Delay That Big Purchase. Think About It First.

2018-11-22

Lifestyle Debt

Every purchase we make is an attempt to solve a problem. When we’re hungry, we buy food. When our car breaks down, we look for a new one. When we feel burned out at work, we plan a vacation. It often seems like the only thing standing between our current tension and immediate release is whether we have enough money to connect the dots.

Of course, with a range of financing options at our fingertips, we can easily solve that problem, too. We use credit cards, loans and lines of credit to bridge the gap between what we have and what we need (or want) – and pay the difference over manageable monthly installments. It’s only when the bills begin piling up that we realize we never really  fixed anything; we simply shifted our problems from one place to another. And now we’re paying interest on them to boot.

It can feel tempting, even exciting to forge ahead with a big purchase – and imagine how much better our lives will be for it. But there’s value in stepping back and considering what we might be giving up – what unintended consequences may result and what alternatives we may be ignoring by financing our road to contentment.

What Qualifies as a Big Purchase ?

In short, it depends. A big purchase could be anything from a new pair of jeans to a renovation project, a business investment or going back to school. Essentially, it’s anything that you don’t have the cash on hand to pay for in full. In other words, if you require credit anywhere in the process, it’s a big purchase.

Keep in mind that even if you do have the funds available, a high value transaction may still trigger unease and apprehension. While the long-term financial consequences will not be as significant, it may still be worth listening to your gut and taking a moment to reflect before moving ahead.

The Benefits of Waiting

Think back to your last big purchase. Do you remember feeling torn between two conflicting voices in the back of your head ?

One was urgent, persuasive and demanding. It painted a convincing picture of how much happier and better your life would be after you signed on the dotted line. It didn’t want you to think – only act.

The other was subtler, gentler, quieter. If you listened, you’d have heard it ask some important questions, like:

  • What is motivating me to make this purchase at this moment ?
    • What are the potential benefits or drawbacks of waiting ?
  • Have I done my research and considered all the options ? 
  • Have I worked the monthly payments into my budget ?
    • Am I depending on known or unknown future income (e.g. raise, bonus, tax refund) to pay the bill ?
    • Will another monthly payment create stress, anxiety and conflict within our household?
  • Have I considered the total cost of ownership (e.g. maintenance, storage, insurance, etc.) ?
  • Will the usefulness of this purchase outlast the time it takes to pay it off ?
  • The first voice is all about now. It doesn’t care how you’ll feel in a week, a year or a decade. Nor does it care about the other problems you’ll inevitably encounter on the road ahead. The second voice plays long game. It wants you to be able to solve not just this problem, but each one that comes after it, with confidence and ease. It wants to help you build a sustainable life, not just pour water on a series of increasingly uncontrollable fires.

What Kind of Shopper Are You ?

People tend to shop on a spectrum, with frugality at one extreme and impulsiveness on the other. If you’re still reading, it’s probably safe to assume you’re somewhere in the middle or lean more toward the latter. But there’s no judgement and it certainly doesn’t mean you can’t inject some more structure and intentionality into your shopping habits.

The following techniques can help you make more strategic and financially sound purchase decisions:

Set Your Price and Pre-Shop

Set clear boundaries around what you’re willing to spend. If you need to make sacrifices, your monthly budget will tell you what they are. Avoid forcing the numbers by sacrificing either your savings or leisure allowance. Whatever you’re buying, don’t let it dictate your enjoyment of the present or future.

Next, start pre-shopping online. Many websites allow you to narrow your search by price and features, so you can target only the items which fit your preferences. You can also compare the features and functions of several different options, so you can get a like to like understanding of what works best for you and why.

Be Firm with the Salesperson (and Yourself)

If you’re not careful, a skilled salesperson will find a way to sway you toward a more expensive and feature-laden option than you need. This is where research pays off. If you must deal with a salesperson, be clear on what you want and what you expect to pay.

If you don’t trust yourself, bring along a friend or family member for moral support. Tell them about your research and your budget and ask them to intervene if it seems like you’re straying from your goal. You may even bring a copy of your budget along as a reminder. Lastly, only bring the cash you’re willing to spend and leave your credit cards at home.

Predict the Future

Of course, you really can’t predict the future – especially when it comes to finances – but that’s the reason unexpected expenses are unexpected. You never know when they’ll happen; all you can do is prepare.

Have you considered all the irregular costs you have on the horizon?

  • Vacations
  • Medical appointments
  • Car repairs
  • Gifts or special occasions
  • Children’s sports fees
  • Etc.

And how’s your emergency fund?

Most financial planners recommend setting aside between three and 12-months’ living expenses to get you through a worst-case scenario – such as a job loss, illness or caring for an ailing family member, major home or vehicle repair / replacement, divorce, etc.

The truth is, even if you have the cash to make a purchase but don’t have an emergency fund – or if your purchase will get in the way of an irregular expense one or several months down the road – you can’t afford it right now.

Own Your Life

Convenience is more accessible than ever. You can use credit cards to buy things when you don’t have the cash. You can get free two-day shipping on most online purchases. Many services offer hassle-free one-click ordering. But it begs the question: who is really in control?

Removing some immediacy and convenience from the process ensures whatever you do buy adds value to your life, now and over the long term. What this process lacks in spontaneity and thrills more than makes up for in long-term satisfaction, comfort and peace of mind. Ultimately, though, you need to decide which sounds more appealing.

Life-Changing Debt Solutions

If you’re struggling with unmanageable debt due to one or more big purchases, you don’t have to suffer alone. During a Free Confidential Consultation, your Licensed Insolvency Trustee will review your entire financial situation and explain your options. Whether you qualify for a Consumer Proposal, bankruptcy or one of several other debt solutions, your trustee will help you choose the best path toward a financial fresh start.