Health & Fitness
Can you really afford that big ticket item?
With Fourth of July sales just around the corner, you may be contemplating a big purchase. Perhaps you are considering the purchase of a new TV, refrigerator or even a car. No matter what the purchase is, you need to have a plan in place to know if you can afford it and what’s the best way for you to pay for it.
First consider your options:
Pay in full: If you have the extra money why not pay for it in full? Make sure before you make a large financial commitment that you consider the repercussions of emptying out an account for the purchase. Consider that paying something off in full means no monthly bills and avoiding interest charges which would make the initial purchase price higher by the time you paid it off. On the other hand, by using a large sum of money at one time, it may take some time to then replenish your account. Don’t leave yourself short on an emergency fund or with an empty bank account. Regardless, for many purchases such as a car, it is simply impractical to pay in full. Here are some other options for your big purchase.
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Payment plan: Some retailers offer payment or installment plans when you are purchasing a big ticket item. Make sure you read the fine print and know all the details of the arrangement. This means that you need to know the interest rate and what your payment is along with the term or how long you will be paying for the item. Ask if there are any fees associated with the financing and what may happen if you can no longer make the payments. A good tip if you need to use a payment plan is to see if you can put some money down on the purchase to lessen the dollar amount of the payments and the length that you are paying it off.
Credit card: Putting a big purchase on a credit card can have advantages but unfortunately most often there are disadvantages. Many retailers will encourage you to pay for the purchase with their store credit card. Note that most store cards are coupled with exorbitant interest rates. Many may come with an initial interest free period, if this is so try and budget to pay off the entire purchase BEFORE the introductory rate expires.Can you really afford it?
Which ever plan you pick, make sure it is a manageable financial option. Experiment with your budget and make sure that you will be able to afford the payments on top of your usual monthly expenses. If it is too tight for comfort, forget about buying it! There will be other sales and unless it is an emergency purchase (ex: a new fridge because the old one is broken) it can wait until the next sale.
