5 Factors to Consider Prior to Making a Large Purchase

Many times in our lives, we have to make large purchases and with that will come some challenges and indecisiveness on what to do. Most of these purchases could have waited and then others are necessary. Spending your hard-earned money should not be an easy decision. It should take some thought and if you have to sleep on it, by all means, you need to do so.

 

Things to Consider

After paying down your debt and building a solid amount in your savings account, you have to discuss any attempt to make a large purchase. This is especially true when you share finances with a spouse or partner. In addition, prior to making that large purchase, you have to consider the price and the affordability.  You have to think about how the purchase will affect other areas of your life and how it will impact your life in the future. For example, if you were to purchase a home at a time when you are unable to afford it, this could greatly impact your financial future.

 

A Sense of Peace

Large purchases can place a financial strain on you for the short term, but some people will make the purchase risk anyway for the long term benefits that they will gain. If you were to decide and build a new home after careful thought and the resolve that you may have to drain your savings account, but the home provides a sense of peace and security to you and your family, then it might be worth the journey. In addition, because you are using your savings to build your home, it allows you to avoid paying on a large mortgage for 30 years.

 

The Price

Price is so important when making a large purchase. Even in a situation where you are using your savings to build your home. You want to make sure that you plan the construction, down to the last cent. You don’t want to have any regrets. There are several things you have to consider:

  •       The purpose for the purchase
  •       The risk
  •       The inherent value
  •       Your commitment to the purchase
  •       The emotional investment

 

The Purpose

No matter what you spend money on, it should serve a purpose. It is important not to rush the purchase. If you have to ask for opinions, you should. You should never buy out of ‘wants,’ but your need.

 

The Risk

Once your purpose is established (need over want), it is time to look at the risk. Usually, you should only take risks on the things that you need. Be careful how you use credit because this adds to the risks.

The Inherent Value

Does the purchase have an intangible value that improves the quality of your life? The inherent value should take care of a specific need in your life.

 

The Commitment

If you were to make a large purchase such as a home, then you have to be committed to paying a mortgage for thirty years. If you were to purchase a vehicle, you would have to consider ongoing maintenance and the recurring cost of buying fuel.

 

The Emotional Investment

Emotions are always attached to making a purchase, large or small.  However, you should never buy something on impulse or you may make the wrong purchase. Even if it is tempting to make the purchase, it requires careful thought.

 

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