6 Things To Avoid Buying Until You Have $100,000 Saved Up
Written by
Martin Dasko
Edited by
Amber Barkley
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As your income increases, you may want to spend the money on treating yourself as a reward, since it’s natural to want to adjust your spending habits now that you see money rolling in. However, there are some purchases that you should avoid until you’ve saved up enough money to be in a position to make them comfortably.
What things should you avoid buying until you have $100,000 saved up?
Club Memberships
“High-end club memberships, like golf or country clubs, come with hefty initiation fees and ongoing dues,” Jeff Rose, CFP and founder of Good Financial Cents. “These can range from $5,000 to $100,000 per year, and that’s without playing a round of golf!”
You may want to create networking opportunities for yourself by joining the country club in town to meet new people, but this won’t be worth it if you’re not in the financial position to make such an investment yet.
“While they offer prestige and amenities, you should ensure your savings can comfortably absorb these luxury leisure expenses.” Rose acknowledged that these do come with perks, but the reality is that you have to get your finances in order first.
When you have money saved in the bank, you can decide how you will invest in yourself. You may discover that joining that golf club would help with your career options.
Luxury Cars
“[Luxury vehicles are] not just pricey to buy; they cost a lot to insure and maintain, too,” Rose shared. “Plus, they can lose value fast. It’s better to have a solid financial cushion before going for that fancy ride.”
As tempting as it can be to treat yourself to a brand-new luxury car, you have to be realistic about your financial situation. That luxury car could be a status symbol that you simply can’t afford at this point in your life. This is why you must practice delayed gratification so that you can focus on saving money and investing your savings until you have the resources to treat yourself. That luxury car purchase at the wrong time could hurt your financial future.
Purchasing a New Home
You’ll want to save the money up for your down payment, along with other expenses associated with closing a home, before you make this investment. This is why it’s crucial that you build up your savings before you even start looking for that home.
Why should you save at least $100,000 before you search for a home? Here are some of the costs to consider:
- Your down payment should be about 20% of the purchase price, which could easily be up to $100,000.
- You have to spend up to 5% of the loan amount on closing costs, ranging from lawyer expenses to lender fees.
- The lender may require you to have money saved in the bank to ensure that you can afford the monthly mortgage payments.
- Your consumption will increase when you move into a home. This includes expenses like furnishing every room and purchasing tools for lawn maintenance.
This is why it helps to focus on saving as much as possible before deciding to get into home ownership.
Expensive Home Renovations
“Large-scale home upgrades can be a bottomless money pit,” commented Rose. “It’s easy to go over budget, and you might not get your investment back if you sell. Having a good savings buffer helps you handle any unexpected costs without straining your finances.”
Home renovations can quickly add up with the rising costs of raw materials and with the price of borrowing money increasing. You’ll want to save money to handle the possibility that the project costs more than anticipated.
Risky and Speculative Assets
“Many younger people are investing in very risky investments, such as cryptocurrencies, even before they have $100,000 saved,” said Doug Carey, a chartered financial analyst (CFA) and owner of WealthTrace. “This is a big mistake. As I tell my clients, when you invest in high-risk assets, you need to be prepared to lose it all.”
The investing world has changed over the last few years, with young people turning to digital assets that promise astronomical returns. Even though it may seem boring to allocate your funds towards an investment that provides an 8% return, this beats losing your money because you gambled. As always, when an investment seems too good to be true, it usually is.
Is there ever a right time to invest in speculative assets? It comes down to your risk tolerance and wealth, since there’s no such thing as a one-size-fits-all answer here. Carey shared his advice to clients: “If losing it all would upend your lifestyle, then you shouldn’t be investing in it.”
You could also extend this logic to art and expensive collectibles. Some investments may be out of your reach until you reach a higher financial level. There’s nothing wrong with waiting until you have the funds.
Expensive Vacations
“Pricey vacations are another luxury item that people should not be buying unless they have at least $100,000 saved,” according to Carey. “The cost of traveling is very high right now, and that money can be saved to a retirement account instead, allowing the returns to compound over many years.”
With the rise of social media content creators and the constant updates, you may feel the urge to splurge on expensive trips that you don’t have the finances for yet. It’s crucial that you find ways to entertain yourself and to travel within your budget before you have the funds saved up for these luxuries.
Closing Thoughts
As you’re saving up and building wealth, you’ll feel the temptation to treat yourself or to upgrade your lifestyle. While there’s nothing wrong with the occasional splurge, you want to ensure that you save $100,000 before you take on certain risks. By creating this financial buffer, you can feel more comfortable with making those purchases.
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