Budgeting for Big Purchases: The How

Step 2: Out of Site, Out of Mind

It is very useful to have multiple bank accounts and this is one of the ways that those accounts come in handy.  Set up an account that you will use only for money for big purchases.  If you have an ING account, there are no minimums so it is perfect for this type of activity.  This account will keep the money out of reach until it is time to buy the Big Purchase.

At each pay period, immediately deposit the amount you determined in Step 1 into the account.  Do so until you have a little more than the amount you need.  This will keep the account from being closed after you remove the amount for the purchase.  You will need the account again for your next big purchase.

Step 3:  Buy the Big Purchase

Now for the fun part, buying your Big Purchase.  You have two options: you can buy it with cash and own it free and clear or you can buy it on credit.  The reason credit is an option now is because you already have the money you need.  Buying it on credit and paying it off before the interest kicks in will improve your credit history.

That's it.  Not a difficult technique but most assuredly worth it.  Have fun with your new Big Purchase.