Still saving for a big item by dropping pennies in a piggy bank? Derek and Carrie Olsen have a better way: break down big purchases into smaller steps to get there faster.

Taking on a new, million-step project can feel overwhelming.

When I start a large project, looking at the whole thing all at once is intimidating. Thinking of all the steps and substeps leaves me feeling defeated before I even begin. Even a “simple” project like buying a new bed can spiral out of control in my mind. Hard or firm? King or Queen? What is a California King? What do we do with our old bed, do they deliver, will we need a new frame? Should we paint the bedroom to match? I’m done before I’ve begun. It would be easier to just do nothing this weekend. I have to break big projects down into small, doable steps just to get my mind in the right place. Tackling a small part each day is the best way for me to make progress. Seeing a large project as a series of smaller steps can build your confidence in your ability to get it done.

The same is true for a big financial project. Saving for big-ticket items like a trip to South America, a new computer, or even a new car doesn’t have to feel overwhelming.

[subheader]Start small, then go big.[/subheader]

Let’s start with a new computer. Say it costs $1,200. Coming up with all of that cash on the spot can be a challenge. Working out a savings plan of $134 a month will score you that new computer in just nine months.
Now let’s go big. How about a new-to-you $12,500 car? Say you’ve already got $2000 saved towards the purchase of your next car. $10,500 more and you’ll be smiling big in a car that’s paid for! Saving $10,500 doesn’t happen all at once and it won’t happen without a plan. I don’t know about you but I don’t accidentally save that kind of money. When it comes to saving up for a new car, I like to pretend that I’m paying a monthly car payment. Instead of making the payment (plus interest) to the financing department, I make payments to myself before I buy the car. Think of it as a car-savement instead of a car payment.

[subheader]Let’s break down the purchase of your new car into smaller steps.[/subheader]

4 years is 48 months. $10,500 divided by 48 months is $218.75. There you have it, your monthly car payment… I mean save-ment. Divide the cost of the item by the number of months until you want to make the purchase. This is an easy way to break down a large purchase into small, doable financial steps. $218.75 a month is a much easier number to grasp compared to $10,500. And, saving $218.75 a month for 48 months is a lot easier than paying $362 over 72 months like a typical car payment, right? Having a well thought-out plan based on real numbers takes the mystery out of saving up for big-ticket items. Blindly saving a random amount each month doesn’t equate to intentional savings. Blindly saving leaves you scratching your head, scraping together a down payment, and signing up for endless payments. You are most likely going to need a new-to-you car within the next several years. (Then another one after that.) Establishing a monthly car-savement plan makes each car you purchase smoother for the rest of your car-buying life. Pay yourself a car-savement, even when you don’t have a car-payment. Think of it as an ongoing monthly bill like any other.

[subheader]Left brain, right brain[/subheader]

OK, we’ve tackled the left-brain side of this discussion, now for the emotional component. Have your heart set on a car that’s twice as expensive as you can “afford?” Try this instead: Set your sights even higher, save up to pay cash for it, and you’ll be driving a better car for half the expense when compared to making payments!
For example, interested in that snazzy 2012 model? You can get a loan and pay for it for six years OR you can put a picture of the new 2015 model on your fridge, save up for three years, and pay cash for a cooler ride.
Breaking bigger expenses into smaller steps gives you a better idea of what it takes to make it happen. Including these items in your monthly budget makes saving easier to visualize. Saving up for a car is as simple as paying your monthly electric bill. This monthly save-ment formula can be used to visualize any large purchase. A new computer or a vacation can easily be calculated with this monthly save-ment method. Just divide the total cost by the number of months until you want to make the purchase. When you include several of these big-ticket items, calculate the monthly save-ment needed and then add them all together. Doing so will give you one total monthly amount to save that covers all of these items. This further simplifies the savings process.

Derek and Carrie Olsen write about money and marriage at DerekandCarrie.com.

Let's take action, Grownup.

Check out our online classes to start taking action on your goals any time.

Take a class

Let's stay in touch, Grownup.