Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
Making a significant purchase requires more than just the desire for a new item; it calls for careful consideration of its impact on your life and finances.
Whether you're contemplating an upgrade to your living space or investing in a long-desired luxury, asking the right questions can transform a fleeting desire into a wise investment.
This guide outlines key inquiries to ensure your next large purchase aligns not only with your financial reality but also enhances your overall quality of life.
By taking a moment to evaluate your motives, financial readiness, and the potential value added, you can navigate the complexities of major spending decisions with confidence and clarity.
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Question 1: Do I Need It or Want It?
A need is something that is necessary for your life. A want is not essential and is a desire. Shelter, such as a house or apartment is a need. A want is a “desirable” or amenity. The same goes for a car or a cell phone. Most Americans need a car or a phone, but do you need the newest and fanciest?
If you have a tight budget or a lot of bills, things you want may need to be set aside for a time. That designer purse or new watch would look great but is it worth spending the money on?
Identify whether the purchase is a need or a want. You can ask the same questions for either type of purchase to clarify if the need is truly necessary. If you can afford a want without putting yourself in financial hardship, consider the following questions anyway – it may make a difference to your financial future.
Question 2: Can It Wait 24 Hours?
Think about it, you probably won’t come back and buy it. If you can’t wait 24 hours, you probably don’t need it, and you are most likely making an impulse purchase.
If it is a deal too good to pass up, go back to question #1.
After waiting 24 hours, ask yourself the next question.
Question 3: Can I Afford It?
If the answer is no, it is time to walk away. If the answer is maybe, can you pay cash or pay off a credit card before the grace period is over? If the answer is no, walk away.
The final question is to ask whether the purchase will hurt your ability to purchase a need in the future. For instance, if you have a 20-year old water heater, the odds are that the water heater is going to fail sooner than later. Will buying that ATV mean that the water heater, a definite need, will be out of the question? If the answer is yes, walk away and save up enough to replace the water heater before you purchase something you want.
Question 4: How Many Hours Did It Take to Earn the Money?
Put the item in the context of how long did it take you to earn the money to buy it. Let’s say you have an eye on some $500 shoes. If you make the federal minimum wage, that represents 68 hours of your work life. That’s almost 2 weeks! Are those shoes truly worth the two weeks that it took to earn the money for your style?
If the answer is yes, move on to the next question.
Question 5: What are the Additional Costs?
Most people are aware that the cheapest part of buying a vehicle or house is actually buying it. The rest of the cost is in the maintenance and upkeep. Consider that if you buy a high-end car, even a used one, means that you will lay out far more money in repairs than you will on a less fancy car. Even your windshield replacement and oil changes will cost more. Replacement parts are also more expensive than a lower-end car. Insurance is another factor. The more expensive the car, the more expensive the insurance.
If you buy those $500 shoes and put them on your credit card without paying them off, let’s see how long it will take to pay them off.
Cost of shoes: $500
Interest rate: 16%
Time to pay off: 6 months
Interest paid: $20.89
Total cost: $520.89 (or more than 72 hours at minimum wage)
A sub-question to consider is “what else can I spend this money on?” Five hundred twenty dollars will buy several weeks of carefully selected groceries. You might be better off putting $500 into an emergency account against the water heater failing, or pay down some outstanding bills.
If the costs are more than you can afford, this item falls within the want category.
Question 6: Is This the Best Value?
If an item has caught your eye, is it at the best possible price? Can you find a used item that will serve just as well? Larger cities often have high-end used clothing boutiques that offer great deals on gently used designer clothing.
Take some time and research different stores, including online venus. If you are looking at a big-ticket item, check out both positive and negative reviews as well as publications like Consumer Reports. You might be buying a name brand item that has a reputation as a lemon. Having to have it immediately without taking the time to check for the best deal is the sure sign of an impulse purchase.
Question 7: Where Am I Going to Put This?
If you are buying something large, ask where you are going to put it. An RV can make camping a breeze, but where are you going to park the thing? Will you have to pay storage fees?
Will that new couch even fit through the door?
Question 8: Does It Have a Return Policy?
If you are still having doubts, find out what the return policy is. You may get the item home and decide it just doesn’t fit right. Be aware that some companies charge a restocking fee or offer store credit instead of money back. You also want to check on warranties (and recalls).
The odds are that if you aren’t 100% certain that you want the item and you buy it anyway you will eventually come to regret the expenditure.
Question 9: Does This Have Real Use?
We all have stuff that takes up space, collects dust, and frankly, could burn up and we’d never miss it. This question is particularly useful when deciding whether or not to buy a knickknack.
Not everything has to be useful, but buying items because you think they are cool or pretty is not cost-effective.
Question 10: Have I Regretted Purchases in the Past?
If you have a closet, garage, or storage shed full of regret purchases, you may have an issue with impulse shopping. Slow down, take your time, work through the questions above and make an informed decision.
If your credit cards are full of impulse purchases and you are having trouble making your minimum payments, consider giving the debt settlement specialists at Pacific Debt a call.
FAQs
Conclusion
Making major purchases can be exciting, but avoid letting emotions or sales pressure overrule sound judgment. By first budgeting properly, separating wants from needs, understanding all your financing options, and doing your due diligence, you set yourself up for solid decision-making. Don't agonize over buyer's remorse - being an informed consumer is the best way to invest in purchases that provide true lasting value and align with your financial goals.
If debt balance creep becomes unmanageable, don't hesitate to reach out. Our financial experts can advise on managing payments, consolidating credit card balances, and creating a customized debt payoff plan. We're here to help you gain control of your finances.
The key is staying focused on the big picture. Carefully weigh each purchasing decision against your overall financial health and personal priorities. And never feel embarrassed to walk away, even at the last minute. Protecting your financial future is what matters most.
Pacific Debt Relief
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*Disclaimer: Pacific Debt Relief explicitly states that it is not a credit repair organization, and its program does not aim to improve individuals' credit scores. The information provided here is intended solely for educational purposes, aiding consumers in making informed decisions regarding credit and debt matters. The content does not constitute legal or financial advice. Pacific Debt Relief strongly advises individuals to seek the counsel of qualified professionals before undertaking any legal or financial actions.
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