One of the simplest ways to stay out of credit card debt is to save for major purchases. By planning ahead and saving for things you know you’re going to need or want in the future, you avoid having to borrow. And taking certain steps can make this a lot easier. We’ll talk about that on this Faith and Finance. <ul><li>Okay, you might be thinking, “Save for things I’ll need in the future? Isn’t that my emergency fund?” Actually, no, it isn’t. This is sometimes called a “sinking fund,” a term borrowed from the business world.</li><li>It’s a pool of money you regularly contribute to so you’ll eventually have the cash you need for an upcoming big-ticket expense, like a vacation, a new car or home repairs.</li><li>First, you need a goal. Let’s say you want to put a new roof on the house and you estimate it’ll cost $7,500, which is pretty typical these days. That’s your goal.</li><li>Next, you have to look at your budget and determine how much you can pull each month from other categories to go toward your new roof. Let’s say that’s $500. Divide 7,500 by 500 and you get 15. That’s how many months it will take to save up enough cash to replace your roof.</li><li>It’s okay to start small. If you can’t put away $500 a month, start with $100. But begin looking for ways you can increase that amount by cutting your expenses. Be flexible. It’s okay to adjust your savings as needed, just keep in mind that you want to reach your goal as soon as possible.</li><li>WHERE TO PUT YOUR SAVINGS</li><li>So now you’re ready to start saving, but where should you put that money? It should definitely go into a separate account apart from your usual checking and savings, and even your emergency fund. You want to reduce the temptation to tap into this money for something else.</li><li>So put these special savings into an online bank to get the best rate. Like with your emergency fund, you can have a certain amount automatically transferred into this account from every paycheck, once a week, or once a month. Then pretend it’s not there.</li><li>Now, if this special purchase is something you know is several years down the road, like a car or even a house, you can put some of this money in a CD or money market account to get a better rate. You should ladder CDs, so that one is coming due every 6 months or so. As you near the target date for your big purchase, begin cashing the mature CDs and putting that money back into savings.</li><li>SMART GOALS</li><li>Okay, you may remember a while back we talked about setting up SMART financial goals. That’s S.M.A.R.T. and it stands for Specific, Measurable, Attainable, Relevant and Timely.</li><li>So first, Specific. Make sure you know exactly what you’re saving for and how much you’ll need, like with our example of the replacement roof. The more specific the goal, the more likely you are to get there.</li><li>Next, it should be Measurable. Set your monthly savings goal and track how well you’re doing. Make adjustments as needed.</li><li>Then there’s Attainable. That means setting a goal that you can realistically attain. If you set it too high, you’ll get discouraged along the way.</li><li>Next is Relevant. Make sure this big-ticket item you’re saving for is important, something you know you’ll need or really want. That way you’ll stay motivated.</li><li>Finally, there’s Timely. Set a deadline for reaching your savings goal. That will also hello keep you motivated. It’s okay if you don’t get there by the deadline, just keep plugging away until you do.</li><li>So, those are some tips to help you save for a major purchase. We hope you find them useful and when you reach a savings goal, let us know. We’d love to hear how you did it.</li></ul>On this program, Rob also answers listener questions: <ul><li>What happens to the amortization schedule of your original mortgage when you take out a second mortgage? </li><li>Should we be concerned about the future security of the US dollar currency? </li><li>Is a cash-out refinance a wise thing to pursue?</li><li>When does it make sense to invest in a fixed annuity? </li></ul>RESOURCES MENTIONED:<ul><li><a href="https://www.faithfi.com/find">Find a CKA</a></li></ul>Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at <a href="https://www.faithfi.com/">FaithFi.com</a> where you can join the FaithFi Community, <a href="https://faithfi.netviewshop.com/donate2">and give </a>as we expand our outreach.

FaithFi

Faith & Finance is a daily radio ministry hosted by Rob West. The program offers a practical, biblical and good-natured approach to managing your time, talents and resources.

Faith & Finance with Rob West

One of the simplest ways to stay out of credit card debt is to save for major purchases. By planning ahead and saving for things you know you’re going to need or want in the future, you avoid having to borrow. And taking certain steps can make this a lot easier. We’ll talk about that on this Faith and Finance.

Saving for Major Purchases

FaithFi: Faith & Finance | May 30, 2023

Show Notes

Where Faith Meets Finance

You May Also Like