Affording a major purchase like buying a house can seem out of reach, but if you put the wheels in motion right now, before you know it you will be looking for homes for sale. The key to affording a major purchase is to get your finances organized.

Undoubtedly you have heard stories about the school teacher or another mid-income earner, saving millions of dollars over their lifetime. They may sound like urban legends, but it is possible to live frugally and be ready for affording a major purchase on any salary.

Many people can tell you what they want, but not many people can tell you how they plan on getting what they want. Reaching your goals requires a plan and not a rough draft plan, but a detailed plan.

For example, your goal is to go to the Chevrolet dealer and be able to pay cash for the latest model pickup truck, but that seems out of reach. Believe it or not, it is not. It will take patience and discipline but you can easily wind up affording a major purchase like this.

Let’s say it is a new truck you are after. Figure out what your monthly payments would be if you financed it then start paying yourself. Yes, it may take you 3 years of constant payments to yourself to get that new truck, but at the end of the journey, you will have a brand new truck of your choice free and clear.

The point is you have to clearly define your goals, write them down to have a visual, then clearly define your plan to reach your goals. This pay yourself first plan can work with just about any financial goal that you have.

Let’s say your kids need braces, you typically know this in advance. The dentist may start talking about braces up to two years before they ever actually get the braces. During that two year period, you can use the same formula you used for your new truck. Figure out what the monthly payments would be for the dentist, then start paying yourself.

What if the dentist was hemming and hawing about braces and after two years they decide that little Johnny’s teeth are just fine? Better for you, now you have a chunk of money that you can spend on new living room furniture you have been thinking about.

We all have an issue with distinguishing what we want with what we need, except of course that school teacher that saved a million dollars on about $50K a year, she knew what she was doing. Affording a major purchase without having to finance it, like a new air conditioning installation, means being financially prepared.

Cutting back on expenses is the quickest way to beef up the savings. The problem is that most people do not really know where all the money goes in the first place. The bills seem manageable, so why then are you always broke and depending on credit?

It is those little things in life that can suck your bank account dry. That daily coffee shop stop, grabbing take out, paying for closer parking, those little $10 here and there really start to add up. Most people spend mindlessly without realizing that it is a self-defeating behavior.

One of the easiest ways to see where your money is going is to keep better track of it. Write down everything that you spend every day. You can set up a spreadsheet if you are so inclined to keep track or you can simply send yourself a text of what you just spent and tally it up at the end of the day.

Keeping a running total of what you are doling out on the regular can be eye-opening, and a little shocking. Consider this $10 bucks a day on a coffee and muffin equates to $50 bucks a week, $200 a month and $2400 a year. That is a lot of money for a coffee and a muffin.

When you get your spending organized and see where the money is going, then think about where that money could be going it can be a great motivator to cut your spending. Ultimately you have to be able to balance the wants and the needs.

, For example, you NEED to eat breakfast, but you want it to be quick and on the way. Eat breakfast at home, and start stacking the savings. We all like, want, nice things but there are usually less expensive options that deliver the same feelings of joy.

A good example of feeling good about something without overpaying and upsetting the budget is jewelry. You have a big event coming up and you would love a little bling to go along with your look, buy custom jewelry and leave the good stuff on the shelf.

Part of figuring out affording a major purchase is understanding what you are investing in and getting behind the idea. Let’s take a stroll around the furniture stores to drive this idea home.

You NEED a new bedroom set, not WANT, but need. Your old set is falling apart and cannot be upgraded or repaired. You head to the furniture store. Now you have been working on wants and needs, and you understand that you need a place to sleep and you need a place to store things.

When you shop for anything there are three things that will affect the price, quality, craftsmanship, and brand. Lots of people think that the first two go hand in hand with the last, but the fact is that brand name is probably one of the most influential factors when it comes to pricing.

The solution for not falling into the brand name trap is to do your research before you ever walk into the store. Read reviews, compare prices, options, and come into the store well-prepared. Remember that you are investing in good night sleep and a comfortable environment, neither of which requires that you overspend.

Affording a major purchase can mean just being reasonable and practical about what the purchase is all about. No one ever got a divorce because they chose an inexpensive furniture option. Shop for quality not by brand.

This “knowing what you are investing in” applies to every area of your budget and lifestyle. Consider the following before you spend:

  • Identify your purchase and place them into the need or want category. Impulsive spending is a budget killer. Remember that coffee and muffin, that is a want, not a need.
  • You need shelter, food, and water. You likely want to live a certain lifestyle, but keep in mind when spending on those three major needs that you can easily outspend your budget if you are not careful than affording a major purchase will mean taking on more debt.
  • If you fully understand what you are investing in and why it is necessary before you actually spend the money than affording a major purchase will come easily.

Before you replace kitchen countertops or do any major renovation work that will put you in debt, consider waiting until you have the cash in hand and ways that you can get the cash together instead of financing the projects. Remember needs and wants, there is a difference.

Let’s say you and the gang are going out for dinner, you do not really have the money, but you do have a credit card to pick up the tab. This is one of the worst things you can use a credit card for. Of course, the first issue is this is absolutely a want, which goes against the spending on the needs and saving for the wants theory.

You can end up paying for that meal for about 5 years if you only make minimum payments on that credit card. Long after the meal has been forgotten you will still be shoveling cash to the credit card company.

The point is don’t be a hero with your credit. Other times you want to keep your card in your wallet is for an immediate purchase that will long be forgotten while the bills are still coming to the mailbox. A credit card should only be used when you can pay the full balance at the end of the month, or in the case of an unexpected expense like a flat tire on the side of the road. It is not for the extras no matter what the commercials tell you.

Running up your available credit on those dinners, nights out, new clothes, and other wants will keep you from affording a major purchase and also keep you from getting the credit you need to afford it.

Be careful with that plastic there can be some very major consequences. It is not free money and should not be used as such.

Tips For Affording a Major Purchase That is an Emergency

Maybe you have just found this article and have yet to get your budget organized so that you have an emergency fund available for life’s emergencies. Don’t panic, while financing life’s emergencies are not the best way of affording a major purchase, it can get you out of a real jam.

Using financing options carefully include:

  • Paying the debt down quickly. The longer you finance something the more the interest builds up. The sooner you pay the debt down the more money you can save.
  • Shop around. Yes, it is understood that an emergency kind of takes you by surprise and it can leave you in a desperate state, but this is no time to succumb to high-interest rates and difficult terms. Shop your issue before you make a decision, it could save you thousands of dollars.
  • Don’t finance things that can wait. Clearly you cannot live without heat or air conditioning but you can live without new carpets, at least for a little while. If it does not a true need, do not finance it.

Life throws curve balls at you all the time, like the heat going out right after the new baby comes home, or the water heater giving out just as the in-laws arrive. In those cases, getting the problem fixed fast is a need and financing can be the way to get what you need.

Ideally you have an emergency fund set up that will cover life’s emergencies but when you do not, and financing is the only way out, hopefully, you have managed your credit wisely. If you have not your options may be limited, but that still does not mean that you should not shop around a bit to find the right option.

Paying down your debt as fast as you can is important when you have had to finance a need. The sooner you pay down the debt the faster you can start stockpiling cash so affording a major purchase that is an emergency is possible.

Affording a major purchase can be as hard or as easy as you make it. Having a good understanding of where your money goes, planning ahead, and being disciplined with your finances can help to ensure that affording a major purchase will not break you financially.

Getting on board with the idea that the school teacher that became a millionaire simply by living frugally is not an urban legend and is something that you can do, can change your financial future.