9 Tips for Making a Budget for a Big Purchase

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Big purchases take planning. 

Making a budget for your big purchase will help you stay out of debt.

Here are nine tips to help you think through buying the next big thing.

Think

The first step to buying something expensive is deciding if you need it.

1. Decide if the purchase is essential
A car for commuting to work is probably essential, but a new television probably isn’t. Figure out if you’re buying for need or want.

A good test is to ask yourself: can I keep working and earning at the same level without buying this item? If the answer is yes, you probably don’t need it.

For non-essential items, look at your budget or think about budget friendly options like buying used or repairing the broken item.

2. Set a goal
Decide exactly what you want to buy. Be as specific as possible.

What model are you looking at? How soon are you looking to buy?

Answering these questions upfront will help later.

3. Make a pros and cons list
Write out a list of all pros and cons of buying this item.

Pros would be things like saving time on chores from having a fixed dishwasher. Cons would be things like where you’d have to cut back on spending.

Plan

After you’ve decided to buy, it’s time to plan. 

4. Research purchase options
Find out what sellers have the item in stock. Look at who has the lowest price and their customer care policies.

Read reviews about the item itself and sellers.

If the item has a good reputation for quality, think about buying used to save some money.

5. Look at your spending
Budgeting usually means cutting back on spending.

Look at your bank statement. See how much you make and where you spend.

Out of your non-essential spending, decide where you can cut back.

If you can’t afford purchasing the item in full. Look at financing options.

6. Look at the risk
Every time you buy there are risks. It’s up to you to figure out what they are.

Look at warranties in case your item breaks. See how long you’re covered.

If you’re taking out a loan, make sure you’re able to pay it back and you understand its terms.

Buy

Once you’ve planned, it’s time to buy. 

7. Look at financing options
Many people choose to finance big purchases instead of buying outright.

That means you’ll take out a loan and pay it back over time.

Sometimes, the seller offers financing, but you can also see what options your bank offers.

8. Understand and protect your credit score
Getting a loan and how good the loan options are often depend on your credit score.

Talk to both the buyer and your local bank to see what financing options you qualify for.

Remember that if you can’t pay off a loan, it will hurt your credit.

9. Follow up on payments
If you’re financing your buy, you’ll have to make regular payments.

Put these payments in your calendar.

Remember to budget for these when you’re making your monthly budget. Missed payments can get your purchase repossessed or damage your credit.

Be Responsible

The ticket to responsible buying is careful budgeting. 

Remember that just because you can buy something, doesn’t mean you can afford it. If you can’t afford your big purchase, don’t buy it. 

Start saving early. Sometimes saving for a big buy can take months or years. 

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