Big purchases are something we all have to make, whether we like it or not. These expenses can be expected, like paying for a holiday, or they can be unexpected, like paying for a new washing machine after yours broke down. But whatever expenses you’re faced with, a little planning can help to make sure these purchases don’t cause too much stress.
To help you with your next big purchase, here are some top tips:
Don’t Keep a Revolving Credit Card Balance
The word “revolving” says it all here because you’ll just be going round in circles when you’re putting more on your credit card each month. This can lead to your debts spiraling out of control, especially if you aren’t able to clear the balance every month. So, instead of turning to your credit card, look for options that have an end date, as these will help you to stop spending beyond your means and will prevent you from accumulating huge interest on your big purchases.
Don’t Max Out Your Credit Card
It’s also important not to use up the difference between your outstanding balance and your credit limit. If you do this, it might prevent you from using your card for recurring charges via the auto-pay option, plus it’s always a good idea to leave this amount free for any unexpected purchases. Essentially, you just need to strike the right balance with your credit card, making sure you can afford to pay off the purchases you are making each month.
Make Sure You Shop Around
When you’re saving up for a big purchase, you’ll probably have a particular figure in mind, but it’s still a good idea to shop around to find the best deal, even if you do find one that’s in your budget. For example, if you’re wanting to get a new car, it’s worth looking at various dealers and looking out for the next big sales. Signing up to things like news from CarAdvice can provide you with the heads up you need to make your next purchase. And, although this requires a bit more time and effort, it could be well worth it in the long run.
Watch Out for Free Financing Options
Even though free financing options are a very attractive prospect, it’s crucial you’re looking at the fine print before you go ahead with this. Companies offer this solution for a reason – they lure people in. And the downside of this is they’ll often hammer you with penalties if you make a late payment, charging you interest as soon you’ve taken out the agreement. Plus, it may result in a balance that you’re unable to pay.
Furthermore, it’s also worth avoiding any other financial methods that can prove costly, such as rent-to-own purchases, payday loans and expensive credit options that are available in stores. Not only could you be faced with a price tag that’s four times the original price of the item, but you’ll often find they’re riddled with extortionate interest rates, penalties, and hidden fees. And, missed payments could lead to your credit score being adversely affected.
Ensure You Have Sufficient Funds
This probably sounds quite obvious but going into your overdraft is something that can happen without you even realizing. You don’t just need to be aware of overdraft fees in these instances but bank-backed balance protection ones too. These are designed to charge you additional fees, which means they can get very costly, fast. That’s why it’s a good idea to closely monitor your bank balance, making sure you’re only spending the money you have available to you. If you’re not good at doing this, it may be worth setting up an alert on your account so you know when you’re near a certain limit. Having this in place will make you think twice about making purchases until your next paycheck has come in.
Focus On Your Budget
Once you’ve put together a detailed financial plan, it’s important you remain focused on it. Even though small purchases might not seem a problem, these can add up over time, which may impact those big purchases you’re planning for. Furthermore, as you keep plucking away at your money, you could soon find yourself using your credit card more frequently, getting loans out to help you meet your payments each month. This is a nasty downward spiral you can get into and it may be hard for you to recover.
However, by watching out for the above and being savvier with your spending, you could be making great savings that will help you make those all-important big purchases.
Callum McKenzie shares his money tips with like-minded people around the web. He’s on a mission to get his family out of debt by 2020.