Many people who diligently seek out money-saving discounts on smaller purchases may still find themselves inadvertently overspending by thousands on major purchases. Over time, this type of large-scale overspending may cut into your savings rate. What should savvy investors consider before making major purchases?
Do You Need It?
Even if you’re already certain that you need the item or service you’re planning to purchase, you may not need all the features you’re looking for—or, if you’re finding yourself with relatively few options, you may need to expand your horizons to take in more. After analyzing whether the purchase is a good investment in itself, when reviewing your options, avoid putting too many limits on your search parameters so that you’ll be able to see all your options before you make a decision.
This isn’t to say that all major purchases must be “needs”—it’s fine to splurge on wants that are compatible with your general financial philosophy. But in fulfilling these wants, you should be conscious of what you value in the item or service you’re buying and ensure that these valued traits make the cost worthwhile.
Does “You Get What You Pay For” Apply?
Skimping on major expenses can be a penny-wise but pound-foolish approach. However, this doesn’t mean it’s always necessary to go with the most expensive option when you’re faced with an array of choices at different price points.
Instead, do a deeper dive into what you’re planning to purchase to determine whether “you get what you pay for” is really the case. For example, if much of the cost of a new car is based on finishes and features you don’t necessarily need (or that just provide more opportunities for things to need repair), it can make sense to go with a simpler and cheaper option. Jewelry and other discretionary expenses can also have hefty markups that don’t translate into increased value.
Can You Negotiate?
One mistake many people make when planning a major purchase is assuming that the list price is firm. It never hurts to ask if the price is negotiable—after all, the worst anyone can say is “no.” Negotiating a discount or asking for concessions on a major purchase can save you thousands, allowing you to put more money toward the things that matter most.
What’s the Impact of Your Purchase?
Whether you’re making a major purchase or a more modest one, it’s important to look at the environmental and societal impact of this purchase. You may want to opt for fair trade or Made in USA items over those that are produced in countries with weak employee protections or child labor laws. By that same token, a purchase from a local business can ensure that these dollars stick around—in fact, $68 of every $100 you spend at a local business will remain in the community.1
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