I Want, I Want! 5 Rules to Follow When Making Big Purchases

Making a big-ticket purchase such as a fridge, washing machine or furnishing your living room  in the early years of your employment life can be tough. Will you get what you pay for? Or will you regret it later? 

This calls for careful planning to ensure the need to set yourself up, afford some comfort and enjoy your sweat does not come in the way of the more important long-term financial planning.  

Here are 5 rules to guide you so that you don’t make an expensive mistake when planning to make big purchases. 

#Rule 1: Know Your Financial Status

This means being aware of what your current income allows you to do, what you own in assets, what you have saved, the extent and status of your debts as well as what your fixed and variable expenses look like. 

This will help you know if you can afford a big ticket item or not. Or whether you have to take a phased approach. Importantly, you will reduce the risk of raiding and/or depleting your savings account as well as avoid the possibility of getting into consumer debt that doesn't increase your net worth. 

For example, if you are considering buying the latest laptop, you will need to know how much money you have available. If you have a limited budget, you may need to consider a less expensive option or save for a few months. 

Your financial status can be interpreted to mean your personal net worth - the amount by which your assets exceed your liabilities.

To calculate your net worth, take the value of your assets such as cash and investments and subtract everything you have as debt. 

After knowing  your financial status and how much your big ticket purchase will cost, the next step is to save for it. To make it easier, automate the process by opening a separate savings account where you’ll transfer money after each paycheck. 

Also read: 8 Questions You Must Ask About Your Finances Today

Rule 2: Prioritise Your Purchases

Your big purchase shopping list probably includes executive kitchen appliances, furniture, entertainment units, a fridge, or a washing machine. But you can’t really afford all these at once. 

To determine the order in which you are going to make the purchases, ask yourself the following questions:

• How necessary is this purchase to me?

• What are my financial goals?

• What are my priorities?

• Do I have the money to afford this purchase?

• What are the potential consequences of not making this purchase?

• What are the potential consequences of making this purchase?

By answering these questions, you can better assess whether or not a big purchase fits your budget. And if it does, you can begin to prioritise and figure out what steps you need to take to make it happen.

Also read: 10 Big Purchases that Stress Everyone In Their 20s

Rule 3: Research and Compare Prices

Avoid impulse buying with big-ticket items. Even if you’ve been considering an item for a while, don’t buy it as soon as you see it.

Instead, do a little research. For instance, if you’re looking to buy a washing machine, you can visit different online stores and compare the prices. 

If you’re unsure what to buy, ask for recommendations from friends, family members, or financial experts. They might have gone through a similar experience and can offer some great insights that will help you make up your mind. 

Lastly, give yourself time to think about the purchase.  Weigh your options. This will ensure you make the best decision for yourself.

Also read: How to Figure Out If Something Is Worth Spending On

Rule 4: Stay Disciplined

Financial discipline refers to how well you can control your spending and saving habits. It allows you to reach your big goals faster.

If you’re not disciplined,  it's easy to get carried away when you're browsing your favourite stores. Here is how you can develop financial discipline:

1. Set your financial goals

You need to know your short-term, mid-term, and long-term financial goals. For instance, your short-term goals could include paying off your student loan debt or setting a monthly spending limit. 

On the other hand, your mid-term financial goals could include saving money to invest in real estate or setting away funds to pursue a postgraduate degree. Lastly, your long-term financial goals could include setting aside money for retirement, owning a home, starting a business and building an education fund for your children. .

Learn more: Money Mastery: How to Set & Actually Achieve Your Financial Goals

2. Create a convenient budget

Budgeting brings you closer to your financial goals.  So sit down and list all of the expenses you anticipate incurring, including the purchase price, shipping cost, and any other associated costs. 

Here are a few steps that you can take in order to create a budget that will work for you.

1. Take a look at your income and expenses to get an idea of how much money you have available to spend on a big purchase. 
2. Set a limit for yourself on how much you are willing to spend. 
3. Looking for ways to save money on the purchase. For instance check if there are any discounts or cheaper alternatives.

By creating a budget and looking for ways to save money, you can make sure that you are able to make a large purchase while staying disciplined.

Also read: The Ultimate Personal Budgeting Guide

3. Manage your debts

Coping with debt is a crucial step in achieving financial discipline. It makes it easier to start saving money, investing, and planning your financial goals. You can employ different debt repayment methods. These can include living within your means and debt consolidation.

4. Establish an Emergency Fund

A rainy day fund helps you weather unforeseen expenses such as medical bills, home repairs, or sudden death. This fund should cover 3-6 months' worth of your expenses. However, this can be a tall order to achieve.  So start small and gradually improve your savings. 

#Rule 5: Keep Your Receipts and Documentation

When you make a big purchase, be sure to keep your receipts and documentation in a safe place.  So, why do you need to keep these crucial documents safely?

• They will come in handy if you ever need to return or exchange the item.
• They will also be useful if you need to file a warranty claim
• Receipts can help you keep track of your spending.

If you keep your receipts and documentation organised, you will be able to find them easily when you need them. You can use a file cabinet, a plastic bin, or a folder system to keep everything organised. Whatever system you use, be sure to label everything clearly.

Also read: Spending 101: Skills to Keep Your Expenses In Check

Wrapping it Up

Big-ticket purchases aren’t items you buy everyday and are costly.  You thus need to be cautious when making these purchases. To help you out, keep the rules we’ve discussed here in mind whenever buying a big purchase item. This way, you’ll stay on track and put your hard-earned money to its best use.