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When considering a major purchase like a house, a new car, or even a new appliance for your home, it’s no time to be impulsive.
And because we’re so close to the start of the holiday rush, I know many of you will be considering making a major purchase this Christmas.
That purchase, unless you’ve been saving for it, can mean a significant hit to your budget and savings account.
If you can’t pay in full, you’ll end up with monthly payments that will squeeze your budget even tighter if you haven’t increased your income or decreased another line item to make room for it.
Often, after making a large purchase, you may be left with a feeling a dread. You may be wondering how you’re going to be able to afford it, particularly if you’ve financed it.
Plus you might be thinking about all the other things you could have spent that money on.
You may even be mad at yourself for wasting money and going into debt.
If you’re already feeling stressed about money, a big purchase that you don’t really need is only going to increase that stress level.
A major purchase can leave you paying for it for years to come, reminding you again and again that maybe it wasn’t the best financial choice to make.
So, before you start living with a pile of regret or anger, it’s time to take a step back and evaluate if this is really the right purchase for you. And you can make that evaluation with a few simple questions, asked of yourself before you make your purchase.
5 QUESTIONS TO ASK BEFORE YOU MAKE A MAJOR PURCHASE
CAN I AFFORD IT?
Simply said, if you can’t afford it, you shouldn’t be getting it. Maintaining or improving your current lifestyle (and credit rating) are more important.
Take into consideration how much it will cost you now (down payment) and how it will impact your budget (monthly payment). Look at your buying options. Will you save money by paying all at once or paying off early?
You may also want to consider the time of year because many items have lower prices at certain times of the year. For instance, a new TV might be a better purchase on Black Friday or at a holiday sale.
Current year car models are reduced when the newer model is released so buying a new car may be a better purchase in the summer when the dealership is making room for the new models.
WHAT OTHER COSTS WILL I INCUR BECAUSE OF THIS NEW PURCHASE?
Your major purchase will most likely include additional costs. Things like cars and homes have ongoing costs. Purchases made on credit cards or through loans will come with interest payments. Cars have added fees like delivery and taxes. Homes include extra charges like closing costs and home warranties.
Even simpler purchases like TV’s and computers can come with extra costs like extended warranties, additional software needs, added internet access, and virus protection.
Consider how much your purchase will cost to maintain over time and what additional items you will need to purchase in the future.
IS THIS THE RIGHT TIME TO MAKE A BIG PURCHASE?
We talked about making some purchases at the right time of year, but what about the right time in your life?
Do you really need this purchase right now or is it just something you’d like to have? Could the money be used for other, more important things? Do your kids need braces, and if so, is that more important than a big screen TV? Probably.
Before making an impulse purchase, consider the other things you could be spending that money on and decide how important this purchase is right now. That’s not to say you can never have it, just that now might not be the right time.
DOES IT HAVE TO BE BRAND NEW?
While new is shiny and pretty, it’s usually not the least expensive option. Consider a gently used version instead.
For instance, a used car in the same make and model of the brand new one you want will be much less expensive and so will the insurance you’ll need to protect yourself. Shop around, both online and at stores, for gently used items that can be a better option for your wallet than buying brand new.
eBay is a great place to shop for used items, and many are still in the original box or packaging.
WHERE CAN I FIND THE BEST VALUE?
If you’ve decided that now is the right time and you can afford it, make sure you’re getting the best deal possible so that you don’t regret your purchase later on.
If your major purchase is a new house, consider moving just 10 minutes further out from the city than where you live now. Moving out to the suburbs and even to a more rural area can mean a significant difference in the cost of a home. You may even be able to buy more home for your money.
If it’s a newer model used car you’re looking for, shop around. Visit several dealerships and look online. And don’t forget to check the newspaper, many people still list their cars in the classified to sell themselves, saving you all of the dealership fees and markups.
As for the new electronic item you’d love to have, visit different stores and online sites. Compare prices and features all around before making your final decision on a purchase so that you choose the best electronic for your needs. And, if possible, find a refurbished item that will be significantly less expensive than buying brand new.
Finally, make sure you use these money saving tips and strategies so you know you’re saving the absolute most money you can save when you do decide to buy.
Use these questions as your checklist before making an impulse purchase; you’ll be glad you took the time to consider everything involved. It may take a little homework and research to find the best price, and after shopping around, you may even decide it’s not the right time.
The last thing you want is to make a major purchase that affects your finances for years to come only to regret making it because you found a better deal later or didn’t really need it.