Essential furniture in a new apartment, including a place to eat, work and sleep, is more than just helpful—it is vital to make your space livable. Decorating a new home with a few chic necessities should be exciting, but finding the money to do it may steal the joy from furniture shopping. When you know a big buy is coming, budgeting for the expense stops anxiety in its tracks.
You can enjoy picking out decor you love and still act responsibly with your finances by saving money over time for a large purchase. Read on to discover our top tips and tricks for evaluating your finances, making a personal budget and getting creative to save for the furniture of your dreams.
Creating a Budget
If you have trouble with budgeting, studies show you have plenty of company. A GOBankingRates survey reports the majority of Americans have less than $1000 in a savings account. Living paycheck to paycheck can make saving enough to buy furniture seem out of reach, so a budget may be just what you need to stay on track.
In the simplest terms, a budget is an estimate of how much money your household has coming in versus how much you spend. Once you know how much income you have after taking out necessities and factoring in debt, it becomes easier to see where the money is going, take control of your spending and start saving for a big-ticket item.
Picking a Budgeting Method
From collecting loose change to tracking every cent on a spreadsheet, people have different methods to save up. We've compiled a list of popular budgets with options for those who like things simple and flexible or detailed and structured. Some systems will work better for you than others, so weighing the pros and cons is the first step towards buying your new decor.
The Envelope Method
Looking to limit frivolous spending? The envelope system divides your income between main expenses and saving goals with an envelope for each category. For example, groceries, student loans and your mattress set fund might each get their own envelope. Allot a certain amount to each category monthly, then fill that envelope with cash.
- Controls Impulse Spending: Deciding on a budget for extras and withdrawing the cash in advance puts a limit on your spending. Simply count what's left in your extras envelope to know if you can afford to go to the movies this week, or whether it's best to stay home.
- Makes Money Feel Real: Despite the reality of credit card debt, we often accept cash we can see and touch as real money while digits in a bank account seem more abstract. Watching the number of bills in your envelope shrink as the month goes by makes you think twice about unnecessary purchases.
- Ideal for Budget Beginners: If you have a tough time keeping diligent notes of your purchases, the envelope method is perfect for you. All the work of deciding how much money goes to each category happens upfront, so you can skip the detailed records and let the envelopes do the work for you.
- Limitations of Cash: While this method lets you skip logging your receipts, it relies on cash. Depending on where you live, regularly going to the bank or ATM might put a strain on your schedule. Carrying around large amounts of cash also leaves you open to loss or theft.
- Misses Out on Credit Benefits: Going all cash means that you lose out on interest from a bank account or rewards from a credit card. It can also be tough to build the credit history you need to take out a bank loan. You may find that using the envelope system for some categories of spending and a credit card for others works best.
The 50/30/20 Rule
The 50/30/20 Rule is one of the most popular methods to save up. After taxes and insurance, 50 percent of your income goes to needs, like rent and groceries. Wants, such as a restaurant meal or concert tickets, take up 30 percent, and the last 20 percent goes towards debt repayment and savings.
- Simple and Straightforward: The 50/30/20 Rule is a common budget choice for a reason. By splitting your whole income into three categories, this method is easy to understand and therefore simple to manage on your own even if you're not a math whiz.
- Covers Both Spending and Saving: Since paying down debt, saving and regular expenses are all part of the system, it's easier to factor them all into your monthly plan.
- Flexible: Many people use this method in tandem with another system. For example, you could use the 50/30/20 Rule as the basis for dividing your income with the Envelope Method.
- Wants vs. Needs: The difference between a want and a need can be unclear, so it's easy to fudge the system. For example, some groceries are a need, like vegetables, while others are wants, like ice cream. Some clothes are vital, but how many outfits do you need before it's a want?
- High Effort: For this method to work, you need to track each purchase and sort it into one of these three categories to keep a running tally for the month. This might mean going back through bank transcripts weekly or even daily, which takes a high level of commitment.
The idea behind zero-based budgeting is giving every cent a purpose. All of your money goes to purchases, savings or debt payments, so your income minus your monthly expenses should equal zero. If you end up with a surplus, add the leftover amount to next month's budget or move it into your emergency fund.
- Reveals Spending Habits: This method begins with totaling your monthly income and tracking your spending for a few months. You'll use that data to sort your expenses into categories and estimate how much money you need for each category. Zero-based budgeting can be eye-opening in helping you see where all your money actually goes.
- Helps Prevent Overspending: With this type of budgeting, the goal is to keep you from spending more than you have. If you've already allocated every cent for the month, there's zero left to spend on extras.
- Customizable: Two families’ zero-based budgets might look totally different because of their diverse expenses and needs. Without rigid rules about how much money goes where, you can decide what to devote to each category from paying off your car to saving up for a living room set.
- Time Commitment: Zero-based budgets are for the detail-oriented and dedicated. To hold yourself accountable to only spending what you have, you need to closely monitor your money and keep good records.
- Variable Expenses Can Put You in the Negative: Sometimes you'll need a little more than you planned for in one category. Unexpected or irregular expenses like replacing a broken appliance or holiday shopping might put you over the limit if you forgot to factor emergencies into your budget.
- Unsuited to Some Incomes: Freelancers or hourly workers with shifting schedules can have a hard time knowing how much they'll earn each month. As a result, it's tough to guess how much they can safely spend on a zero-based budget.
The 80/20 Method
The simplest of all the common budgeting plans, the 80/20 Method is an even more streamlined version of the 50/30/20 Rule. With this system, you put 20 percent of your income towards savings and 80 percent towards everything else.
- Makes Saving a Priority: If you struggle with saving money over time for a large purchase, the 80/20 method is a step towards making saving a habit. Some financial experts call the 80/20 method paying yourself first because you're paying into your own savings account before you spend anything else.
- Low Effort: The 80/20 method removes the need to discern between wants and needs or split your expenses into categories. With this approach, you minimize the time you need to spend tracking your purchases. Just take your savings straight off the top, then spend the rest.
- Lack of Accountability: If you can't remember the last time you put money into a savings account, this system ensures that you start saving. However, if you're running out of money by the end of the month, the 80/20 system won't tell you how or why that happened.
- Only Covers the Minimum: Financial experts say that 20 percent of your income is the least you should be saving. For retirement alone, you'll need to save between 10 and 20 percent of your monthly earnings over your whole career. Once you achieve 80/20, try pushing yourself to 70/30 or 60/40 to save for college, healthcare or that bedroom set you've been eyeing.
Enroll in Automatic Savings
Saving money over time for a large purchase is hard, so the more you can save with a minimal amount of effort, the better. Using systems that let you save automatically makes saving feel painless. One option is talking to your bank about enrolling in automatic savings, which will route some of your paycheck into a savings account each month.
If you need a system that tracks and reports your savings while you're on the go, try automating the saving process with a mobile app. There are an ever-growing number of programs that make budgeting a breeze, so do your research to see which one works for you.
Set a Monthly Goal
It's easy to get price tag paralysis when you're looking at a large expense. To make big-ticket items seem more manageable, consider breaking a large number into several smaller ones by setting monthly saving goals. Start by considering how long you have to save. If you need a kid's bedroom set by the time you move in six months, then that supplies your time frame.
Next, divide the cost of the purchase by the number of months until the deadline to find the amount you'll need to save each month. Need to spend a little less this month? Save what you can, add the remainder to the amount left to save, and divide this new total by the number of months left to get your new savings goal.
Create a Separate Savings Account
When you put all your savings in one account, it can be tough to distinguish what's okay to spend on a dining room set from your emergency or retirement money. To see at a glance how much you have for each goal, talk to your bank about setting up multiple savings accounts to give each fund its own home.
Earn Extra Income
Along with putting some of your paycheck towards a furniture fund, another method to save up and reach your goal faster is earning extra cash. Even if it's just a few hours of overtime a week or a couple of small sales, little sums start to add up. Some simple ways to make money for furniture include:
- Getting a Side-Gig: According to a survey from Bankrate.com, nearly half of employed Americans have a side job along with their regular part- or full-time work. Try picking up freelance gigs, making something to sell or renting out a spare room.
- Holding a Garage Sale: Things you rarely use are prime fodder for a garage sale. If you're getting a new loveseat, sell the old one rather than putting it in storage. Consider collaborating with neighbors to create a bigger sale that will draw more people, and keep prices realistic to make the bargain too good to miss.
- Using an Online Marketplace: If you have an item with special value to a niche group, like a rare comic book or designer shoes, you might be better off selling it in an online marketplace than at a garage sale. Searchable listings make your item easier to find for the people who are willing to pay more for it.
Reduce Expenses and Discretionary Spending
Saving for a big purchase often requires sacrifice, either in the form of cutting back on regular expenses or extras. Thankfully, it's possible to do this without forgoing the things that make you happy. By shaving a bit off your budget in areas you'll barely notice, you can have your new furniture sooner.
Reducing a few recurring charges is a huge help in saving money over time for a large purchase. Have a gym membership or subscription service you rarely use? Cancel it and put the fees towards your savings. Paying for more phone data than you need? Switch your plan to save a little every month.
Another option is reducing your utility charges. Small habit changes, such as air-drying your clothes or switching to efficient LED bulbs, can lower your bills. Many utility companies also offer incentive programs for reducing use during peak hours, receiving paperless statements or putting your bills on a budget. Talk to your provider to find out about available discounts.
Cutting Down on Extras
Discretionary spending is the amount you put towards wants rather than needs. To eliminate some non-essentials, look through your bank statements to find areas where you can spend less. For example, try buying generic brand groceries, switching from disposable to reusable items or bringing your coffee from home rather than using a drive-through.
You can also apply the same principle while shopping for furniture online. Furniture sites make comparing different brands and stores easy, putting all the price points and details at your fingertips. If you have your eye on a designer piece, you may find a similar style, size and color elsewhere for much less with a bit of research.
Some expenses come up unexpectedly. If a new job needs you to move cross-country this week, you might lose the time to save up for furniture. In this case, either a personal bank loan or store financing plan can break the amount you owe on a new sofa or other large purchase into affordable payments. Keep in mind that interest does apply, so this option will cost extra in the long run.
Time to Start Saving
Furniture is a big purchase, but it's one that rewards your investment by creating a cozy, welcoming space you're proud to call home. Taking the first steps towards your next saving project is easier than you might think. Once you've considered the methods to save up, picked the best ones for you and set up your budget, all that's left is to stick to your plan and watch your furniture fund grow.