There are several things to keep in mind before spending on a big purchase. These items can wreck a sizeable hole in your pocket and it won’t be easy to recover from such purchases in the short term.
A large purchase need not always have a high dollar value attached to it. It can be something simple as a yoga mat that calls for you to make major lifestyle upheavals. Also, what you consider a big purchase may not be what others consider as a big purchase. Do not fall into the fallacy of comparing apples with oranges.
Most people make large purchases without spending a second on the why behind it. Sometimes it’s just ego-stroking—living life the way someone else with bigger fortunes live. Never do that.
Let’s analyse what you must think of prior to big splurges.
1. Can I afford it?
The very first thing you should consider is the affordability—whether you can afford it or not? If not, then you don’t have to waste your time and money on that. Planning and executing purchases which you can’t afford leads to a gigantic debt problem. For example, if you want to buy a house which is out of your budget but still want to purchase, will cause you to take a loan from banks putting down a big pre-payment eventually putting yourself in debt. Hence you should avoid the things which you can’t afford.
2. How long it takes to pay for it?
You should consider the “earning time” for the item you want to purchase. Before making any big purchase take a note of how long you will take to earn for that item. This will help you to get rid of unnecessary purchases. For example, you want a car that costs $8000 and you are earning 2000$ a month. You need to work for 4 months to get $8000 to purchase that car. If you think that working and saving all the money for that car is worthy, then it may be good. But if you think it is not worthy then you may end up regretting later.
3. Do they offer the best price?
The thing you are purchasing through sales or offers may not offer you the best price. For instance Vivo Y15 on grand sale days costs $50 more than when there’s no explicit sale mentioned. If you are purchasing it from a shop or showroom, the prices are going to vary. Don’t rush the purchase, make sure you search for that item in different places and you will find the best price for the same.
4. What will be the future cost for that item?
The final amount you pay isn’t any item’s cost. This is true for most big purchases. You either pay in cold-hard cash or with your time. There are various ongoing costs on items like cars, home, bikes, etc. Before purchasing any item you want you must consider the long-term costs for it, this will help you arrive at better purchase ideas. For example, if you’re purchasing something on EMI the rate of interest and how long are you paying the interest matters. What will be the cost for the maintenance of that item? Different liabilities have their maintenance costs depending upon how you use them.
5. Where the item will be put?
There is a lot of issue of space, before purchasing any item you should think of where will you put that item. Spacing is a common issue for everyone, we never think about the space that item would consume and purchase it nevertheless. We should consider items that help in preserving space as well as avoid buying unnecessary things we don’t have space for. For example, you like a cupboard and want it but you already have one at your home. If you want that you need to free up space for that item by removing the cupboard you have.
6. Where else I can use the money?
Keep this in mind that buying unnecessary items is a waste of money and hard work you put to earn that money. Instead, you can use that money for some other important work or in buying an item you really need. Do you have any debt? Do you have some unpaid bills? Have you saved money for your retirement? If the answer to all the questions above is a resounding “no” you may consider dropping the idea.
7. What mistakes you made in the past?
Remembering the mistakes you made a while ago when making a big purchase helps you to not do the same in the present. Asking yourself every time while purchasing, in a similar decision can save you from experiencing the bad feeling again. If you do not think about the past mistakes you made while making a big purchase you may end up with a similar mistake again.
8. How often the item will be used?
Considering the usage of the item is the most important thing before buying any item. Sometimes you just buy an item which you need for a handful of times in your life and let it be a dust magnet. This wastes both money and space. If you really need such type of item for use, you can take it from your friends if they have one. Or you can take it on rent which costs less and save both money and space.
9. Can I wait for 24 hours?
It is very usual for people to get attracted to the items they saw when window shopping or when surfing online on e-commerce sites. Do not get distracted by the charm of the offers. And in case you can’t reign in the temptation— wait for at least 24 hours. You may have heard of the 24 hours rule popular in personal finance management circles. You have to apply the same trick here as well. Wait for 24 – 48 hours. While waiting for 24 hours if you feel you don’t need to purchase then its good and if you still find you need to buy then buy without hesitation.
10. Where the best value can be found?
Don’t buy the items in a hurry, visit different stores, see different offers for that item. Find the best value for that item and then purchase it. Many people tend to do shopping from one store and do not bother to visit other stores. Maybe you will find better price value in another store and you will end up regretting the purchase you made earlier. Do visit different stores and search for different offers before buying the items.
11. Can I borrow the item?
If the item you want will not be used often and is used for a handful amount of time. And later it will be stored in the storeroom, then buying that item is not a great idea. Instead, you can borrow it from someone you know like your friends, family members, relatives. Or else you can rent it when there is a need for that. This way you can save your money and space.
12. Can I get a discount on the purchase?
The great question to ask yourself before any big purchase is, if you’re getting a discount on your purchase? Many fool you with the discount tag. For example, if the price of an item is $50 they will jack up the price to $100 and add a 50% discount tag.
Many stores apply this strategy to attract more customers. If you don’t want to get fooled by the discount tag, then you should know the actual MRP of that item. After that, if there really is a discount on a purchase than you can buy it, if not then don’t waste your hard earned money.
13. Is there is a return policy?
While making a large purchase you have to make sure about the return policy because it is one of the most seminal things. What is a return policy? Returning back the item you purchased within a specific period of time with the acceptable condition and getting your money back. Isn’t it great? Indeed it is. Most stores in the real-world even offer returns if you have buyer’s regret. I am not kidding. You have to see the return policy from where you are buying the item and understand it. That being said, some items are not returnable you have to check for that and read the return policy very well.
If you meet the terms and conditions of their return policy then only you can return the item.
Always be mindful of the financial strain or lifestyle upheavals that big purchases can and will put you through.
Be very clear of your EMIs and have a savings nest egg you can rely on should emergencies arise. Buying a house is often something you cannot undo. Think it through with friends and family members before you commit to something like that.
What do you think?