- Sometimes, we end up spending money on one-off expenses that cost a lot.
- Before moving forward, make sure to do your research and figure out a payoff plan if you can't cover your costs up front.
Don't move forward until you've addressed each and every one of these questions.
We all have recurring expenses that eat up our income month after month. These include things like food, medications, rent payments, auto loan payments, and utility bills.
But from time to time, you may have to make a larger purchase -- one your regular paycheck can't cover. Before you move forward with such a purchase, it's important to run through these key questions.
1. Can I pay for this outright?
If you're buying something that's a need rather than a want -- say, a new fridge because your old one just gave out on you -- then you may have to move forward right away even if you haven't saved up for it. But if you're looking to buy something that isn't a necessity, like a new TV, then your goal should really be to pay for it all at once, as opposed to landing in debt because of it.
Now to be clear, it's okay to dip into your savings account to treat yourself to a large purchase here and there (that is, as long as you leave yourself with enough cash to cover emergencies). But if you can't pay for a luxury purchase in full, then you may want to hold off until you've socked away more cash for it.
2. What's the best way to finance this?
If your large purchase is a need, not a want, then you may have to resign yourself to financing it in the absence of having the cash. To that end, you may have different options.
A credit card might seem like your best bet, especially if you're not close to having reached your spending limit across your various cards. But you can also look at other options. For example, if you think you'll be able to pay off your purchase within a few months, you can look at a "buy now, pay later" plan, or BNPL plan.
BNPL plans let you pay off purchases in installments, usually over the course of three months or less. The good thing about them, though, is that they don't charge interest like credit cards do as long as you stick to your payment agreement. And so a BNPL plan could be a good option if you can't pay for your purchase in full now, but you're expecting a bonus from work next month that will allow you to cover its cost.
3. Have I shopped around for the best price?
When you're buying a pair of socks or new sponges for your kitchen, there's a limit as to how much of your time you should give up for bargain-hunting purposes. But if you're making a larger purchase, it definitely pays to shop around and see where you can get the best deal. If you're buying electronics, for example, you can look at major retailers, but it also pays to browse on Amazon and see what price the site has to offer.
Furthermore, if you're a Costco member, you might manage to snag a good deal on things like electronics, furniture, and even larger appliances. Spending a small amount of time on research could result in paying less for your purchase.
Large purchases pop up from time to time, and that's normal. But be sure to tackle these questions so you don't end up making any poor financial choices along the way.
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