If managing your budget better was your main goal for 2020, you might be rethinking your spending and money management habits in entirety. The truth is, managing finances isn’t easy for everyone, and unfortunately, there’s no one-size-fits-all approach to make it all work.
And when it comes to making a big purchase, the stakes are even higher. There’s more money on the line, so naturally the investment becomes more important to you. And sometimes, you might even need to take out a loan in order to afford the item that you’re purchasing. These are all things worth considering if you’re trying to make money management more of a priority in 2020.
To help you navigate this process, we’re diving into 4 factors you should consider before making a major purchase.
1. Do you really need it?
When you’re considering making a big purchase, or any purchase at all, it can be tempting to buy on impulse alone. But when you let your emotions dictate your decisions, oftentimes you end up with buyer’s remorse which can be damaging to your budget and your self esteem.
Before you make any decisions regarding a big purchase—stop. Think it over for an evening, a week, or longer if you can wait. To organize your thoughts, make a pros and cons list with some of the benefits and drawbacks of making this kind of purchase.
Weigh the pros and cons, think about why you want this product, and ask yourself, “is this a need or a want?”. Once you’ve had some time to think it over, your brain will naturally make a more sound decision that better aligns with your budget and priorities.
2. Can you afford it?
This one is pretty obvious, but it’s not always so easy to figure out, especially if you’re just getting used to budgeting. To determine whether or not you can afford to make a big purchase, you’ll need to take a tally of your income and expenses.
First, add all avenues of income from your primary job to any secondary forms of income—make sure to subtract taxes, benefits, and other contributions that are taken out of your paycheck. Then, add up your monthly expenses such as your rent, utility bills, and average grocery costs. There will surely be some expenses that you won’t be able to predict, so add in a little cushion to account for these extra expenses.
If you have money leftover, you can likely afford the item outright by spending less here and there. If it’s a bigger purchase such as a car or a home, you might need to take out a loan and pay it off later on. Of course, loans are also a big commitment to make, and you’ll have to consider the interest and monthly payments that come with signing a loan agreement. To figure out if this fits in with your budget and financial goals, use a tool like this Intuit Turbo loan calculator which factors in interest rates, loan term, and the loan amount to give you more insight on how opening a loan would impact your finances.
3. Can you get a better deal?
Thanks to the age of the internet, consumers have more choices than ever, and also access to more deals than ever. When deciding whether or not to make a big purchasing decision, it’s a good idea to see if you can get a better price on the item that you’re looking at. Of course, you don’t want to sacrifice quality, so make sure that you only buy from reputable vendors if you do in fact decide that you want to buy used or via third party vendor.
If you’re looking to buy the latest iPhone or are in need of a new computer, you might look at tech resale vendors like Gazelle which sells used electronic products after evaluating their functionality on a multi-point scale. Other ways to buy used items include online marketplaces like eBay or Craigslist which allow private sellers to sell their used furniture, clothing, or even vehicles. As for designer clothing items, vendors like Poshmark are great for saving money on gently used clothing and accessories.
And if you’d rather buy new, you can use this promo code extension from Honey to automatically find the best deals on the web. As you browse an eCommerce site, the app notifies you if you’re getting the best deal and automatically applies the best promo codes when you check out.
4. Is it worth the money?
As we mentioned before, shoppers have more choices than ever. If you’re looking to buy a product for a substantial amount of money, you might want to see how product competitors stack up. Consult product reviews to help you decide if the item you’re thinking about buying is really worth the high price point.
With these purchasing tips, you’ll be managing your money more efficiently than ever before!