Purchasing a “big ticket item”should be viewed as a long-term goal because it will usually take a few years to save up.
BusinessDictionary.com defines a big ticket item as:
Items that are of high value such as houses or cars, as well as other expensive products like furniture and appliances. There is no actual dollar figure threshold that defines a big ticket item, and the item does not necessarily need to be considered a luxury item. In the context of retail establishments, a big ticket item can also refer to products that have selling prices and profit margins that are significantly higher than those of other items in the store.
One of the biggest purchases anyone will make is their house and it can take years to save enough to obtain the donw payment required.
According to a September 2014 Financial Post article, in May 2014 the average price of a house in Canada was $416,000. The ideal down payment for a house of that price would be nearly $84,000, a lot of money for the average Canadian.
Keep in mind that the points below can be used for saving for a house, a car, an RV, your retirement, or paying down debt.
Identify your priorities
Saving for a home or any other large purchase is about determining your priorities. If you’re eating out regularly, buying the “latest and greatest”cars or gadgets, or going on expensive vacations it will take you longer to save for your house. If you really want to save up for a home, you need to identify the expenses you can cut back on and put that money into your savings account.
Budgeting & paying down debt
Having existing credit card debt will hinder your ability to save money because all your “extra”money will be allocated to debt repayment. The best option is to allocate as much as possible to pay down the smallest high-interest items first and at the same time maintain the minimum payments on your other accounts. Once it’s paid off, take the payment from that debt to pay down the next high-interest debt, and so on until all debt is paid down.
The best way to identify areas where you can cut back is to develop a budget. If you haven’t put together a budget yet, that is probably the best place to start. Print out this handy “How to Create a Budget”infographic for some great tips.
Ready for Zero is an online tool that helps you manage and reduce your debt. It helps you track the different interest rates of your loans, gives you payment reminders, and helps you set debt reduction goals.
You can also check out this great blog post on the 4Pillars main site for other debt reduction tips.
Get rid of one vehicle
If you and your partner each have a car, consider selling your second vehicle. Instead, you can set your goal to move closer to work and walk, take public transit, or carpool. Even if you’re a one-car household, you can still save money by carpooling or taking the bus.
The money you save on insurance, maintenance and gas can be put towards your debt and/or down payment.
Start a second savings account
When you get paid, a raise, birthday money, or tax refunds put that money into a second savings account specifically for your down payment. If you do this regularly, this money will add up fast.
Be frugal
Many people save money by choosing to save money every day by making small adjustments to their spending habits. There are lots of easy ways to save money every day without “missing out.”
Eat out less often. Find more frugal ways to eat out: 2-for-1 coupon books or eating at restaurants with specials
- Skip the Starbucks and make your own “fancy coffees.” Do the math: $5 per coffee for 5 days = $25/week, or approximately $100 per month. You could save $1200/year if you make your own lattes.
- Save money on clothes by sticking with your existing wardrobe for a bit longer or if you need to buy new clothes, choose items that can be mixed and matched with what you already have and watch for sales. Another option is to purchase clothes at consignment stores.
- Have movie night at home. You can rent movies from the library or stream TV and movies online.
- Plan a “staycation” instead of a vacation. There are probably a lot of places you’ve been meaning to visit that don’t cost a lot and are close to home. Many Tourism Bureaus have a “Be a Tourist in Your Hometown” event every year which has savings for locals at participating restaurants and tourist attractions.
How 4 Pillars Can Help
These are just a few ways to save money for a large purchase, and 4 Pillars Victoria can help you learn other ways to save money for the future. We can also help turn your family finances around from a cash negative position to a cash positive position, call us to see how you can be debt free and have more money at the end of the month.
Benjy Houser
Victoria, BC
Tel: 250-882-5556
