Buying a new house, car, or household appliance can be exciting. Barring an emergency, rarely do big-ticket purchases like these fall into the category of impulse buy or spur-of-the-moment decision. Instead, expensive investments are pre-planned and heavily contemplated. However, during the decision making stage, it’s important that you focus on the right factors. Here are three essential questions to ask yourself before making a major purchase.
1. Can I Truly Afford This Item?
The first question you should ask yourself is, “Can I truly afford this item?” With opportunities to obtain bank loans or open new lines of credit at most retail stores, it’s easy to feel that you can afford the premium purchase of your dreams. But you must dive deeper in order to answer the question honestly. Here are a few points to consider:
- How does this purchase fit into my existing budget?
- Do I have enough cash to comfortably pay for this outright?
- If I need a loan or line of credit (LOC), how much will the interest rate be? How long will it take to pay off?
- Will my LOC significantly impact my credit score?
- In the case of an unexpected emergency, will this purchase still be affordable?
After answering these questions, you’ll have a better idea about whether you can afford your proposed purchase or not.
2. Should I Wait to Buy This?
The second question to consider is, “Should I wait to buy this?” Sometimes waiting is to your advantage. Other times, it’s not. For example, if you’re considering buying a house because your current home value is high and interest rates are low, it may be best to seize the moment due to fluid market variables. On the other hand, if you’re considering booking a pricey overseas trip during peak travel months, it may be beneficial to wait. When asking yourself whether you should move forward or wait, consider the pros and cons of both options, then make the decision that’s best for you.
3. How Will This Purchase Impact My Family?
If your desired purchase has passed the affordability and timeline test, it’s time to ask yourself, “How will this purchase impact my family?” This inquiry forces you to think about the bigger picture. Sure, you want a pool, but how will it impact your life? Maybe a new pool will create bonding opportunities, encourage a more active lifestyle and serve as a form of self-care. Or, it may reduce the usable space in your backyard, become an annoyance to maintain, and rarely get used. Only you know whether your purchase will add joy to your family’s life or cause undue stress, so be honest with yourself and decide accordingly.
Making a large purchase is a decision that should be considered with care. So, take adequate time to ask yourself these three essential questions and rest assured that you’ve made the right choice.
