We've all been there. You swipe your card for a dream item and are thrilled at first. That's until, a few weeks down the line, you can't help wondering why you thought your expensive purchase was worth the steep price tag.
Before you say "yes" to a large purchase, ask yourself these 7 hard-hitting questions. You may end up leaving that "dream" product in the store.
1. Do I have the cash to pay for this item?
This is the No. 1 question to ask to determine if you can afford a purchase.
You might have been trimming your monthly budget or using a surprise work bonus to pay for this item. Either way, make sure you have liquid funds that can cover the cost of your item. Putting it on credit means you can't really afford it, and you'll be hiking up the price once interest is tacked on.
2. Is this the best price I can get for this item?
When making a large purchase – and what constitutes "large" will vary with individual budgets – it's essential to comparison-shop before plunking down your money. Check several online listings and hit some brick-and-mortar shops to find the lowest selling price. Finally, consider buying your item pre-owned for steep savings. There can be exceptions to this "rule," but generally, don't spend any more money than you absolutely must.
3. How many hours of work will you need to do to pay for this purchase?
An easy, effective method for determining the worth of a large purchase is to calculate the total hours you'll need to work to pay for this "must-have" item. Then ask if it is really worth the price. Sometimes it is, and sometimes it's most satisfying to leave it on the shelf or delete it from your cart.
4. How else can I spend this money?
Think about the money you're about to spend on this item. What else can that money buy? Can it pay for a few weeks of groceries? Would it go further on vacation, where it can fund a priceless trip filled with memories that will last your lifetime? It might even be enough to pay for your child's wardrobe for the season! Take some time to think of other ways you can spend this money before making your final decision.
5. Have you splurged on any other large purchases recently?
If you can afford it, there's nothing wrong with an occasional pricey indulgence, even if you don't need it. But when luxury purchases become a habit, it can spell disaster for your finances. Your standard of living will rise to match your choices, and you might soon find yourself spending enough to go into long-term debt.
When was the last time you bought something this expensive? If you've been super careful with your spending for a while and can afford this purchase, go ahead and enjoy! But, if you picked up a large ticket item last week, you might want to wait a bit before buying another.
6. How often will I use this item?
Yes, the item seems essential today, but how often do you think you'll really use it? If you see yourself growing tired of it quickly or only using this purchase several times a year, you might want to re-think your decision.
7. How much will this money be worth if I put it into savings?
Even if you have funds for this purchase, you might find that you don't want it that badly once you calculate how much this money can earn you over time. Check out this investment calculator to get that magic number. The results might leave you pleasantly surprised.
Azura Credit Union has several types of long-term savings accounts that can help your money grow. Give us a call or stop by, and we'll help you choose one that's perfect for you!