Saving for major purchases can seem like a daunting task. Many times, people don’t even count the cost because they don’t want to know what the total will be. That is not the way you should live if your goal is to build wealth.
Let’s Zero In on the target: Strategically Save, specifically, for major purchases.
Saving for Major Purchases is possible
You have heard it said a million times: the way to eat an elephant is one bite at a time. But it’s true!
Robert Kiyosaki, the author of Rich Dad, Poor Dad, is famous for saying, “It’s not how much you make. It’s how much you keep that is important.”
I’ve witnessed couples that make little money save up for a big vacation over time. There are kids that dream of buying their first car, and when they turn 16, they realized their dream, using cash. A young man I know carefully budgeted for his wedding, and by saving the money ahead of time, paid for everything using hard-earned dollars and cents.
How are all these scenarios possible? One dollar at a time.
Credit is Cancer to you Wealth
The year I got married, I had saved up a pretty good pile of money, and I could have started off marriage debt-free. But, the pressure to impress my new bride and my family got to me. By the way, this pressure was all in my head. Many times, we are our worst enemy when it comes to keeping money where it belongs.
Instead of paying off debt, living on less than we made, and building wealth, we let credit crush our potential. I financed a car, financed our honeymoon, financed a timeshare, ran up the credit cards, and lived it up! Did we have fun? Heck, yes!
Then the bills started to roll it, and before I knew it, we were in 6-figure debt.
I had plenty of money to live life at the speed of cash and love every minute of it. But I thought that borrowing money was going to enhance the experience. What it did was stymie my future dreams and goals. And that’s when we decided to never use credit again, and begin saving for major purchases.
Saving for Vacations

What a difference ten years makes. We got married and had our honeymoon in Hawaii, and as I described above, we did it with debt! I planned it all out, so I must take 100% responsibility for spending $15,000 on 6 days in paradise. We had an amazing time, but it wasn’t really worth it.
You see, for our 10th anniversary, we went back to Hawaii. In fact, we spent 8 days in California and 14 days in Hawaii. It was awesome! We came back with amazing memories, dirty clothes, souvenirs, and no debt. Yes, it was all done with cash.
So, the year we got married, $15,000 was spent for 6 days using credit. Ten years later, we celebrate for 22 days and spend $8000 with cash. And the latter was so much more fun.
But, how is this possible?
Well, after we demolished our debt and canceled the credit from our lives, we started saving. First, we saved up an emergency fund, which I’ll write about in a future post. Then, we started saving for vacations because that was our next budgeting priority.
For us, we could put aside $1000 per month, every month, for future vacations and still have enough room in the budget to save for other goals and dreams.
Every person’s budget is unique to them, so your strategy for saving for major purchases will certainly look different from mine or anyone else’s.
Saving for a Car Purchases
Saving for a car is another one of those major purchases that normal people go into debt for all the time. This is almost as bad as putting the vacation on a credit card. I like to use this example to show how saving for major purchases can save you big money.
Here is the short version of this example. You can read the entire example I give in the post: Never Use Credit Again: 4 Reasons to Cancel Credit
Using Easy Credit Gets You Debt
Let’s say you qualify for a $30,000 loan on a new car with a 3.74% interest rate over 60 months. Your monthly payment would be $549, and you’d pay $2,939 in interest over the life of the loan.
This is where we lied to ourselves and said, “I can afford the payment”. By the way, the average new car payment in America in 2019 was $554 a month.
Using Saved Cash Gets You Deals
But, instead, let’s say you decide to get by for 3 years by doing whatever it takes to travel to the places you need to go because you are not ever going back into debt and you have vowed to never use credit again.
You may have a junky car that looks bad but runs. Or you may be in a city where there is public transportation available. Maybe you know someone that will sell their old car to you for a thousand bucks which you already have saved up in cash.
Anyways, while you tough it out for 3 years, you invest that $549 a month and get a 7% return. (Yes, you can earn an average of 7% annually over 3 years. I do all the time.)
After a long horrible 36 months (not really), you have $21,921 in the bank. During this time, your $30,000 dream car has been depreciating and now has a Kelley Blue Book value of $21,000. So you find for a private seller who has been the only owner and took good care of it.
Because you have a certified bank check in hand, you tell her that you will take it right now for the amount of the check, which is $18,500, or else you will find another seller of this popular model. You drive away with a “new to you” car straight to a restaurant to celebrate.
The Real Savings You Realize by Using Cash
According to the study of over 10,000 millionaires done by Chris Hogan in his book Everyday Millionaires, he reveals that 8 out of 10 Millionaires buy cars used.
Why? Well let’s play out the rest of the above scenario.
Notice, you would have still been paying from that new car for another two years. So, if you keep investing that $549 for the next 24 months, of course keeping adding the $3,421 you had leftover from your great buy, you will have $18,032 at the end of the 60 months.
That’s enough to buy a second car! Or several vacations! If you want to build more wealth, you could max out your 401k for the year and let compound interest continue to work for you.
When you said to yourself, “I can afford the $549 payment”, because the car salesman said the “cost” of the loan was only $2,939, you made a mistake. You forgot to count the cost of depreciation and the lost cost of investing cash. The true cost of the loan is over $20,000.
Saving Cash For All Major Purchases
Saving cash for a major purchase is the way you should buy anything that costs more than a week’s pay. From weddings to washing machines, you can save a relatively small amount every week or month now, to purchase it for cash later. Don’t forget the power of purchasing with cash; don’t be afraid to ask for a discount and get a deal!