Big expenses are a fact of life, but that doesn’t mean they aren’t daunting. Parting with your hard-earned income isn’t easy, which is why it’s important to be prepared for life’s more expensive moments. Here are 5 budgeting tips to consider before making a big purchase.
Whether it’s a major appliance, a car repair, a vacation, or a wedding party, the moment of the big purchase is upon you. Reluctantly, you reach for your bank statement to see how much you can afford, and you’re pleasantly surprised. That’s because you had the foresight to budget for those upcoming events and unexpected purchases.
You’ve heard it a hundred times, but spending within the limits of a budget is a necessity, especially when trying to save up for a big purchase. So, if you haven’t done it already, set up a simple spreadsheet on your computer (or use existing budgeting software), and then spend a few minutes each day to record your expenses and refresh your financial memory. If you’re like most people, you’ll have to skimp here a little and save there a little, but that’s part of the process. Don’t think of it as a restriction, but rather a way to fulfill those long-term, big-purchase pursuits.
One way to save money for a big purchase is to set up a savings account. The simple act of separating certain money from your regular checking account is a great way to keep those funds off limits. And, even when you feel you’re finally ready to make that big purchase, the “savings” designation attached to those dollars can make you think twice before pulling the trigger.
Before making any big purchase, ask yourself the question, “Do I need it now?” Even if you have the cash, this simple question can save you money in the long run, and it’s a great way to filter out unnecessary major purchases you’ll regret down the road.
In today’s information-intensive world, it’s easier than ever to price compare. Before making any major purchase, spend some time online to make sure you’re getting the best deal and the best product possible. Think about how long it took you to save up for the item, and everything you had to give up in the process, and you’ll appreciate the importance of getting the purchase right the first time.
Especially when it comes to big purchases, it’s important to consider whether spending a few extra dollars up front will make for a better investment. When it comes to certain types of big purchase items, including electronics, new or used cars, and even home repairs, even lesser quality can be expensive. Again, spend some time to research your purchase. Oftentimes, investing a few more dollars up front (even if it takes a little longer to save) is the smarter decision.
For many, making a big purchase involves borrowing at least some money. In times of necessity, emergency, and for certain expensive purchases, budgeting involves saving up for monthly payments and shopping around for interest rates.
If you need to borrow money to make a big purchase, it’s always smart to speak with a loan expert to see what type of loan would be best for your particular purchase and circumstances. Depending on the expense, a credit card, a home equity line of credit, or even a personal loan may be best, which is why it’s important to explore your options and get good advice.
Managing your finances isn’t always fun to do, but by following a few practical budgeting tips you can be ready for life’s expensive moments, and have peace of mind that your hard-earned cash is being saved and spent wisely.
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