How to Save for a Big Purchase

dollararmyHow to save for a big purchase? Little by little. The End.

OK, ok, maybe a little more detail would be nice. Saving for a big purchase can be really hard, especially in these days of high limit credit cards. A lot of people have $10, $20, even $50 thousand available on their cards. So why wait to buy anything? Just go out, purchase it and pay it off. That way, you get the item now and instead of saving a little every month, you’ll pay a little every month and already have the item! What a great idea, right?

Wrong.

The entire time you will be paying interest on your card, sometimes over 20%! In the bank, your monthly savings will actually grow a little. And, I do mean a little. 🙂 But a little is better than a big negative something. Also, what happens if you have an emergency need for money while paying off the card, you might miss a payment and that adds to your interest payments! Another benefit is that you might actually find you don’t want the item after saving for it and you can spend that money elsewhere.

Once you have decided what you want to purchase, get a pretty good estimate of the costs and where you are going to buy it. Include taxes and shipping on expensive items or really heavy items. That UPS battery backup might be $100, but it weighs 120 pounds and costs $50 to ship! Then, once you have a final cost, begin the saving.

I find that a separate account is the best bet. It is too much of a temptation to spend from it if you keep it in your normal checking/savings accounts. You’ll say, “Oh, I just need an extra $100, I’ll just use some of what I have saved.” If your item is small and you won’t gain any benefit from having it in the bank, a plain white envelope works great. I know, crazy right? But, an envelope hiding in the drawer is fantastic, you never see it, it just collects money, you can even write on the outside the current balance which is fun. Also, holding a wad of cash in an envelope is lots of fun.

Break your savings into amounts that you can handle every month. A great way is to always save an amount of money and put it in an envelope labeled, ‘Big Purchases.’ Then you always have a little seed money. You can up the amount if you need more for a larger purchase. Set a time frame where the item won’t be obsolete before you buy it. Tech stuff is notorious for this, although a newer model will come out so you can always buy that one. Or buy the original at a lower price.

Then, when it is time, get out your envelope and go buy what you have been wanting and know that you haven’t gained any debt from it. You also may want to just put it in the bank if you used an envelope and use your credit card. Then you get the benefits of using your card without the interest charges since you can pay it off immediately!

Gifts for the Second Child

What do you take to a shower for a mom who is having her second or third (or more) baby? This question especially rings true if you know they are having another of the same sex they already have. And what can you do for a gift that won’t break the bank? Here are some ideas:

  • Diapers. I’m guessing that everyone would need diapers, for whatever sex. Even if they usually use cloth, disposables are so handy to have for travel, etc. When your own child grows out of a certain size, save the leftovers from the smaller size. You can put a nice gift bag together with diapers of all sizes. Babies might start with the newborn size diapers, but eventually they will need the bigger sizes.
  • Clothes. Hand-me-downs can be made into a really nice gift. This is especially for moms who are having a different sex than they already have. Wash, dry and fold your nicest hand-me-downs and wrap them up for a shower gift. Maybe even attach a note telling about how some of them were your favorites or memories you have of your own kids wearing them.
  • Toys. Chances are, second-time moms already have plenty of toys around. If their first child is much older, then baby toys are a good bet. Toys that will be chewed on are also a good idea. You can often find some of these cheaply at mega-stores like WalMart or Target. If you have toys that are in excellent condition, they might make a good hand-me-down too.
  • Gift Cards. If your budget allows, the new mom might appreciate a gift card to the local grocery store or Target – somewhere that they can go to get their own necessities for the new baby.
  • Meals. Another thing you might be able to do on a small budget is fix a meal or two for the family. One meal before the baby comes (when mom is getting too big and tired to cook) and one after the baby arrives.

Toddler Classes at Home

There are many classes available out there for toddler and preschool age kids, especially in urban areas. However, classes can be expensive and hard to fit into the budget of a single income family. If classes aren’t going to fit into your budget, here are some ideas of ways to do class activities and socialization at home.

1. Form a Playgroup. If you don’t know anyone in your area with kids, start hanging out at the park or another play area. If you already have some friends who are also stay at home parents, organize one or more day(s) per week to get your kids together to play. A park is an ideal place to start. When the weather turns bad, try a play area inside a mall or other free play area. This may not be a structured activity, but it will get your child playing with and around other children, an important part of early socialization skills.

2. Plan ‘Classes’ at Home. Plan an hour (or 10 minutes) every day (or once a week) to do some structures ‘class’ activities at home.

For Gymnastics: Put some pillows on the floor and let the kids do tumbling. Practice balancing on one foot, hopping and doing other stretching/tumbling activities.

For Art: Put a protective cover on the table and get out the paints. Use crayons, colored pencils, watercolors, scissors, glue, stickers and paper and simply let the kids explore different types of media.

For Music: If you are not a singer yourself, find a cd or dvd that has some good singing and encourage your kids to sing along. If you have toy musical instruments, get them out and have ‘band practice.’ Find songs that have a good rhythm for clapping hands and tapping toes. Sing songs that include movements like “Hokey-Pokey” and “Head, Shoulders, Knees and Toes.”

Family’s Best Friend on the Cheap

If you have a pet, you know how easy it can be to spend money like no one’s business on them. A new collar, chew toys, fancy food, plush beds, even clothes in some cases! All that can add up very quickly, you would think a tiny sweater would be $5 or so, not $20!

We have one 50 lb dog that we budget $50 a month for and that seems to work out fine. You will have months where the costs will be higher, the yearly checkup is one that comes to mind, but it will usually even out in the end. One way to save money is to purchase any medicine like Frontline or anti-flea soaps or sprays online and NOT at the vet’s office. They can be almost twice as expensive in some cases!

We do splurge a little bit in this food category, buying the slightly expensive Eukanuba pet food instead of a generic product. They are probably all the same but we have been with Eukanuba for the dog’s entire life so why switch now.

If you have a baller like we do, you can find huge lots of used tennis balls on eBay for next to nothing. They usually come from a tennis academy or school and have plenty of bounce left in them. You can usually get them in lots of 50 or more that will last for many many years. Don’t buy fresh tennis balls just for your dog to slobber all over and chew through.

Just keep in mind that pets are quite content with only a few things and really don’t need that plush velvet bed.

Allowances for the Little Ones?

Raising4boys gives some advice on when to start an allowance and a what amount to give them. He bases their allowance on a formula so they get automatic raises at certain intervals. He also stresses the need to have them split up their allowance, giving it to different sources. I think they should also pay taxes back to the House just to get used to the idea. 😉