Plan Your Expenses
What’s the most money you’ve ever spent at one time?
Maybe you bought a vehicle like a motorcycle or low-cost car in cash. Maybe you went on vacation and had the best time of your life. Most likely any big purchase you’ve made you had to plan in advance to make. Most people don’t and most likely can’t buy expensive items or pay for trips without coming up with a plan in advance.
You’re going to learn
- How to fit big purchases into your budget
- How to get the Best Deal on everything you buy
- Deciding the best way to pay for your purchase
Coming Up With a Plan to Pay for a Big Purchase
We make our financial decisions based on how much money we have available monthly. And as we all know every dollar we spend on our monthly expenses is a dollar that we cannot spend on other things such as fun and big purchases.
The easiest way to find how much money we have available to plan for a big purchase is to see where the money that’s coming in is going. For myself, I find that using a spreadsheet sheet that keeps track of household spending. I know exactly how much money is coming out monthly based on my past spending.
The spreadsheet automatically calculates how much money I have dedicated to saving and investing in addition to spending. That way I know exactly how much money it takes to pay my expenses month to month.
You can get the spreadsheet for yourself here (link)
Because I have a plan to spend money consciously I don’t overspend and can find room in my budget for big purchase planning.
It’s easy to justify pulling money from our savings to cover a big purchase and there’s nothing wrong with it as long as you don’t wipe out our savings in the process.
The best time to plan for a big purchase is before making the purchase. We can’t plan for the unexpected but being prepared for a big purchase by having a plan to pay it off helps us save money. The plan we come up with depends on the expense and everything associated with it.
For example, when planning to pay for a mortgage the way it’s paid off pays a big factor in how much you pay. For example, if you decide to make a bi-monthly payment instead of just a monthly payment you’ll save thousands of dollars over the life of the loan.
Find ways to lower expenses associated with the Purchase
Saving money will cost you time. We won’t find the deal that works for us without research.
If our big purchase is a vacation, for example, we’d be looking for the best ticket prices for travel.
Priceline is one of my favorite sites for securing low-cost plane tickets.
For a new vehicle we would be finding the best deal by comparing vehicles at different dealerships and the deals they’re willing to make to sell them.
Determining the Best Way to Pay for Our Purchase
In the first step, we made a plan to save money, in the last step we’ll make sure we make the best financial decision possible when it comes to paying for our big purchase.
If you’ve planned according and done your research there’s no reason why you should overspend for any big purchase and still get exactly what you want this is where we follow through on our plan.
This means if we’ve planned the financing of our new vehicle and done our research on how reliable it is we can confidently decline any extended warranties and add-ons that are going to cost us unnecessary money.
Bonus: Make the Most of The Things We Buy
Ideally, a big purchase should be an item of quality that will last a long time. To get the most out of your investment, you may want to protect it. These items often come with warranty options and service or insurance plans. No homeowner ever buys a home without also getting homeowners insurance because the cost, if anything terrible were to happen, is too great to have to repurchase in cash for most people.
If we planned on buying a computer in one lump sum consider paying for it on a rewards credit card. The points you acclimate from your purchase can be used for other things such as travel.
If you’re moving from one house to another you could consider renting your house to create a second source of income.
If you keep your car in great condition you’ll get more money if you try to sell your car in the future. Other factors such as picking a great car during your research can get you more money because the car hasn’t depreciated as much compared to other vehicles.
If you follow these steps you are guaranteed to make smarter purchases and be happier with the results of your financial decisions long-term.
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