Planning ahead for major purchases makes very good financial sense. If you save instead of buying now and paying later, you won’t pay interest which, on a major purchase, could save you hundreds or even thousands of dollars. Trying to save while keeping up with your current expenses can be challenging, but it’s not impossible.
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Here’s what you need to know about how to save for a major purchase in two years.
There’s a reason this article is about saving for a major purchase “in two years.” If you want to save for a major purchase, it’s critical to have a deadline by which you want to reach your goal.
Without a target to reach for, it’s far too easy to get off track with your savings. Emergencies will always come up, and having a goal for your major purchase will help you prioritize your saving.
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Creating a savings plan that works with your life is one of the secrets to success when it comes to saving for a future large purchase. To break down how much you need to save, take the total amount your large purchase will cost and divide it by the number of paychecks you get in two years.
Here’s an example: Suppose you want to pay for a $10,000 vacation two years from now. Here’s how much you’ll need to save from each paycheck, depending on how often you get paid.
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If you get paid once a month, you get 24 paychecks in two years, so you need to save $416.67 from each paycheck.
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If you get paid twice a month, you get 48 paychecks in two years, so you need to save $208.33 from each paycheck.
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If you get paid every two weeks, you get 52 paychecks in two years, so you need to save $192.31 from each paycheck.
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If you get paid every week, you get 104 paychecks in two years, so you need to save $96.15 from each paycheck.
Now that you know how much you need to save to pay for your major purchase two years from now, it’s time to figure out where that money is going to come from.
If you’re living paycheck to paycheck now, it’s probably unrealistic to assume you can suddenly begin saving $2,000 a month toward a future purchase. Take a good look at your spending to see where you can cut back. Add up those expenses you’re willing to forgo in order to reach your savings goal.
If you can’t cut enough from your current budget to save what you need, the other option is to bring more money in. Perhaps you have some clothes or household items you no longer need that you could sell to bring in some money. You could take on a side hustle or a second job to boost your income, or, if you are paid hourly, you may be able to pick up additional hours to boost your income.
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