Evaluate a Big-Ticket Item before Buying

It isn’t always easy to postpone buying things you really want. But before making any impulse purchases or signing contracts to make a big purchase, invest time to explore the rationale for these decisions and how they may impact your other financial objectives. All your choices matter, especially the larger ones involving your money, so take a moment to think them through and do a little number-crunching before you buy.

When confronted with a decision about making a big-ticket purchase, ask yourself, “Is this [fill in the blank] one of my most important financial objectives?” If your answer is no, step back and ask yourself the following:

  • What am I willing to give up in order to have this item?

  • Is spending money on this big-ticket purchase really worth it?

If you answer yes, substitute one of your primary financial objectives and do as a savvy shopper would do. Spend away — carefully, that is.

Here’s an example: Would you choose to trade your car in on a newer model now, even though it’s running perfectly fine? Ask yourself what sacrifices you’d be willing to make:

  • Are you willing to work 20 hours of overtime per week for six months?

  • Are you willing to sell your motorcycle?

  • Are you willing to charge the cost of your plane tickets to Florida next winter (which ends up costing you twice as much as paying cash)?

Too many times, you may take the easiest short-term option and say, “Charge it.” Financing provides immediate gratification and postpones the pain of having to pay for a while. If you aren’t willing to raise or earn what you need to make this purchase immediately, you need to ask yourself: Is this thing so important that you’re willing to give up twice as much for it over time? These decisions can make or break your financial plans.

You will have times when financing a big-ticket item is the only way to purchase what you need. The primary big-ticket items, other than retirement and college funding, are homes and vehicles, which you likely need or choose to finance. But before you finance anything, make sure that you have all the relevant facts, enabling you to make an informed, thoughtful decision.

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