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  1. #1

    3 Questions I Ask Myself Before Making a Big Purchase

    Before I became debt-free I was pretty “loosey-goosey” with my money. I didn’t always make the best financial decisions and I didn’t always pay attention to what I was buying or how much it cost. If I wanted something I bought it. I figured I was already in $30k of student loan debt, so what difference did it make if I splurged on myself a little here and there?

    Wait, I’ll Answer That - A Huge Difference!



    What I quickly found out, was those "small splurges” added up. A $50 haircut here, a $30 top there, $50 for dinner and drinks with friends, and I was $130 in the red. I could easy spend a few hundred dollars each month on things I didn’t need. Things that had no real value and didn’t yield me any financial, emotional, or spiritual gains.

    That’s when I started thinking about ways I could get my spending back under control. What I came up with are 3 important questions that I asked myself before making a purchase over $20 (that was a "big purchase" when I was getting out of debt). After I became debt-free I increased my $20 spending limit to one that is more inline with what most people would consider a "big purchase", but the premise behind the questions and the actual questions are still exactly the same.

    3 Questions I Ask Myself Before Making a Big Purchase:

    1. Need or want? Recognizing the difference between needs and wants was really important for me. I’m not naturally a frivolous spender, but thinking about whether my pending purchase was a want or a need, really changed the way I spent and saved my money. When I was in debt, I cut out all of my “wants” and focused solely on purchasing items that were “needs”. Just to be clear, there’s nothing wrong with purchasing items from the “wants” category. Now that I’m debt-free I indulge myself with a "want" now and then. The difference being, I now make sure that I can afford these purchases. That means I pay for them with cash and I don’t go into debt to buy them.

    2. Will I still want it in 3 days? For larger purchases I usually self-regulate myself with a “mandatory” 3 day waiting period. Sounds intense, but it’s not. It just means that I make myself wait three days before making a big purchase. A lot of times I decide that I don’t actually need something after I wait a couple of days. The initial feeling of “needing” to purchase the item dissipates and I’m able to make more rational spending decisions. If I still want the item after 3 days and I can afford it, I buy it.

    3. Does it have a resale value? If I purchase an item and later decide that I no longer need it, or I want to upgrade to a nicer version, will I be able to resell the older item? How much profit will it yield me? Certain name brand items and functional items like tools and certain appliances seem to have decent resale rates. Whereas cars and diamond rings have notoriously poor resale values. Neither cars nor diamond rings are a good "investment" in my opinion. Does that mean I haven’t or wouldn’t buy either? No. It just means that I would carefully consider how much I can afford to spend, given the fact that the item will have a minimal or limited resale value.

    Lastly, I do a very simplistic cost benefit analysis. I.e. what’s the cost of the item I want to buy and what benefits will I gain by owning it? I’m not just talking about monetary gains if you were curious. Sometimes spending money will benefit me physically, emotionally or spiritually. For example a $100 donation to our local food pantry won’t make me money, but it will fulfill emotional and spiritual obligations. A good use of my money that’s well worth it in my opinion.
    Last edited by CreditDave; 06-01-2013 at 11:35 AM.

  2. 3 Questions I Ask Myself Before Making a Big Purchase
  3. #2
    Registered User New Member
    Posts
    16
    Quote Originally Posted by DebtSurvivor View Post
    What I quickly found out, was those "small splurges” added up. A $50 haircut here, a $30 top there, $50 for dinner and drinks with friends, and I was $130 in the red. I could easy spend a few hundred dollars each month on things I didn’t need. Things that had no real value and didn’t yield me any financial, emotional, or spiritual gains.
    Same here, once I started using mint.com which breaks spending down by category it really changed how I looked at these small purchases. I was spending $300+ a month eating dinner out without even realizing it.

  4. #3
    I haven't used mint before but know lot of people who really enjoy using it. I guess I'm sort of "old school" with my excel spreadsheets. Once you see how much you're really spending in each category it can be pretty startling. It was a wake-up call for me for sure.

  5. #4
    Registered User New Member
    Posts
    15
    I ask myself the same three things, well almost, I don't necessarily worry about the resale value because there are many things that would be hard to sell (and knowing myself I wouldn't take the time to sell them and they would just sit somewhere) so instead I ask myself if I will still be using it in a year or two which for me is an indicator of its worth.

  6. #5
    Quote Originally Posted by Baily View Post
    I ask myself if I will still be using it in a year or two
    Great point!
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  7. #6
    Registered User Enthusiast
    Posts
    64
    These are great points. I'm really bad with the impulse purchases, personally. I'll buy something online and by the time it arrives at the door I already don't want it. That's money that should be going to pay down my debt not to buying stupid stuff.

  8. #7
    Registered User Junior Member
    Posts
    43
    Most people don't know the difference between needs and wants. I haven't had cable tv in over 10 years, its a luxury. Needs are food and a place to live, not just things you really want.

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