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  • Writer's pictureSahastha

How to economize for big expenses

Updated: Oct 4, 2023

You must have experienced the subtle art of blowing first salary. Now that I have entered the workforce population, I can definitely relate to it. It’s the first veracious sign of having made it. Though, dreams these days come with a high price tag. We all aspire to own a car, a house, a long vacation to Europe and I’m no different. In the past few months I have become more aware that saving up for a big ticket item is doable.

Scrimping for something big

How much will you need?

Prior to diving deep into it, I took the time to create a budget for my goals. How much money will it actually take to make it happen?

Some big purchases were fairly easy to estimate like buying a specific model of car. Figuring out how much to budget for other big expenses might be harder to estimate, like a trip to Europe. The total cost will depend on where I’ll stay, how much I’ll spend on airfare and other transportation costs, and how much I’ll choose to indulge in local delicacies. A little research on Pinterest really helped me to figure out everything I’ll need to include in my total expenses.

By when will you need it?

Once I estimated the cost, it was time to set a due date to put my plan into action! This helped me to figure out how much I need to save per day, per week, or per pay period in order to make my goal a reality.

How will you fund your goal?

The biggest dilemma that young earners face is where to invest their money. I went through the same perplexity. To start with short term goal like a trip to Europe, I just chose simple instruments like a recurring deposit, fixed deposit. Once I prioritized my goals, then I started converting my savings into investments. Essentially, the investment vehicle should be chosen in line with goals and time horizon. If it’s a short-term goal, go for recurring deposit, liquid funds, fixed deposit or short-term debt funds. If it’s for the long term, it should be mandatorily equity.  The medium-term goals should have a mix of debt and equity. This is because debt will offer you the safety of capital since you need it in the short term, while equity has historically given the highest returns in the long term. This must seem main stream but as I have just started earning and I’m not familiar with the investing territory, I went for it till I’m better informed. I also took into consideration other factors like returns, liquidity and tax liability before choosing an asset class.

Celebrate

One day, after a few months, a year, or a little longer, I’ll be done!  I always take a moment to think about what I’ve just achieved. Saving takes persistence and sometimes a little sacrifice from our end. Taking the right step towards achieving all that we’ve dreamt of must be celebrated wholeheartedly!

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