4 Step method to fund your next big buy
Expenditures should always be planned, especially if they are big. Let us consider a premium mobile phone or a new bike that you are planning to buy. Even after earning a handsome salary on your sail, it is necessary to plan for such buys, long in advance and refrain from “impulse buying”. What could be the smartest way to afford these big expenditures without taking the support of credit cards?
Here are few of them listed below:
Know your target amount
A financial outlook towards a product which one may term it as ‘costly’ or ‘luxurious’ is only because of its cost, rarity or the cost of maintaining it. If you can afford the cost of the product it isn’t a luxury at least for you. So the first step towards smart financial planning to afford that luxury is to know how much you need to afford that product. For example, if you plan to buy a bike worth Rupees 1, 50,000; then that amount is your goal.
Note: Do not buy the product all in cash, you would need the liquidity when you are on land.
Split the goal amount into equal parts
It is always said that to achieve an aim, it is necessary to keep short-term goals because achieving short-term goals is much easier and measurable.
Dividing the goal amount in say 12 equal parts gives you the rough idea on how much you need to save every month so as to meet the goal within a year.
For example, if you wish to buy a smartphone worth rupees 40,000 then saving rupees 3300 every month can help you to meet your goal amount. Saving 3300 rupees every month doesn’t seem to be a huge amount and saving this amount never becomes a burden to your pocket.
Tip: Keep a habit of saving 100$ per month when you are sailing. Keep the savings in USD so that you can carry it easily and convert only when necessary.
Now that the monthly target amount is known, how to fund it?
Funding for your goal amount can be achieved by extracting a part of your regular financial inflows like salary which you can later keep in banks or any other investment options.
Keeping this amount in banks can give you an average interest of say 6% on the amount you invested for a year; whereas investing the same amount in liquid mutual funds can give you rate of interest as much as 14% which may help you to buy a much better phone than planned or the target whose time frame was about a year can be easily achieved in 10 or 11 months.
Note: It is important to know that Mutual funds are high-risk investment options. Their returns are largely dependent on the current market conditions. Therefore, they need time, for you to make a substantial profit out of your investment. If you are not ready to take this risk, you should go for debt funds instead.
What if the buy is too heavy on your pocket?
If you plan to buy a sports bike worth 2.5 lakhs then putting aside 21,000 a month seems difficult. Instead, I would suggest you plan out your monthly saving amount and EMI accordingly. This could help you to meet the goal amount in a smart way.
Happy Buying !!