The need to make a major purchase pops up in everyone’s life from time to time. Whether it is a bigger house for the family, a newer car, furniture, or a family vacation; consumers are analyzing these purchase decisions now more than ever. But when are these major purchases truly a necessity, and not a “want” in disguise? Knowing where a purchase fits on your (or your family’s) priority list is crucial to making a well informed decision. We all purchase items that we “want” from time to time…and we should! But first we need to make sure we are making the right decision within our current financial picture. Here are some tips to help make a good decision and get the most for your money:
· Sleep on it: Wait at least 24 hours after visiting the store (dealer, etc.) before purchasing or signing an agreement. This will greatly lessen the chances of an impulse purchase and will give you the time to further review using the tips below.
· Be able to walk away: Do not become emotionally attached to an item (vehicle, etc). You must be able to walk away from a purchase in order to make a good decision and get the best price possible. Sales staff can identify if you have emotionally bought an item at first sight. In this situation they are confident you will buy and will usually stick with the retail price.
· What’s the Opportunity Cost: Take the total purchase price of the item you are considering for purchase and write down at the top of a sheet of paper. Now list all the other things you could buy, do, or payoff with that amount of money (this should be a fun exercise!). If your item is more important and/or necessary than all the other purposes, then you are one step closer to making a well thought-out decision.
· Review your long-term financial goals: Ask yourself, “Is this purchase congruent with my (our) long-term goals?” Whether your long-term financial goal is to retire at age 55, be debt free in 5 years, or fund your children’s college expenses; your saving and spending practices along the way will be the biggest determination of meeting your goal.
· Have your financing in order: Get a loan preapproval before shopping for a new home or vehicle. A preapproval will provide your preapproval amount, interest rate, and available terms. You can then utilize an auto loan calculator or mortgage calculator to find your affordable payment and make an informed decision.
· Negotiate, Negotiate, Negotiate: Never pay the retail price on a large purchase. The majority of retailers have a lot of haggle room off the listed price (even off of sale prices too). There is so much competition in the market place that you will always find a deal…if you ask.
· Shop with Cash: If possible, shop with cold-hard cash when making a purchase. Having “cash in hand” gives you more negotiating power to get the best price possible. This practice is most effective when purchasing items such as: appliances, televisions, and furniture.