A step-by-step guide to saving for big purchases
Saving for big purchases requires planning and commitment. Learn how to build a solid savings plan to reach your goals.
CIBC
May. 20, 2022
5-minute read
Saving for big purchases requires planning and commitment. But achieving a big goal, like saving for an international trip, your wedding, a down payment on a home or funding for your new business, can be incredibly rewarding and even life-changing. It might seem like Mount Everest at first, but with a solid plan you’ll reach your savings summit one step at a time.
Know your target
As you start working towards your savings goal, figure out exactly what you’re trying to achieve. Being specific about your goal helps you to stay focused and determine the best way forward. Understanding why you want to achieve this goal will also help you stay motivated, even if it requires making some sacrifices.
Do your research
Knowing what you’re working towards will shape your plan for getting there, so it’s important to do your research and understand the realistic costs. If you’re saving for a trip, you can research the cost of transportation, accommodations, dining and excursions in the destination you want to visit. For example, a lunch in London will likely be more expensive than a bite on the beach in Thailand.
Decide on your timeline
When do you want to make this purchase? Is it a short-term goal, like a vacation in the next 6 to 8 months, or a long-term goal that may take a few years to achieve? You can always tinker with your timeline, but setting a deadline will help you know how aggressively you should save to reach your target.
Break it down by month
The best way to save for a big goal is to put a set amount of money aside each month. Once you know how much you need to save and how much time you have, you can divide the cost by the number of months until your target date. To make it easy, try using our savings calculator.
Get real about your budget
You’ll need to understand your budget and cash flow to meet your savings goal each month. Your cash flow is how much money you have coming in each month compared to your expenses. This will help you make decisions about where to spend and save. For an at-a-glance picture of where your money is going each month, check out our budget calculator.
If you’re not currently saving enough to reach your goals, there are some options that could help you get there:
Find ways to save
Small changes can add up and make a big difference over time. For example, if you’re someone who enjoys a coffee every morning, pouring a French press coffee at home instead of buying a latte from a café could save you nearly $100 each month. Do you have a subscription to a streaming service or app that you’re not using right now? Putting it on pause could save you money every month, too.
Top up your income
Earning additional income could help you reach your savings goal faster. This may motivate you to advance in your career, or start a side hustle like selling items through an online marketplace, or rent out a guest room through a home-sharing site like Airbnb. Freelance work, or temporarily taking on a side job, can also earn you extra cash.
Get it for less
Maybe you don’t have to save quite as much as you think. Is there a way that you can buy what you want, or something similar, at a lower price? Maybe you can find a used item through an online marketplace. You could also vacation in off-seasons for lower prices and smaller crowds if you aren’t set on a specific time of year to travel.
Adjust your timeline
Sometimes your ideal timeline and your savings goal don’t align. Ask yourself if you’re okay with saving a bit longer to get what you really want. For instance, you could make saving less stressful by waiting another year to do the renovations you’ve been dreaming of.
Put your savings on autopilot
Once you’ve figured out how much you need to save each month, set up automatic transfers to a savings account each payday. This is a great way to pay yourself first before you’re tempted to spend the money on other purchases that don’t align with your plan. Plus, it takes the manual labour out of saving.
Setting up a separate savings account for a big purchase will help you know exactly how much you’ve saved. Depending on your timeline, you can grow your money while saving with a registered savings vehicle like a TFSA.
Reviewing your progress regularly will help you stay focused and motivated. Your advisor can also help you stay on track and adjust your plan if you need to.
Get help creating the life you want
Our advisors can put together a personalized plan to help you meet your financial goals so you can do what you love.
