08 August 2012

Three Things To Consider Before Making a Major Purchase

Making a major purchase like a new refrigerator or a new car can be quite stressful. You want to buy the item you need and/or want and you also want to get a good price that’s within your budget.

These purchases are usually planned for or expected, they're not the spontaneous "I see it, I want it, I think I'll have it" type of purchase. These spontaneous purchases can be managed with the $100/24 Hour Rule

Often the stress of making a major purchase is so overwhelming that people simply throw up their arms and buy whatever they find first. This isn’t a great way to make an important decision. You’ll no doubt be left with at the very least with buyer’s remorse and at worst a blown budget.

Instead, consider these three factors before making any major purchase and ensure you’re happier with your decision.

1. How Much Do You Have To Spend?
This should always be the very first question and ideally you’re looking at paying for the item with cash. If you absolutely have to finance it, how much can you afford and still achieve your financial goals? How long would it take you to save the cash if you focused on just saving for this item? Can you wait that long, or make-do with what you have until you have the cash saved?

2. What Features And Functions Does Your New Item Have To Have?
Start with the must haves first. Then, if you have room in your budget to add on some luxury features you’ll know how much wiggle room you have. Ignore the bells and whistles until you are sure you have your basic requirements met - let the salesperson talk and demonstrate by all means, just don’t lose sight of what you really want with the purchase.

3. Overall Buyer Satisfaction
Let’s face it; some purchases are more rewarding than others. Before you buy, consider how much pleasure the item is going to offer you or how much value it will add to your life. For example, a new refrigerator may or may not add much to your overall quality of life.

Sure you need a fridge but do you need the most expensive one? For most people, material things don’t bring pleasure. Experiences do however provide pleasure. Evaluate the item and decide how much it will actually add to your life. You can then create a more reasonable “emotional” budget for the item.

For example, let’s say your car dies and you need a new car but upon evaluating the overall buyer satisfaction you decide that you’d much rather continue saving money for that luxury around Australia holiday than spend hundreds of dollars a month on car payments. This decision changes your budget.

You may be able to afford $500 a month on car payments but you may not want to spend that much each month.

Buying big ticket items can be stressful and overwhelming. Asking yourself these three questions before you start shopping can help you approach any purchase with a clear and logical plan, ensuring you get the item you want at a price you can truly afford.

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