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How to Save for Big Expenses: Things you can start today!

Written By: Rick Orford
Reviewed by: Mike Reyes
Last Updated January 12, 2022
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In this article, I discuss how to save for big expenses. Do you know someone who recently got engaged and starts planning for the wedding? Or perhaps you need a new car or plan to buy a house. Indeed, these are some of the biggest budget killing expenses consumers face during their lifetime. Whatever the amount, you need to start with a plan for saving money when saving for a big expense.

When I was in my early 20’s, I remember (like yesterday) the day I wanted to buy my first home. When I was renting an apartment, and two doors down, another (much larger) unit went on the market. After making some phone calls, I got to visit the apartment with my Realtor. The condo needed a complete renovation. It needed to get nuked! I knew it would be an incredible investment opportunity, yet an expensive undertaking, and wondered, “How on earth can I make this happen?” How can I pay for it? Indeed, this would be my first investment in real estate.

The following discusses my very best ways to save money on big expenses, such as a new home. And, it’s essentially some of the very same methods for saving money I use today.  

Let’s dig in.

Where to begin when saving for big expenses

where to start saving for a big expense

When savings for big expenses, one must start by looking at their savings. And indeed, one must look beyond their emergency fund. If there’s no emergency fund, then the focus first has to be on that. However, I’ll assume you have a fully-funded emergency fund.  

If you don’t have enough savings for the large expense, I won’t blame you if you’re wondering, “how can will I save for it on my income?” To be sure, saving isn’t an easy task. Saving requires baby steps. Indeed, cents become dollars. Rome wasn’t built in a day, and neither will your savings account. 

To start saving for your big expense, it begins with the budget. And evaluating your financial goals is the first step to making a budget.

If you don’t already have a budget set up, or aren’t good at budgeting, click here to learn how to make a budget. Then, you can refer back to this article later on.

Types of big expenses 

When you want to save for a big expense, the best way to start is by preparing the budget in advance. That way, you’ll find how much you can save each month.  

In general, big expenses will fall under one of the following categories: 


The emergency fund is the most crucial part of the budget. And, it’s especially critical to your financial health. For example, you may become sick, needed to fix your car, or lose your job. These are all emergencies, but how would you pay for them? Therefore, before saving for anything else, your emergency fund must be fully funded, with at least six months of needs expenses.  

Needs expenses are things that you need to pay monthly. They are your living expenses. For example, think about your rent or mortgage payment, minimum debt payments (credit card, student loan, line of credit, etc.). So, with that in mind, you’ll be covered should there be an unexpected expense.

Big, planned expenses

If you have a big expense coming up, maybe you want to save for a new car, a down payment on a new house, or a wedding. These types of expenses are “planned expenses” as they are one-off’s.  

Large, annual expenses

These expenses are annually recurring. For example, they might include income and property taxes, vacations, charitable donations, and more. In my case, each year, I have to make a 5 figure tax payment to the government. And because I plan for it in advance, it’s never a problem. 

Also, the funds you’ve saved for the big expense should get used for that specific expense. It means, don’t touch it for anything else! If you use money from your emergency fund, for example, to pay for a vacation, you might find yourself in trouble should a real emergency occur. 

Finally, you don’t already have a clear picture of your expenses, now would be an ideal time to review them, and you can start by looking back at the regular costs over the past three months, and significant expenses incurred the past 12 months. This way, you’ll have a clear financial picture of your average spending. 

Related read: How to Sell a Structured Settlement

Breaking down the financial goals, paycheck by paycheck

Let’s say you pay $600 for car insurance every six months. If you don’t already pay your insurance monthly, you can plan by setting aside $100 a month for car insurance. I like to keep these sorts of expenses in their own savings account. After all, which is a more manageable payment, $100 or $600? The same goes for bigger purchases.

However, making big savings goals can seem intimidating. For example, when you realize that you’ll need $50,000 for a wedding or $20,000 for a new home’s downpayment, it can only be manageable by breaking it down into mini financial goals. For example, you’ll need to save $833.33/mo for 24 months for the down payment.  

Proper planning for these types of expenses must get done in advance. 

Take the amount you’ll need to spend on the big expense and divide it by the number of paychecks. And, armed with this information, you have to know the amount you need to deduct and save from your paycheck every week, every two weeks, or every month. 

Taking the wedding example above, assuming you get paid twice a month, divide the target amount ($20,000) by 52. It now means that by breaking down the financial goal, thus, you can set aside $385 every two weeks for the downpayment on your new home. But what if you don’t have $385 every paycheck to set aside for your goal? Here’s what you can do.

Look for a reliable place to save 

After you know the dollar amount you need to save for a specific big expense and the periodic payments required, over a particular time, now you’ll need a place to put the money. For large purchases, it’s best to keep the funds in a savings account. One account for each large expense. For example, if you’re saving for a wedding, deposit the money into a savings account and name it something like “Wedding savings.” And if you’re also saving for a new car, you can call that account “New car savings.” By doing so, you’ll always know where you stand with your financial goal.

The nice thing about savings accounts is that, in general, banks and credit unions will give you the savings account, free of any expenses or monthly fees. You won’t earn much interest either, but that’s okay. It’s is short term savings.

Cut your expenses 

If you find that you’re a little short on cash at the end of the month, it means that you don’t have a monthly surplus of income. And, to save for big expenses, you need a monthly surplus. To generate a monthly surplus, you need to spend less than you earn.

It doesn’t matter if you make $50,000 a year or $150,000 a year. Unless you spend less than you earn, you’ll never get ahead.  

Rick Orford

To spend less than you earn and generate a monthly surplus, you’ll need to work on a combination cost-cutting and income generation plan. Start by looking at your daily expenses. If you organize your day-to-day spending in groups, such as rent payment, food, shopping, car payment, etc., you’ll begin to know where your money is getting spent.

The easiest way to generate a monthly surplus that you can use to save for a big expense is to cut the budget. Indeed, most of the money you spend in a month is likely on housing, transportation, food, and entertainment. If you further group the expenses into needs and wants, you’ll end up with a budget that shows what you need to live on (“Needs”), and the stuff that makes life feel better (“Wants”).

With that in mind, start by cutting the wants side of your budget by 50%.

Some ideas to cut the budget

Food – Certainly, food is a “needs” expense. But restaurants are not. So, to cut back on food spending, consider:

  • Bring your lunch to work instead of going out to eat.
  • Host friends at home instead of dining out at a restaurant.
  • Avoid delivery services.
  • Buy your groceries at a discount store.
  • Make your coffee at home.
  • Eat the leftovers!

Housing – To save money on housing expenses, consider these options: 

  • Find a roommate 
  • Move to a less expensive apartment
  • Refinance your home (Interest rates are at historic lows).

Transportation – For this category, you can cut back as follows: 

  • Get rid of the car loan.  
  • Shop around for car insurance.
  • Use a carpooling or carsharing program.
  • Use public transportation. 
  • Sell extra (unused) cars. 

But, don’t stop there! Here are some other areas that you can find extra money in your budget.


No doubt, student loans, and high-interest rate credit cards will eat into your budget. If you have any high-interest debt, i.e., over 7%, you’ll want to focus on paying down those debts before considering any big expenses. Alternatively, you can consider refinancing high-interest debt through a consolidation loan. If you find yourself using overdraft in your checking account on a month to month basis, consider keeping a little extra money in the account. If you can reduce your debt payments, you’ll increase your saved money toward the goal.

Focus on a no-fee, interest-bearing savings account

If you want to save for a big expense, it’s best to keep those funds in a dedicated savings account. Separating the savings account is an excellent way to track progress. Moreover, there will be fewer temptations to use the money, knowing that the money in the savings account has a job: Your big expense. 

When picking a savings account, remember all accounts are not equal. Therefore, look for one with high rate savings that do not have a monthly service fee. Unfortunately, these days, interest rates are rock bottom, so it might be difficult to find a bank that pays interest. At the very least, you can find no-fee options.

Control your impulse spending

Another way to save money is to cut back on spending impulsively. Online shopping, ATMs, and credit cards are some of the enablers that welcome you to spend your money. Use your debit-card instead, and use it sparingly!

But, to save for a big expense, self-control is key. Saving requires discipline: if you plan to buy something, wait a while before buying it. The urge may pass. Another way to curb impulsive spending is to look at the item’s price as the number of hours you’d have to work for it. For example, if the new pair of jeans cost $100, and you make $30/hr, then it would take nearly 5 hours to pay it (after taxes). If you look at purchases that way, chances are, you may find it not worth buying.

Reign in the recurring expenses

When it comes to generating a monthly surplus of income, every little bit helps. And recurring expenses tend to eat up a significant chunk of one’s budget. Start by reviewing your credit card statements and look at how you spent your money in the past year on subscriptions. Then, ask yourself if it will eat into your tight budget, and could you live without any of it? For example, do you need two streaming accounts? Or, what about the gym membership? If so, that money could get redirected to your savings account for that big expense. 

Cell phone provider

You may be happy with your mobile network provider. But they may not be the cheapest in the market. According to a recent study by the US Bureau of Labor Statistics, in 2018, Americans aged 25-64 spent, on average, spent $114/mo on cell phone service. Per line! Indeed, that’s a lot of monthly expenses.

If these same consumers switched to a lower-cost carrier, they could save as much as $1500 a year toward their big expense for a family with two lines.  

Pay yourself first, automatically.

If you want to supercharge your savings rate, consider paying yourself first. The concept works like this: Set up an automated deposit to your savings account at the beginning of the month. This way, the expense is accounted for at the start of the month.

Automating the savings is an excellent way to save for big purchases quickly. 

Additional income

If you find it challenging to have enough monthly surplus to cover the costs of large expenses, you can consider other ways to earn extra income. Indeed, to supercharge your monthly surplus, you’ll need to make more money. While more challenging, the payoff can be outstanding. When looking to make more money, the first step is to figure out the amount you need to earn.  

Some ways you can make some extra income include:

Negotiate a raise

By far, the easiest thing one can do to increase their monthly surplus is to ask for a raise. According to a recent report from the Bureau of Labor Statistics, we can estimate the average American earns $48,672 a year. Even a 10% raise could mean an extra $4,867 a year toward your savings, minus taxes, of course.

Side hustle

After asking for a raise, you might consider starting a side hustle. A recent study from The Ascent showed that American men earned an average of $746/mo from a side hustle. And women made an average of $507/mo. It could mean $8952/year toward your financial goal, if you are AVERAGE!  

Change jobs

Finally, if you’ve been working a dead-end job or haven’t got a promotion in a long time, it may be time to consider changing jobs. While it’s the most challenging thing to do during the pandemic, it offers the best potential earnings increase. For example, if you can find a job that pays $20,000+ more per year, imagine what you could do what that extra money. But, considering its pandemic time, if you do change jobs, choose wisely. The last thing you’d want is for your new employer to shut their doors. 

Surprise bonuses

Throughout the year, you’ll inevitably end up with some unexpected extra cash. For example, maybe it’s a:  

  • Tax refund
  • Stimulus check
  • Cash-back reward from your credit card.  
  • Proceeds from a yard sale, 
  • An investment.  

Whatever the bonus, make sure to apply it to your savings plan.  


Should I invest my savings?

Savings set aside for big expenses should never be invested. Instead, this money should get held in a savings account because the investment could lose value.

The Bottom Line on Saving for Big Expenses

Learning how to save money for big expenses is no easy task saving is a continuous process. However, by continually seeking out opportunities to save, and sticking to your budget, you will improve your money-management skills to pay dividends for the rest of your life. 


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