Are you contemplating a big purchase, such as a car, home, vacation, motorhome, etc.? Since you plan to spend the money anyway, you might as well do so wisely. Here are some tips that should help.
Large expenditures don’t usually come along all that often, and when they do, the impact on your budget and savings can be substantial. It’s a good idea to prepare before spending, and the longer you have to prepare, the better off you’ll be.
Develop a savings plan.
If you anticipate a purchase with enough lead time, you might use the interim period to save the necessary funds. That can begin with paying yourself first—set up an automatic transfer of a set amount from each paycheck into a savings account dedicated to paying for the purchase. You can also trim your budget to eliminate things you don’t really need.
Set a timeline.
If you know when you’ll be making your purchase, you’ll have time to prepare by reformulating your spending plans. These changes might mean short-term sacrifices, like not dining out or going to the movies for a while. Any temporary budget you develop will only work if you adhere to it, so keep it real and don’t cut things unrealistically.
Timing is important.
Many items are seasonally priced, and vacations during the off-season can cost substantially less. Big-ticket items like cars often have holiday sales during which dealerships cut prices and financing rates. If interest rates are rising, it might make sense to lock in a mortgage rate as soon as you can if you will be house shopping in the near future.
Use credit wisely.
If there isn’t time to save up for a purchase, consider applying for a credit card with an introductory 0% APR for the first 15 or more months. You can finance any purchases you make during this period without accruing interest. Look for a credit card with a sufficiently high credit limit to pay for most or all purchased items. Then, budget your payments so you pay off the credit card before the end of the promotion period.
Don’t let big purchases interfere with your long-term goals.
Saving for your retirement should be one of your primary goals. To the extent that a purchase or its timing is discretionary, you will want to arrange it so you can continue to contribute to your retirement accounts at the optimal rate. Please contact me to discuss planning your major purchases without impacting your long-term objectives.
Rebecca E. Bayless, MSM
Email: [email protected]
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