We are all used to spending small amounts of money on a daily basis and probably don’t put that much thought into deciding what to buy at the grocery store, but when it comes to making a big purchase, that often requires a lot more careful consideration.
If you have your eye on a new Dodge Charger for example, you will likely have read some reviews, had a look at the car personally and worked out your finances.
There are a number of different things to consider before you finally commit to investing a large amount of money on a major purchase like a home or a car for instance, so here is a look at some of the questions you might want to ask yourself beforehand.
Defining a financial threshold
The world is not equal of course and some of us have much more money or a great deal less than others, so defining what is a big purchase does come down to your financial standing, to a certain extent.
It could be that you don’t blink when ordering a $300 bottle of wine at a restaurant or you might have a household income that considers a lower number to be a reason to hesitate before parting with your cash for something.
A major purchase can probably be defined as buying an item that would definitely affect your monthly budget or costs more than you have in available cash. Most of us don’t have all the cash needed to buy a house or a car without needing some finance to help us do it, so regardless of your own financial threshold, there are some purchases that are always going to be considered a big deal.
Desirability and affordability
Acting on impulse is never a good idea when it comes to money, especially when you are talking about committing to major purchase.
It is always a good idea to take a brief step back before making a major purchase decision, just to confirm to yourself that it is what you want to do and what you really want, and whether you can really afford it.
All too often, you might buy an expensive item on impulse while out shopping, only to regret the decision shortly afterwards.
You wouldn’t rush into buying the first house you see, without thinking about all aspects of the purchase from whether it is the right property for you and in the right location, to checking that your finances can cope with the payments.
Always take a moment to decide that your intended purchase is exactly what you want and is right for you, before agreeing to spend your money.
Status symbol or useful investment?
It definitely feels good to live in a smart home in a great neighborhood and to drive a high-spec luxury car, but you need to ensure that your finances are robust enough to match your dreams and ambitions.
The average new car can cost on somewhere around $30,000 as a median figure, with some luxury models rising well above that figure when you add in all the options. Nothing wrong with wanting a great looking car that does everything you want and need for your purposes, but stretching your finances beyond your own comfort level, is not going to enhance your enjoyment level.
Take your time and think about the money you are spending, once you have done that, it will probably help you to make that next big purchase are more rewarding experience.
George Barnes works in personal finance and likes to help people when it comes to making a large purchase, to ensure they are properly prepared and won’t be putting themselves under financial pressure. Find his articles on money saving and personal finance blogs.