This is the sixth post in a multi-part series on how to manage your finances so you can build up your savings, have a safety net, and still live comfortably today without having to live paycheck to paycheck. Click here for part 5, which discusses how to deal with debt.

We all love to buy things.  Getting some new clothes or a new computer makes us feel good.  Shiny new things activate the pleasure centers in our brain.  Unfortunately, some of the more expensive things we like to buy can put is in debt, and if you read my last post, you’ll know that’s something you want to avoid at all costs.

Ideally, you’d be able to fund all of your wants, both small and large, with one single payment at the time of purchase.  This is obviously not always possible for extremely large purchases, such as a house, or a jet (you’re not seriously considering buying a jet if you’re reading this article though, right?).  But for mid-size purchases, it’s actually not as tough as you may think.

The key is planning and a little foresight.

If you realize that you want to buy a large item early on, then you can actually avoid financing it.  How?  Pay yourself first.

Set up a savings account for any large items that you think you’ll want to purchase later on down the line.  Every month, transfer a portion of your paycheck into that account.  When you’ve saved up enough to buy the item, withdraw the money from your account and use it for the purchase.  This is possibly one of the simplest things you can do to save yourself credit and debt hassles down the line.

Sometimes, you may not be able to save up for a large purchase.  You may not have the time, or the purchase may be so large that there’s just no way you can make it without financing it.  If that’s the case, this post obviously doesn’t apply.  However, if you really try, I bet you can set up an account like this for purchases that you may think are too large.

Lets look at an example: me.  I’m a sucker for sports cars.  I don’t know what it is about them, but they make me swoon.  I love ‘em.  I’ll always love ‘em.  Some people have childhood sweethearts.  My childhood heartthrobs are Ferraris, Lamborghinis, and Bugatis.  I know that when I get older, I’m going to have to shell out some serious cash for one of these guys.

So what did I do?  Well, when I started working, I got a car, and the same month that I got that car, I started a fund for my future ride.  I knew then that I’d eventually need to buy another car, and I also knew I wanted to pay for it all up front.  So I started setting aside $500 a month, every month, for my new car.  My plan is to keep putting aside some money each month until my current car breaks down, which will hopefully be in a long, long time.  Once it does, though, I’ll have enough to pay for a new car in cash.  By doing this, I avoid the possibility of spending more than I should on a depreciating asset (since I’ve already allocated money for the purchase, and I know in my mind that that money will only be used on a new car), and I avoid the possibility of going into debt.

You can do this for any large purchase you know you’ll need to make in the future: a car, the down payment on a house, new appliances, a computer, etc.  Try it.  The best part is, you won’t be upset that you’re spending all that money on an item because, in your head, you’ve already told yourself that any money you put aside will be used specifically for that item.  No guilt.  Gotta love it.

In part seven of this series, I talk about insurance, what you need, how much you need, and why.  Read on.