saving for a wedding, trip of a lifetime, a car or a house deposit, you’ll want to make sure you have the funds to cover it.  With some simple calculations and careful planning, you can build up a robust savings pot that will help you achieve those significant purchases.

Analyse your expenses

The first thing you’ll need to do is assess your monthly incomings and outgoings. Work out exactly how much you earn after tax from your salary or any other income such as government benefits.

Next, list all of your essential outgoings such as rent, bills, travel and food expenses and how much they cost. This will leave you with your disposable income.

Research potential costs

Whatever your purchase goal, it’s a good idea to get a realistic view of how much it’s going to cost you. Look into current prices but remember that if your big spend is some distance in the future, costs may rise according to inflation or interest rates.

Once you know how much you need to save, you can budget according to your timeline. Obviously the longer you’re willing to wait to make your large purchase, the more time you’ll have to save. Depending on your goal, you might also want to consider boosting your credit score at the same time to help with those milestone purchases.

Reduce non-essential spending

Take a look at what you’re spending on unnecessary items each month. This could be coffees, lunches out, entertainment, subscriptions or unused memberships.

You could try and eliminate these altogether, but a more realistic plan is to dedicate a certain amount each month to spend on luxuries so you’re still able to enjoy a treat.

Sell items you no longer need

To give your savings a bit of a boost, think about selling items you no longer use or need. For example, clear out your wardrobe and list unwanted clothing online.

Set up a side business

If you have a skill or service you could offer, consider setting up a business and use any income from this to add to your savings. This could be anything from selling craft items to freelancing in your area of expertise.

Refrain from taking on debt

Whilst some debt is often necessary, such as taking out a mortgage, it’s a good idea to limit the amount of credit you borrow to make a big purchase. If the only way you can afford your luxury holiday is to max out credit cards, it might be wise to give yourself a longer time period in which to save.

Although it can be difficult to begin the process of saving each month, creating a proper budget and being aware of your expenditure will help you build up the cash for your future goal.