Thinking about how much you will need to spend on a major purchase, like making a first down payment for your house, a land parcel, a wedding or major furniture upgrade can be a little overwhelming.

But since these purchases are often very important in our lives, that they add value and either increase our comfort or fulfil a longer-term goal, it is worth spending some time to get it right.

Oftentimes, big purchases will likely require us to save up for a while before we can afford the items we need or desire - since paying in cash as soon as the item is identified could leave one with little to spend or be actually impossible when the amount in hand is not enough.

It thus does make sense to start saving up for that particular item so that when enough money is ready, there is no disruption to your everyday life.

This will often be a major financial decision in one’s life and depending on the purchase in question, it could take just a few months or more than a year and beyond to save enough to comfortably make that purchase.

This is of course in addition to doing the needed research to identify the right vendor, brand and payment plan or even purchase period that best meets your needs.

A high-yield savings account is one good option to use to build up the amount to make the purchase depending on how long you need to save up.

Factors to Consider Before Making a Large Purchase

1. Is it a Need or a Want? Can you Survive Without it?

While a want is merely something you would like to have, a need is something you cannot live without.

If you have managed to live this long without this item, why do you suddenly need it? Determine the reason behind you buying it: whether it's social pressure, or an actual rational need.

For instance, you may need to buy a washing machine because you just had a baby and the weather is filthy, and you need to go back to work, and you are having trouble finding a stable househelp. A top-of-the-line sound system, while desirable may not be as urgent.

If it is a true need, you then need to determine why you need it and when.

If you do need the item, but you do not currently have the cash for it, is there a way you can do without it for a short time?

If, say, your car has broken down and needs some significant investment to get back on the road, could you consider carpooling for a while before you can raise that amount without affecting your more significant financial goals?

1. Do You Have Enough Money in Cash?

If you can afford to pay cash for the item without taking a loan, then you should be okay purchasing the item. This means that your current monthly budget should not be adversely affected by the purchase.

If you do not have the cash to cover the purchase, try to do without the item until you have enough money to pay for it in cash.

Taking on a loan means you can’t really afford it, and you’ll be hiking up the total cost of ownership once interest is tacked on.

2. Proper Research of the Item

When you plan to do a big purchase, take the time to research the reviews and issues related to the product thoroughly, including durability. Try finding a product that has the features you want at the best value. Also check its resale price, and evaluate its longer-term value.

3. Items on Sale

There are cycles of sales in retail. If you can wait for some time before making the purchase, you might save some money by waiting for a sale.

4. How Often You Will Use the Item

Yes, the item may seem essential today, but looking forward, how often do you think you’ll really use it? If you can see yourself growing tired of it quickly, or only using it a few times a year, you might want to not splash your money on it.

7 Ways to Save for a Large Purchase

1. Budgeting

You need to know what you can afford before you decide whether or not you should buy it. If you do not know what you can afford, it will be impossible to make an intelligent financial decision. This includes when in the future you could possibly afford it and how you can get there.

2. Start Small

When you begin saving for the big purchase, start small. Just like with exercise, saving a little is better than saving nothing at all, and you’re much more likely to keep saving if you set small, achievable goals.

3. Place Your Money in a High-Yield Savings Account

If you’re saving money for something you don’t expect to purchase for at least two or three years, like a house, you might consider placing it in a high-yield savings account and earn additional interest.

4. Open a Separate Account

Open a separate savings account for your intended big purchase, just to ensure that you do not use the money for something else. Automating deposits into that account such as a standing order will ensure the amount you have budgeted for always goes into the separate account every month.

5. Cut Spending in Other Areas

If you need to make a large purchase soon, then look for ways you can cut non-essential spending so that you can put more money toward the large purchase and buy the item sooner in cash.

For example, you might reduce your entertainment/leisure budget, cut your family’s eating out expenses, find ways to lower your utility bills, reduce your transportation spending, etc.

6. Look for Extra Income Sources

If you want to purchase the item(s) more quickly than your current budget will allow even after cutting your spending, you can also fund them by finding ways to earn additional income. There are even lots of side hustles, side jobs and hobbies that you can do right from home and make some additional income.

7. Set a Timeline

When you set a goal, also set a time limit. Otherwise, it will lack any sense of urgency and die a slow death.

Furthermore, without a timeline, you will not know how much you need to save each month. Make a point to aim for a realistic but challenging timeline which pushes you a little farther towards the goal. It should stretch you just enough to achieve it, and should not be so unattainable that it sets you up for failure.

What if You Need to Purchase Urgently?

Sometimes, you may need to make a big-ticket purchase urgently either for a business need or due to an event that makes owning that item now more beneficial than waiting until you have enough money at hand.

In such a scenario, while it is generally advisable to always plan ahead, it is possible to justify the need to get a loan to finance this purchase.

For example, if you are a new parent, a washing machine may become an urgent need to make the transition easier and reduce the labour needed to keep your child(ren)’s clothes clean.

There are a variety of loan options available in the Kenyan market today from secured to unsecured.

You want to get the best interest rates and repayment terms to justify the need to borrow.

There can be a big difference in the total cost between personal loans, so make sure you do your research first and compare products on the terms that matter to you.

Wrapping Up

When you think about large purchases, we are talking about important things that could in many ways be considered assets; homes, parcels of land, high-quality furniture and so on that you are not expecting to replace anytime soon and indeed, within your lifetime.

As such, quality is key - which may attract a higher price tag but nevertheless gives you a guarantee that you do not have to ever change that sleek dining table set for life or you can absolutely say goodbye to dealing with landlords by owning a home.

It could also be of a lesser magnitude such as a much-needed performance laptop for your work, home gym equipment etc. basically anything that improves your quality of life and contributes to your life goals.

Saving up for such purchases helps you eliminate the need to get into debt and increase the total cost of acquiring that item - unless it is a typically appreciating asset - and ensure when you make the purchase, your normal lifestyle is not disrupted.

This article originally appeared on Money254, which helps consumers and business owners to search, compare and apply for financial products in Kenya.