Every professional is working toward their goals, whether it’s buying a new house or car, traveling abroad, or going on a shopping spree. There are those who save up and prepare for these major purchases, while others spend on a whim and end up going over their budget. On the other hand, there are also major purchases that are unplanned, such as those that are needed for medical emergencies.
But before making a major purchase, there are important questions that we need to ask and factors that we need to consider. According to registered financial planner and business anchor Edric Mendoza, there are three areas when it comes to making major purchases: those that are within the budget, those that are over the budget, and those that are out of the budget or unplanned.
Mendoza says that it is easy to make a major purchase when you have set aside a budget and planned for it. For instance, when you go to a shopping mall during a sale and spend P10,000 and you have set aside a budget for it, then it’s easy to make that purchase since it was planned. However, he admits that a lot of our major purchases fall under the second kind, which are those that are beyond our budget.
When making a purchase that is beyond the budget, you need to determine whether that purchase is an investment or an expense. An investment is something that you buy in order to make it appreciate in value. If the purchase is an expense, you have to determine if it is a want or a need. If the purchase is a want instead of a need, then you may want to re-evaluate the purchase or consider it at another time when you have planned or have the budget for it.
Another question to ask when making a major purchase that is beyond your budget is how you can fund it. You can try to spread out the cost by inquiring if the store you are buying from offers zero percent installment when you purchase their products. If the price being offered is the cheapest the store can give, and they’re allowing you to spread out the cash over a period of time, then you can consider this mode of payment.
However, if you are able to plan or save up before making a major purchase, then it is still advisable to choose this option. If you can’t afford to spread the payment over a period of time, then you can save up and wait for a few months before making the purchase.
One way to gather funds for your next major purchase is selling things at home that you aren’t using. For instance, if you are getting an upgrade on a new gadget, then you can consider selling the older gadget to help fund the upgrade. The money earned from selling can then be used to augment the shortfall in your budget for your major purchase.
Finally, there are major purchases who are out of the budget, such as those for medical emergencies. These purchases are unplanned but are important, and is it where emergency funds will come in handy. Since these purchases are crucial, you have the option to take a loan if the expense goes beyond your budget. You can also borrow money if this major purchase is an investment or something that will appreciate in value.
In the end, Mendoza says that if the major purchase is a need, then we will find a way to purchase it. However, if it is more of a want, then we need to weigh if this is the best time to make that purchase and if there is a better time or a better way to buy it. The important thing to ask ourselves when making a major purchase is: Is this really something I need?