It's important to make sure that you're financially ready to make a large purchase – and that it fits in your budget. What qualifies as a big purchase can vary from person to person, taking into account your household income, amount of debt, or size or your retirement savings.
When considering a large purchase, ask yourself the following questions before signing on the dotted line.
If you can afford to pay cash for the product or service without depleting your emergency fund, then you should be OK making the purchase. This means that the purchase should not adversely affect your current monthly budget.
If you do not have the cash to cover the purchase, do without t until you have enough money to pay for it in cash or manage a stable monthly plan. Whenever possible, avoid making big purchases on credit cards.
This question helps you really think about whether you need the product or service or if it is something you simply want or a luxury purchase. If it is a luxury purchase, be sure that you can afford it and that you can pay cash for it. If it is a true need, then you need to determine why you need it and when.
For example, you may need to settle some debts, since your credit is in desperate need for repair. But you do not need to file bankruptcy to achieve this. Determining if the purchase is a want or a need can help you to prioritize it in your budget.
If you do need this service or product, but you do not currently have the cash for it, is there any way you can do without the item for a short period of time?
For example, if your dryer has stopped working, and you need to purchase a new one, can you hang your clothes out to dry or can you use your local laundromat while you save up for a new dryer? You may also be able to borrow the item from a friend or family member while you are saving up to purchase one of your own. You can also set up a rainy day fund to help you save up the costs.
It may be worth the money to spend extra to get the better deal or top of the line product that will hold up and deliver results. For example, you can purchase an average vacuum cleaner at a store for anywhere from $50-$80, but these vacuums often break after a year or two.
If you purchase a more expensive vacuum for $500 with a five-year warranty, you may end up saving money than if you bought a cheaper vacuum and had to replace it a year or two later. This is especially true if you can purchase the expensive vacuum on sale.
When you purchase a big-ticket item or service, you should take the time to thoroughly research the reviews and issues related to that product or service. You should research several companies that offers the same product or service with the same features you want at the best value.
Read consumer and company reviews, check out the results and reports on the durability of the product, and even check the price of each competitor to see how well the value holds up. Then, you can be sure you are making the right purchase for you.
Comparison is the fun part. As you get to shop around and try to find the best deal. The key here is to look for the best overall value for your money.
Some people believe they are saving money by going the cheapest route but it can backfire. There’s a difference between being frugal and being cheap. In the case of the former, you’re getting more for your money. In the case of the latter, you’re buying something that is highly beneficial and in some cases necessary.
