It can be easy to get swept up in the excitement of buying something you really want, especially if it’s a major purchase you’ve been thinking about for a long time. But knowing your spending limits can help reduce any potential regrets or debt hangover.
Whether you saved to pay in cash, plan to use savings you already have, or are borrowing money, take a good look at your budget before you buy to find out how your purchase will affect your day-to-day spending and saving.
4 ways to pay for a major purchase
- Start saving early toward your goal amount with a plan to buy in the future
- Use existing savings or income
- Borrow money
- Use a combination of savings and borrowing
The best payment option for you is the one you can afford, and live with, most easily.
Understand what you can afford and your payment options
The internet makes it easy to do some preliminary price research about your purchase. Not only can you visit sites you already know, pricing engines can scrape sites all over the internet to bring a collection of prices to one page.
Once you have an idea of prices, think about how you’ll pay for your purchase. Having a clear idea of how much you’re able to pay for something can help you decide when you can splurge and when you can’t. Evaluating the cost and making some preliminary decisions beforehand can also help set expectations in your household and get everyone on the same page.
How to make a major purchase: the process
No matter what you’re buying, it’s important to do your due diligence to ensure you’re getting what you want and need, at the best price, with the right plan for paying for it.
- Set your budget, and make it firm. Research prices, decide how much you’re willing to spend, and have a plan for how you’ll pay. Don’t forget to factor in costs for things like taxes, shipping or delivery charges, installation or setup, accessory and add-ons, and others—these can add up and stretch your budget if you don’t account for them.
- Research your options, and figure out exactly what you want to buy. Keep in mind, depending on what you’re buying, you might find a better deal on a discontinued model.
- Decide who to buy from or who can help. It never hurts to check local listings to see if you can find what you want to buy secondhand for a lower price.
- Pay for your purchase—and, in some cases, start paying it off. As always, if you took on debt to cover your purchase, paying more than the minimum payment can help you get ahead and pay less overall in interest.