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• Identify what it is you want to purchase.
• Estimate its cost by considering similar products.
• Determine when you want to make the purchase. Next month? Next year? In five years?
• Figure out how much money you want to pay at the time of the purchase and how much you want to finance, if any.
• Commit yourself to saving a set amount of money each month, either in a savings account or some other secure account, so that you will have enough money to make the purchase at the predetermined time.
• Be consistent and patient. Over time your savings will accumulate.
Also, remember to avoid putting your savings into risky investments. While you could make a lot of money, you could lose a lot, too. And be sure to watch the price of the item you wish to purchase. If it changes, you’ll have to adjust your savings rate accordingly.
Things to Consider when Purchasing a Car
For most of us, an automobile is a virtual necessity, not a luxury. Yet we sometimes have luxury on the brain and succumb to the temptation to overspend on the car or truck we really want. Keep in mind that it’s important to avoid getting in over your head, especially when you’re working diligently to climb out of debt. Because buying a new or used car is a major purchase, it’s smart to start with a carefully thought-out budget to help you determine how much you can afford.
Most lenders will use the information in your credit report to decide if you qualify for a car loan. Some may use your debt-to-income ratio, which is the amount you owe compared to the amount you earn. Many experts agree that your loan payments should be no more than 20% of the money you have left each month after paying all your regular expenses—rent or mortgage, utilities, credit card balances, living
How to Budget for a Major Purchase