Friday, January 8, 2021 Money Matters: How to plan your finances for a future big purchase
Big purchases - like extended trips and vacations, automobiles, and homes - require a certain amount of logistical planning to become a reality. More importantly, these purchases also require considerable financial planning. Creating a solid financial plan is the best way to ensure you will meet your goal on-time and stay on track.
Follow these steps from UNL's Big Red Resilience & Well-Being Money Coaches:
- Figure out an estimated cost for your financial goal or big purchase. If you are saving for a trip, do a little research into where you might stay, if you'll fly or drive, and what attractions you might see. If you want a new vehicle, look at what items are for sale and what year and model you might be able to afford. Having a firm idea of the total cost helps ensure you won't run out of money on the 2nd day of your trip or get in over your head with a purchase.
- Next, do the math. Figure out how much time you have prior to you needing the money for the purchase. For example, if you are saving up for a trip in July, you can figure out how many pay periods you have until you depart on your trip. Then you can determine how much you'll need to save from each paycheck. Also keep in mind if you have any money in savings that you have already set aside for this financial goal.
- Check in with your overall personal budget. Once you have determined how much money you'll need to set aside from each paycheck, you need to see if it's even feasible within your personal budget. If you find that your current financial situation cannot accommodate the the big purchase, you have several options:
- Lengthen the amount of time you have to save for the financial goal, e.g. waiting a longer time to buy a vehicle so you can have more pay periods to save.
- Reduce spending in other areas of your personal budget so you are able to save additional funds for your planned big purchase.
- Reduce the scale and cost of the financial goal, e.g. buying a less expensive vehicle or going on a road trip instead of flying to a far-flung destination.
Want more 1-on-1 help making a plan to reach your financial goal? Huskers can get free assistance and advice from a UNL Money Coach with Big Red Resilience & Well-Being.