Many of us suffer from periodic bouts of weakness when it comes to personal financial management. Even people who are generally great at making decisions sometimes end up spending money on something that was completely sporadic only to bear the guilt of buyer’s remorse when it is too late to take back that poor decision.
To avoid spending on something that will end up adding to household clutter, or worse, potentially set back your financial goals for some time to come, take a look at the following suggestions.
Before you buy ask yourself these four questions.
1. Can I Afford to Pay Cash?
Often a purchase is evaluated on the grounds that the payment terms are so flexible that it will hardly be noticed on a month to month basis. This is not necessarily a good way to start thinking about your finances because it leaves room for the slow trickle of mounting debt. If you can’t afford to pay for the item with cash, then you should seriously consider putting the decision through some more tests before committing to a decision to purchase.
2. Is it Worth Paying Interest on This Purchase?
If you are not paying cash, you will most likely be using a credit card, which may have astronomical interest rates payable on outstanding balances. The purchase must then be put through the wringer because if you are going to pay double digit interest for the pleasure of owning the item, it definitely should be a fantastic item. If you are taking a consumer loan then you also need to make sure that the item will either hold value or be absolutely necessary for the furthering of other important life goals.
3. Do I Need It? Really?
Sometimes the lines between ‘want’ and ‘need’ are substantially blurred because emotions run high. This might be because there is a desire to keep up with your friends or family, because the marketing for the particular product has been particularly successful or because you may be in a vulnerable emotional state and you believe that you deserve a treat. Whatever the case, you should try to reclaim some sense of logic and answer the question logically, especially if you have already established that you cannot afford to pay cash and the item is not really worth the interest payments it would accrue.
4. What Will I Have to Sacrifice?
If you have come to this point and the craving for the item has not subsided then you should start thinking in terms of your opportunity costs. Since your resources are not unlimited, buying the item in question will most certainly mean you must give something up. What will you sacrifice in order to have this purchase? Will it mean not saving for the month? Will it mean you may need to cut back on other expenses? Will making the purchase jeopardize your ability to meet other obligations?
Of course, your PocketSmith tool can help you to evaluate this decision by manipulating your budgets to figure out when the purchase will be feasible.
When you are faced with the decision “to buy or not to buy” it is rarely a clear cut case. Often several factors come into play and to make the decision that is right for you and your finances you must give them all a fair hearing. It is only then that you can walk away either confident that you can pay for the item you so desire, or happy that you managed to resist the overwhelming temptation to buy wheat you could not afford.