Everyone has that one extravagant possession he’s always wanted, but never had the money for. Even you probably think about your dream wedding, vacation or home every now and then and long for the cash you need to buy it. So why keep wishing when you can start saving instead? If you want something bad enough, you’ll have the ambition and persistence necessary to make that dream a reality. Take a look at how you can do it…
Photo by Honza Sterba via Flickr
Here’s the bottom line: saving a large sum of money for a “dream” expenditure is not going to be fun. You have to reprioritize your wants and needs, which means simplifying your needs and pretty much eliminating wants all together. You have to consider what’s more important to you — buying fun stuff now, or meeting your goal in the future.
You’ll need to pack a lunch instead of eating out, stop buying new clothes, and learn how to entertain yourself on a Friday night for free. The newest iPhone upgrade will have to wait and daily lattes must be eliminated.
Don’t worry; it sounds bad, but it will be worth it.
Accomplishing a goal is much more difficult when it isn’t concrete. Consider the difference between “I want to travel to Italy some day” and “I want to save $5,000, so I can go to Italy two years from now.” Having a specific goal and planning milestones to meet it will ensure you stay on track.
So what’s the best way to do this?
First, calculate exactly how much the dream will cost. We can stick with the $5,000 dream vacation in Italy example. Next, break down the total cost by the amount of time you plan to save. $5,000 in two years means $2,500 per year, or $208 each month, or just $48 per week.
If you don’t already follow a budget (and if not, that’s another problem to tackle), plan one out and look for areas of spending that can be reduced or completely cut out. Keep slicing and dicing until you make room for your dream savings and then stick to your new plan. Whatever you do, don’t reward yourself by spending money! A sense of satisfaction is all you’re going to get.
You should never, by any means, sacrifice your financial security for your dream. The above savings plan is not designed to include your emergency savings, which is essentially your financial safety net. That’s off limits.
A fabulously grandiose wedding is not worth it if you and your spouse lose the home into which you were going to move. A Ferrari will not fill the void of your empty 401(k) in retirement.
Once you have established your all-important emergency fund of at least three months’ salary, then you can start working toward that dream. Good luck.