As we round out the last quarter of 2021, are you thinking ahead to a big purchase?
Perhaps you want to take an epic trip to a destination you’ve always dreamed of visiting. Or, maybe you’ve decided that it’s finally time to invest in that great piece of furniture, add a sunroom onto your home, or pave your driveway.
All of these are major purchases, and it’s easy to get overwhelmed when you think about spending that much money. The good news? You don’t necessarily need to pay for it out of pocket in one lump sum.
Today, we’re sharing a few of the best ways to finance a large purchase, one step at a time.
1. Create a Separate Savings Account
It can be difficult to save money when you keep it in your usual checking or savings account. You use that money to pay your monthly bills, buy groceries, and fund your family’s extracurricular activities.
Deciding to sock away a little cash every month is a great way to slowly build your way up to that big splurge. However, it’s best to store those funds in a place where they aren’t so easily accessible.
That’s why we recommend opening up a separate savings account dedicated solely to your upcoming purchase. Instead of overthinking this step, simply add an account at the bank that you already frequent. Then, create a savings goal for yourself, and commit to it.
2. Optimize Your Credit Score
A good credit score can go a long way in helping you fund a big purchase. Most lenders will look at your score to determine your creditworthiness, which can affect your loan terms and loan amount.
While you don’t need to have a perfect score of 850, it can help to increase yours as much as possible. Start by requesting your annual free copy of your credit report through the major credit bureaus. Go through each report with a fine-toothed comb and report any errors or discrepancies that you see.
Sometimes, this simple step is enough to boost your credit score by a few points. Other ways you can add to yours include:
- Commit to paying your bills on time
- Lower your credit utilization rate
- Pay down revolving credit balances
It might take a few months before you notice a difference, so start this step long before you plan to make a substantial investment.
3. Use a Travel Rewards Card
If you understand how credit cards work and know that you can pay off your balance in full by the end of the month, then why not look into a travel rewards card? Most of these cards will come with a beneficial sign-up bonus, and you can use them to pay for travel-related expenses, such as flights or hotel rooms.
This keeps your trip costs separate from the rest of your everyday costs. However, it’s important to use the card responsibly. If you do so, then you could apply the rewards you earn to help offset some of the items you buy.
Ultimately, the best credit cards are those that are designed to meet your needs. If you plan to travel heavily in the future, then look for ones that offer robust travel rewards you can use!
4. Apply For a Vacation Loan
You have several different payment options as you begin to plan a getaway. This includes applying for a vacation loan, or a personal loan. As most personal loans are unsecured and don’t require collateral, you can use them to cover a wide range of expenses, including a vacation.
You can apply for a personal loan through your traditional bank or credit union, and many online lenders will also offer them. While these can be helpful when you’re in the thick of planning, keep in mind that they can actually add to your overall costs. Any type of loan, including a vacation loan, will include extra fees.
Make sure that you understand the interest rates and repayment timeline before signing on the dotted line. Unless you’ve exhausted all of your other options, it’s best to avoid going into debt for an unnecessary expense.
5. Try Off-Season Travel
If it’s a big trip that you’re eyeing, then take a second look at your schedule. Would you be available to take the same vacation at a less-busy time of year? Especially if you’re traveling to a tourist destination, then you can save a good amount of money by avoiding the peak season.
Likewise, many airlines and hotel chains will experience times of peak activity, where prices are naturally a little higher. It can help to understand those trends so you can snag the lowest prices possible. This guide can help you understand the best time to book a flight, whether you’re flying domestically or internationally.
A little flexibility can go a long way, and can help you save money! You may also find that you can enjoy the destination more when it isn’t teeming with like-minded visitors.
6. Consider a Point-of-Sale Loan
A point-of-sale loan takes a buy now pay later approach. You may see this option on many popular travel websites, such as Expedia. At first glance, the premise is appealing.
Why wouldn’t you want to go ahead and book all the fun parts of your trip, and then worry about the more challenging financial aspects of it later? With this setup, you can make regular payments toward your trip, rather than funding it all in one lump sum.
The kicker here are the interest rates. While it can seem more manageable to break your payments up, you’ll often wind up paying more in the end.
How does it work? When you checkout on a retailer’s page, you’re usually given a few payment options. For instance, you can use your credit card or you can enter a gift card.
If a point-of-sale loan is available, then you’ll also see that option. Some of the most common platforms are Klarna and Afterpay. Depending on the provider, the loan application process may or may not include a hard or soft credit check.
You’ll begin the loan application process online, and you’ll find out in a few minutes if you qualify for the buy now/pay later financing. Again, take a close look at the interest rates and terms so you’re not entering into the agreement blindly. While some will boast 0% interest, others can tack on rates as high as 30% or more!
7. Cut Back on Other Expenses
This one might be obvious in theory, but it can be difficult to put into practice. If you know that a big purchase is coming up soon, then look for ways that you can minimize your day-to-day spending.
Begin by making an account of your monthly cash flow. If you don’t already have a budget in place, then it’s time to make one now. You should be able to tell how every dollar enters and leaves your hands, and where you’re spending your money.
Are there any unnecessary items that you can cut out or reduce, at least for the time being? This may mean eating in restaurants less frequently, or minimizing the number of streaming platforms that your family subscribes to.
These changes might seem minor, but they can add up and make a big difference. Take the savings that you earn and store them in that vacation account you created!
8. Find a Side Gig
You don’t have to look for a new career and higher salary when you’re eyeing a new investment. If you have a few extra hours during the week, find ways to earn supplemental income on the side.
Before long, you can start saving this money and applying it toward your expense. Think of things that you enjoy doing, and look for opportunities to make money doing them. From teaching English online to working weekend retail, there are many different ways you can enhance your earning potential.
9. Volunteer Through Travel
Are you aching to see the world, but don’t have the funds to do so? Sometimes, you can finance a big trip by agreeing to volunteer during a portion of your time away!
For instance, many families will host visitors on farmstay vacations. With this setup, you’ll receive a place to stay and food to eat, but you’re also expected to help out with the land and animals. You can also connect with charities and non-profit organizations that will pay your way to travel, as long as you log some volunteer hours when you arrive.
From building homes to digging wells, there are many different ways to give back through travel. Look for humanitarian causes that are important to you, and ask about any opportunities available.
Your Guide to Spending With Confidence
We all deserve to invest in ourselves every once in a while. Whether you’re planning a vacation or saving up for a big household purchase, there are a few different ways you can fund your adventure.
Before you agree to any loan, be sure to read the terms carefully and make sure you understand how the interest works. Beyond lending options, you can also offset your spending through budgeting, supplementing your income, and looking for out-of-the-box savings opportunities.
Looking for more trusted lifestyle news? If so, be sure to check out our site to discover the rest of our helpful guides!
