You’ve been thinking about making a big purchase — maybe a new truck, boat or ATV. How can you make that happen without letting it get in the way of your other financial responsibilities, especially if you don’t have the cash to buy it today?
Paying cash is better than going into debt
Saving $100 per month is only $3.33 per day, and there are lots of ways to squeeze out those dollars. Instead of ordering a soda in a restaurant, drink water. See if you can negotiate a better rate on your cell phone or cable plan. It takes time, but it takes a lot less time than paying off a big debt at a high interest rate.
What account type is right for you?
There are many types of investment accounts. For a big-ticket item, the best choice is typically an individual or jointly owned taxable account. Investment accounts aren’t guaranteed the way bank accounts are, but they might provide comparable or possibly better rates of return. Your savings can grow even faster when you earn interest on the money you set aside.
Choose your funds
You’ll likely want to choose funds with low levels of volatility, such as Homestead’s Daily Income Fund or Short-Term Bond Fund. But depending on how long you plan to save up, you might look into a blended portfolio that includes a small amount of a conservative stock fund, such as Homestead’s Value Fund. Equities carry higher risk and aren’t right for everyone, but historically they have delivered higher long-term returns. Regardless, when you’re just a year or two away, it will be time to move to a money market fund to reduce your risk exposure.
Debt securities are subject to interest rate risk, credit risk, extension risk, income risk, issuer risk and market risk. The value of U.S. Government securities can decrease due to changes in interest rates or changes to the financial condition or credit rating of the U.S. Government. Investments in asset-backed and mortgage-backed securities are also subject to prepayment risk as well as increased susceptibility to adverse economic developments. High-yield, lower-rated, securities involve greater risk than higher-rated securities.
Homestead Funds does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
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