How to Plan for Large Purchases in 2020 [How They Did It]
Planning for large purchases can be daunting.
Especially if you have other pressing expenses such as a mortgage or rent payments, student loan and credit card debts, and healthcare and childcare expenses.
If you’re scratching your head wondering how to plan for large purchases in the coming year, you aren’t alone.
Keep reading for real-life stories of how people planned and were able to go on a European family vacation, get married, and buy a new home…without going overboard into debt.
How to Plan a Family Vacation That’s Paid For Before You Leave
$4,580. That’s the average a family of 4 spends on a vacation.¹
The budgeting app Mint reported that of the 2.2 million users who created a monthly travel budget with its technology in 2018, 44% spent more in the end than they’d saved for.²
Let’s face it, whether you take a couples trip to France or take a family road trip to the Grand Canyon, vacations are expensive.
If you don’t properly plan and save, you’ll come home with great memories and a mound of debt.
With a little planning, budgeting, and saving, it’s possible to take a worry-free vacation anywhere in the world.
How They Did It: Sara and Dan, Des Moines, Iowa
Sara and her husband recently took a 2-week trip to Europe with their 22-month-old daughter.
The trip cost just under $4,500, which included airline tickets, four-star hotel accommodations in Amsterdam, train tickets, food, and souvenirs.
All of it was paid for before they even headed off to the airport.
They were able to save money on accommodations by staying with friends in Germany for a week and by flying into Amsterdam to get a cheaper flight.
“We chose Amsterdam because it was less expensive than other European cities. We also knew the train to Germany wouldn’t be as expensive as flying, so we chose that route. And because we were staying with friends for half of the trip, we were able to splurge a little more on our Amsterdam hotel.”
Sara and Dan got serious about booking hotels and plane tickets about 7 months out. However, they were saving for their European adventure long before that.
“We started saving in June 2018 and paid off the trip in July 2019,” said Sara. “But we continued to save from July through October for meals, souvenirs, and incidentals.”
They used an online saving tool called SmartyPig, which allow you to set up a savings goal, and then pulls money from your checking account to set aside each month or biweekly.
And it offers 1.75% APY–a much higher rate than other savings accounts.
“SmartyPig is a ‘set it and forget it’ approach to saving that really worked for us,” said Sara. “When we put the booking on our credit card–one that we get miles for travel–we were able to pay it off the same day since we had the money saved.”
While accommodations and travel were paid for before their trip began, they did use their credit card in Europe for some items.
Because they saved in advance, they were able to pay off those charges in the same month and not accrue any interest.
Sara’s advice for those looking to take a vacation next year: “Just start saving something. Even if it’s $25 a week, put it in a ‘vacation jar’ or stash cash away so that when you decide where you want to go, you’ve got a start. When you determine when and where you’re going, you can adjust your saving schedule and amount accordingly to meet your goal.”
Tips for planning a vacation that doesn’t leave you in debt…
- Start saving well in advance of your trip.
- If you put expenses on a credit card, make sure to pay them off right away to avoid interest.
- Consider traveling during off-peak season or weekdays to save money.
- Reduce surprise expenses and budget for extra costs, such as souvenirs and tipping.
- Find out in advance if you will be charged resort fees or if there are any additional fees you might incur.
How to Have the Wedding of Your Dreams and Not Go into Debt
According to the WeddingWire 2019 Newlywed report, couples spend an average of $38,700 getting married. This number includes the price for the ring, ceremony, reception, and honeymoon.³
While you want your wedding to be special and memorable, spending tens of thousands of dollars on a wedding can break the bank and send you into or sink you further into debt.
Most married couples would agree that money troubles are not a good way to start a marriage.
It is possible to have your dream day without going into debt or sacrificing what you want because you have to cut costs.
All it takes is a little planning, setting a budget and sticking to it, patience, and thinking outside the box.
How They Did It: Allison and David, Chicago, Illinois
Fresh out of college, Allison and her husband, David, decided to get married.
They spent a total of $15,500 on their wedding, which covered everything from invites, centerpieces at the reception, travel for the bride, groom, and a few friends, and the honeymoon.
Through strategic planning, they were not only reimbursed for all wedding expenses, but they also received $5,000 over and above what they needed to cover wedding costs.
The lead time for the wedding was 11 months; however, they originally wanted to get married in 6 months.
But they realized it was not realistic because David was busy looking for a job fresh out of college, they had to figure out their living situation, and they needed time to save to pay for it.
“Having a bit more cushion in time turned out to be incredibly wise, as it gave us the ability to really consider how much money we would have to work with versus just shooting in the dark and guessing what our salaries would be and the amount we could save,” said Allison.
Originally, they quoted out costs for a traditional wedding in Chicago.
They quickly realized a wedding there would easily cost $30,000, and, at that price, they wouldn’t even be able to invite all the guests they wanted.
“We started strategizing on how cheap we could do a wedding in Chicago,” said Allison, “which I really struggled with, as it would look nothing like I had hoped for.”
That’s when Allison and David got creative and came up with a destination wedding in Florida.
It was a place they enjoyed going to get out of the Chicago winter, and flights were relatively cheap from anywhere in the U.S.
After conducting research and getting quotes, they realized they could afford not just to have a wedding, but an entire weekend wedding celebration with 55 friends and family.
In fact, Allison and David’s wedding costs came in at half the price they easily would have spent if they married in the dead of winter in Chicago.
“Everyone stayed in the Orlando area or at Disney,” explained Allison. “We got married at a golf resort, booked out a restaurant for our reception. Then, the entire wedding party went to Downtown Disney where we reserved an outdoor music venue and drank and listened to live music.”
Their plan was to use the wedding gift money to help pay for some of the wedding.
By pushing back the wedding a few months and having a cost-effective wedding, they were able to shoulder the burden of the costs upfront, and not rely on gift money.
“We figured we would have some money from guests that could help cover any overage costs, but I strategically felt we should be able to comfortably cover 80% of the expenses prior to relying on gift money,” said Allison.
“We didn’t want to set ourselves up for failure by expecting a certain amount of money to be gifted. While we tried to guess what grandparents and family would contribute, we didn’t want to rely on it or awkwardly ask.”
Of the $15,500 total expenses for the wedding and honeymoon, Allison and David paid $12,000 upfront, out of their own savings–money they saved by pushing back the wedding.
The remaining $3,000 they put on a credit card right before the wedding to get reward points and paid it off the next statement using wedding gift money.
By the time the wedding was over, the cash gifts they received paid for all the wedding expenses and then some.
They received $5,000 above what they needed to cover wedding costs.
“It ended up being the best time. It was a super casual weekend. We captured amazing pictures. But more importantly, we had true time with everyone versus racing around on the wedding day from thing to thing.”
Allison says the best part was that they weren’t strapped for cash the entire year after the wedding like so many of their friends were.
“We could actually enjoy making our home a home, as well as be able to go out and do things together, such as outings and weekend trips.”
Her advice to others planning a wedding: “Keep the wedding realistic. Remember it’s about the two of you and the commitment you are making, and don’t let external pressures tell you otherwise.”
Tips for planning a wedding that doesn’t leave you in debt…
- Decide what you two want (not what everyone else wants for you!).
- Create a detailed budget. Make sure to include additional expenses that might arise.
- Start saving now.
- Ask your parents or grandparents if they’d be willing to help you out (hey, it never hurts to ask!).
- Be willing to compromise, push back the date, or move the venue to stay inside your budget.
- Make sure you don’t assume gift money will come in to cover your expenses. If it does, great. But if not, you won’t be left without a way to pay for costs.
- If you put expenses on your credit card to earn rewards, make sure to pay it off the next statement date.
How to Come Up with the Down Payment to Buy a House without Spending Years Saving
You’re ready to buy a house, but there’s only one small problem: you need enough money for a down payment.
With rents across the nation rising and student loan debt mounting, it’s getting harder to save for a down payment.
Especially when you are trying to save for retirement, have insurance, car, and healthcare payments, and a whole host of other expenses.
Builder Online estimates it takes younger millennials 8.77 years to put down 10% on a house that costs $221,600.⁴
If you are 25 to 34, it will take you 7.34 years to save 10% for a home that costs $277,900.
For those 45 to 54 years old, it will take more than 3.5 years to put down 10% on a house that costs $323,400.
With planning, saving, patience, and expert advice, it is possible to save much quicker than this.
How They Did It: Susan and Robert, Canton, Ohio
Susan and Robert were looking to purchase their first house.
They found their dream home, which cost $200,000, and they needed $20,000 for the 10% down payment.
They had $10,000 already saved, but had to come up with the remaining $10,000.
Robert had a 401(k) with $56,000 in it, and he was allowed to borrow up to $50,000 or half the account value, whichever was less.
After speaking with a financial expert, he borrowed only $10,000.
“Since the funds were borrowed, I didn’t have to pay the 10% penalty for being under age 59 1/2, and I didn’t have to pay taxes either, since the funds were borrowed,” said Robert.
Robert did have to pay interest on the amount borrowed, but it went back into his 401(k).
His 401(k) plan allowed him to repay the money borrowed over the next 5 years with monthly payments.
Since this is a debt, it also counts against your debt-to-income ratio when applying for the loan. So, the more you borrow from your 401(k), the harder it may be to get a loan.
“When we weighed the pros and cons, we decided it was worth the risk to be able to purchase our first home.”
Tips for buying a home and saving for the down payment..
- Request a credit report and review it for any inaccurate information.
- Do what you can now to increase your credit score.
- Create a down payment savings goal and start saving now.
- See what you can cut out of your budget to save even more (rarely used gym memberships, meals out, etc.).
How have you successfully planned for big purchases in the past? Share your success and leave us a comment below!