Questions To Ask Before A Big Purchase

In uncertain times, big purchases can be scary, and more so if we hand over the cash too quickly. Current times are tumultuous, and if there is no big stash of money or other assets saved up somewhere, parting with your money without considering all of the potential issues might be a bit too careless.

As we have seen during the last couple of years, a situation can change overnight. For good and for bad. In March 2022, the world definitely does not look the same as it did 3 years ago! Therefore, purchases need to be thought through. Not only that, they should provide real value to you and your current life circumstances.

Nowadays, getting credit is fairly easy. However, not all credit is worth it. For example, getting into debt for a couple of pairs of shoes when there are already 10 pairs sitting on the shelf just seems not worth the potential hassle when times are tough. Adding the inability to pay off that credit due to the sudden loss of a job, and suddenly these two pairs of shoes can result in a bad credit rating that will impact your life negatively for many years.

So here are some questions to ask before handing over your cash:

Is this purchase going to change your life in a positive way?

How is this purchase going to change your life? What will you gain? Buying a designer handbag may give you many admiring glances from others, but it will not change your life substantially. You’ll feel good for a short while and soon, you’ll want another one. Some of these bags would have good re-sale value. But only if they are in good condition. So, it might end up being a stressful accessory in need of extensive vigilance and care. If you are thinking about purchasing a property, then moving from renting to owning your own place could potentially change your life positively indefinitely, as long as the financials are realistic.

Perhaps a good exercise is thinking whether the purchase would:

Example – A good quality bicycle could answer ‘Yes’ to all 3. You would save money on transport in the long term. It will also make you healthier and fitter if you don’t engage in reckless cycling. Plus, if losing weight is one of your personal goals, a bicycle can aid that as well. So, looking at the purchase from this perspective, a bicycle could change your life in a positive way.

Do you need to get a loan to get it?

All loans are debts. Think about when debt is worth it. Not all purchases justify debt. Debt is like a bad marriage from which you want to divorce from as quickly as possible. You do not want to carry it around forever!

Knowing that debts can be such a burden, you could apply the same 3 points as mentioned above to check whether your planned purchase is worthwhile, and then add one more:

The last point is crucial. In order to take on debt, there is some need of financial stability. Are you working in a stable job? Are you, your partner, and family members, healthy? Will you have an emergency fund left after the purchase?

Finally, what will you gain from getting into debt? For example, getting into debt for a university education may be financially lucrative depending on the subject you chose. Not all university degrees will bring lucrative careers, so it is best to choose wisely and assess whether it is worth getting into huge debts for your education.

Does this purchase make or break you?

Spending big can bring positive changes but it can also bring negative changes. If your budget is tight, then clicking that “buy” button might mean that there is nothing left until the next payday. So this kind of scenario is best avoided.

Another factor to spending big can be overconfidence. It is easy to think that a month is going well financially, only to find a huge unexpected bill in the letterbox that suddenly completely turns your financial situation on its head. Being in that kind of situation often is a clear sign, that your budget is resting on sand. It can collapse with the slightest change in circumstances.

So another good questions to ask would be, do I have an emergency fund left after that big purchase that would cover the unexpected?

Is there a lower cost alternative available?

It’s easy to think that we need a bigger car. After all, a smaller, cheaper car might last as long, and will bring us from A to B as well. Perhaps it will have less horsepower, but then in most European countries it’s illegal to max out a cars speed anyway, except for Germany perhaps.

The same applies to buying a house. To get on the ladder quicker or at all, it may help to compromise. Similar to a car, we might have a long list of requirements, only to find that there is nothing available within our budget, and thus we end up renting for the rest of our lives just because “perfect” wasn’t affordable.

There is always an alternative product for everything. If it does the same, if the quality is on par, then there is no reason to go for the more expensive item.

How did you survive this long without it?

We often think that we need something because someone else has it, out of vanity, or simply because we have seen the same advert over and over until the picture is burned into our brain, and we suddenly wake up wanting something.

In general, as a human, we always want something. It will never change, though we should not always act on our impulses.

So it is always good to ask yourself how you have survived without it for so long. Another good question to ask is, how long it will make you happy until it becomes normality? Maybe postpone the purchase by 4 weeks and you might forget about it. Finally, if you find yourself wanting the most expensive and luxurious things all the time, but cannot afford it, then it might be a good idea to find ways in how to increase your income. Work on making more money, instead of spending it. With hard work and a little bit of luck you might get the financial success that is needed to live the lifestyle you desire.