Day 3 of America Saves Week - Big Ticket Savings

Day 3 – Big Ticket Saving

Occasional “Big Ticket” or expensive purchases can be unavoidable in life. People simply need cars and homes, and want to send their children to college. The best way to deal with these necessary purchases is to plan ahead and be prepared. There are of course many ways to do this, but perhaps the easiest is to devote a percentage of each paycheck to one of these items.

The percentage of a paycheck you can set aside for this kind of preparation will vary for every individual. The percentage could be 10%, 5%, or even as low as 2%. The farther in advance you start preparing, the lower the percent necessary to save.

As an example, consider someone who makes $40,000 a year, and is paid every two weeks. This person is anticipating they will need a new car in 10 years. Assume the price of the desired car is $16,000 (roughly the price of a Ford Focus).

• $40,000/year paid biweekly = $1,538.46 per pay period
• 52 weeks in a year/2(for biweekly payments) = 26 pay periods per year
• 26 pay periods over 10 years = 260 pay periods
• $16,000 (price of new car)/260 pay periods = $61.54 per pay period
• $61.54(amount saved per pay period)/$1,538.46(amount earned per pay period) = .04 or 4% per pay period

In this example, an individual with an annual income of $40,000 is able to purchase a brand new car by saving only 4% of each pay check. Of course, this example does not take into account the interest you would earn on the money you are saving, but that will only increase what you have after ten years. A percentage as low as 4% may seem almost negligible at the time, but it clearly adds up to be a huge help in the long run. The key to avoiding problems when purchasing “Big Ticket” items is to anticipate the need and be prepared.

2013 Ford Focus | With up to 40MPG the all new Ford Focus is more than a car | Ford.com . (n.d.). Ford – New Cars, Trucks, SUVs, Hybrids & Crossovers | Ford Vehicles . Retrieved February 15, 2013, from http://www.ford.com/cars/focus/

Published Feb 27, 2013.