How To Decide If That Big Purchase Is Worth It

It’s normal to feel some trepidation before you make a big purchase. On the one hand, you’re excited about purchasing a product or experience that you’ve had your eye on, but on the other, you may wonder if this is how you should be spending your hard-earned money. Everyone gets a bit nervous about wasting money, and that feeling is magnified when it would be hundreds or thousands of dollars.

You don’t need to agonize over those big purchases, though. These simple tips will help you figure out if you should go through with a purchase or save your money.

Check Your Savings

The first thing to do is take stock of your current financial situation. Ideally, you should have a savings account you use to pay for big purchases. This savings account should be separate from your emergency fund and your retirement savings. If you haven’t built those two up at all, it’s better to focus on them (especially the emergency fund) before making any big purchases.

If you have an emergency fund and you’re saving towards your retirement, then you can see how much this purchase would cost you compared to the amount that you have saved. It’s best if you can pay for the entire purchase with your savings instead of needing to finance anything.

For certain big-ticket items, such as cars and homes, you may need to get a loan. In this case, just make sure you have a suitable down payment saved.

Consider How the Purchase Will Improve Your Life

Once you know that you can afford a purchase, it’s time to consider how it will make your life better. The best purchases are investments that will increase in value. For example, home prices tend to go up. If you buy a home, not only will it improve your life by providing a place to live, but you’ll likely make money on it in the long run.

Of course, most purchases won’t increase in value, and that’s fine. Anything that improves your quality of life can be a good purchase. A car will decrease in value, but if you need reliable transportation, purchasing one may be a smart move. A family vacation isn’t something you invest in, but you’ll create memories that will last the rest of your life.

It’s all about what a purchase means to you. Everyone has different priorities in life. If you would get plenty of use out of a purchase, or if it’s an experience you want to have, then you should pull the trigger on it.

See if There Are Better Things You Could Purchase

Before you make a big purchase, you should make sure that there isn’t anything else you currently need more. For example, let’s say that you’ve had your eye on a new leather jacket. You know that you’ll wear it all the time, and you have enough money for it. The only problem is that your car also needs a new set of tires. In this case, you should get the tires and buy the jacket later when you’ve saved up more money.

It’s important to know the difference between wants and needs. You should always put your needs first and purchase the things you want with the money you have leftover.

Choose the Right Time to Buy

You can often save a considerable amount on a big purchase when you time it right. Research when there are likely to be deals on the purchase you want to make, just in case there is a sale right around the corner.

Cars are a good example here. Dealerships usually have their best deals and are most open to negotiation on the final week of the year, because they want to hit their quotas before the year ends. If it’s October or November and you want to buy a car, waiting a couple months could result in a much better deal.

With the right approach, it’s easy to decide if a big purchase is worth your money. Stick to the tips above and you’ll figure it out in no time.