How-To Guide: Determining if You Can Afford a Big Purchase

Making a big purchase can be an intimidating prospect.  Cars, houses, boats, college degrees, these things add up and most are essential, but not everyone is wealthy.  So, if a check needs to be written for a larger amount than you’re used to, this article will help to determine if now is the right time to make that large purchase. 

Ask, “Is This Necessary?” 

First, before making any purchase, especially a big one, the need should be evaluated.  Is this purchase a need or a want?  Be honest and do not let manipulative sales techniques or other kinds of peer pressure make the decision.  If it is not necessary, that may not eliminate the purchase, but it will certainly change how it is made. 

Shop Around for the Best Deal 

When the decision has been made to buy something big, it is usually an exciting moment, and oftentimes consumers crave instant gratification.  You might be tempted to drive off the lot with it now, click “Buy” now and pay for it later. But, it’s in your best interest to rethink it.  Take the time to make sure that this is the perfect item, and that it is being bought for the best price.  Perhaps there is a better season or an upcoming sale that would be better.  Do not be afraid to wait to save money. 

Save Up and Pay Cash if Possible 

This may sound impossible, but this is the most reliable way to buy anything.  Save up for the big item and pay cash.  The ability to purchase something and then walk away without any further obligations is true liberty.  Now, this may not be possible, for example, for a home – but at the very least, take some extra time to build up a great down payment.  Even if it takes a year or two, this will be less expensive in the long run with fewer interest payments. 

Evaluate Other Financial Commitments 

This is key as well.  The money may be in the account right now, and the present financial situation may allow for the payment plan, but will that remain the same?  Look to see the status of the bills or of any upcoming bills that may jeopardize this purchase.  Even if there are none that prevent it, if it brings the budget down to the wire, it could be a sign that it is time to wait. 

Maintain a Great Credit Score 

A great credit score lays a solid foundation for large purchases. Borrow only what can be paid back and make every payment on time – those are the keys to a great credit score.  Having a great score will open opportunities to make larger purchases on credit once reliability has been proven.