How to Plan for Major Purchases

In addition to buying a new home, we’re also planning to make several other major purchases, including a washer/dryer set, a fridge, a dining room set, china, a new family room set, a living room set, a new sofa bed for the guest room, a new TV, and a new TV stand. Plus the usual stuff like lamps, towel racks, etc. that make a home feel lived in.

That’s a lot to spend, especially after shelling out a six-figure down payment. We’re also looking at other big expenses like property tax and repairs that will total around $6000. Some of the repair money may come from the bank as a closing credit, but some will have to come from us.

How to Prepare for Major Purchases

Obviously, we won’t be buying all those things right away. We’ll buy the washer/dryer before moving, but everything else will wait so we can buy them during the next six months to eighteen months. Here’s how I budgeted for the items so we can buy what we need without going into debt.

Shop Online for Prices

The first step I took was to shop online for items that met my quality and price standards. I don’t want to buy something so cheap that it won’t last more than a year, but I don’t need an heirloom dining room set, either. I want an energy-efficient washer/dryer set, but I don’t need top-of-the-line bells and whistles. So, I compared prices at various stores to set a budget for each item.

Determine a Time Frame

Some items we need immediately, like the washer/dryer. I’m not dealing with a Laundromat! I first thought we’d need the fridge right away, too, but we’ve decided to move our fridge with us so we can get some cabinetry modified to fit the fridge we like. Once again, I don’t need a top of the line fridge, but I do want something that will meet our needs for the next decade.

Other time frames were trickier. I learned in April that I’m hosting Thanksgiving dinner for nine, so I’ll need to buy the dining room set, or find a set of sawhorses and plywood and some borrowed chairs, by November. If I want to serve a fancy dinner, I’ll need to buy the china, too. We didn’t receive any for our wedding, which I’m okay with because I don’t like the original pattern anymore. I also found an online place to buy it at a big discount, but it’s still a big expense.

Once we went into escrow, I also listed out other projects specific to our house (landscaping, for example), an amount, and a target price.

For example:
Dining Room set – $1500 – 11/09
Washer/Dryer – $1200 – 08/09
Sofa Bed – $1000 – 09/09
China – $1500 – 11/09
Backyard steps- $2000 – 08/10
Service panel – $2500 – 11/10
Property tax – $3500 – 12/09
Property tax – $3500 – 04/10

The list is much longer, but you get the idea.

Determine Your Savings Rate

In order to avoid going into debt to buy these items, I then calculate the time until I’d like to complete the project. I divide the target price by the number of months to get the amount I need to save up. For example, our electrical service panel should be replaced. If we do it in 15 months, we need to save $166 a month until then.

Reprioritize if Necessary

I also have to make sure I maintain my other goals like rebuilding our emergency fund, buying a new car, and saving for retirement. If saving up for any of these house purchases or projects puts the other financial goals at risk, I’ll either have to buy something cheaper or extend out the target period. Some things can’t be pushed out – like property tax – so I have to make those top priorities.

Start Saving

Now, each month, I’ll set aside money for each project. We already budget for irregular expenses, so these will go in that category. If I can’t meet all of them, choose one to push back. The goal here is to avoid debt. My only exception is the 12-months no interest deal offered by some appliance retailers. Even though we have the cash, I’m considering using one of those offers if we can’t find our desired appliances as scratch and dents. In some cases, taking advantage of the deal also gets you free shipping and an additional discount. Since we know we can pay it off within the timeframe without interest, it might be worth it if it saves more money.

I already know that more things will come up as we get settled in our new house, but we’re also aware that we don’t have to do everything at once. Sure, there are a few upgrades we’d like to do, and some repairs/changes that need to be made quickly, but this is a long-term home, not a flip. We’ll take our time, pay cash, and do it right.

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