Life is full of major expenses, and while some are unexpected, other big-ticket items such as a house, a new car, and other big purchases can be seen from a mile away. While these expenses might put a strain on you and your wallet, the truth is that if you can see them coming, you can plan accordingly and prepare yourself properly. Here’s how:
preparing a budget
Just as you might set a budget for a night out on the town or a bachelor party, you’ll want to set yourself up with a budget for your big-ticket item. You’ll want to start with an idea of what you can afford to pay (either all at once or financed over time) and compare it with what you’ll have to pay. Once you have an idea of your budget you’ll want to make sure you do three things:1 - Assess your work future
It might not always be possible, but you should think about your work future. Nothing is for certain: Your company might be sold or if you have a performance review coming up soon, it might be a good idea to hold off on making a big-ticket purchase.If you’ve been at the company for a while, you should be able to trust your sixth sense to know if something is up. If you haven’t been on the job a long time, it might not be a good idea to buy a big-ticket item right away, regardless of what you hear, the logic being that a newer employee, (who has been there less than a year) is always more at risk of losing his job.
2 - Make sure you don’t tap into emergency funds
Emergency funds are for emergencies. A big-ticket item is not considered an emergency. You’ll want to save your emergency reserve for something awful, like a death in the family, illness or sudden unemployment. So, when you budget for your big-ticket purchase, remember to leave your emergency money alone.3 - Save money in advance of your purchase
The best thing you can do is save before you spend. In other words, just because you have a budget doesn’t mean you need to buy right away; wait a little. Test out your budget, and make sure you can live with it. Put the money that you’re not spending into a savings account and watch it grow before you make your purchase.tips and times
Here are some big-ticket items and the best times to buy them, along with a few tips to make your big expense more of a success than a stress.Real estate
When to buy: Shop when most others aren't. Few people buy their homes in the winter. While there are lots of theories on why this is so, none of them should stop you from buying in the snowy season. Demand is lower because fewer people are buying, which means prices come down. Sellers who are still in the market during wintertime tend to be more motivated because selling at an off-time indicates a need to sell, which also drives prices down. Finally, things don’t always look as good in winter, which means you won’t pay for curb appeal, which will further drive the price down.When budgeting for real estate, don't overlook all the additional expenses that come with a house. You’ll have to consider maintenance, property taxes, closing costs, inspections, and a whole host of other expenses that pop up. This means you’ll either need extra cash on hand or you’ll need to downsize the house you’re looking for to make up the difference. Otherwise, an unexpected cost could ruin your budget. But remember: when buying a house, you should always expect a few unexpected costs.
Useful tip: Give yourself ample lead time to fix up your credit report. That means paying your bills on time, paying off your credit cards, and getting rid of expense that you don’t need or can’t afford. It should take about six months to do this, depending on your credit situation. In the meantime, try and build your down payment to at least 20%. The more you can put down, the more you’ll save in the long run.
Car
When to buy: Saving on cars often means shopping at the right time. Hitting a dealer at the end of the year, when the next year’s models are rolling in, means he has to drop prices or the factory has offered rebates. Either way, you save, and you get a brand new car.Useful tip: Figure out your monthly payment before you buy. If you’re comparing sticker prices, you won’t have any idea what you’re spending because the loans will be different. What you need to do is work backwards. Figure out the monthly payment you can afford then find the car and the dealer that can make that happen.
Appliances
When to buy: Use layaway plans. If you don’t need the item today, it might pay to use a layaway plan, particularly if there’s no interest assessed. A perfect example for a big-ticket item that should be bought on layaway is an air conditioner. Buy it in the winter when you don’t need it and get the store to hold it until the heat arrives.Useful tip: Buy energy-saving appliances. You’ll save money in the long run (something you should also consider in your budget), but you might even get a rebate, tax break or money back on your utility bill for buying green.
Travel
When to buy: Book as far ahead as possible. Unless it’s truly last minute travel, your best bet is almost always to buy early. While this gives you plenty of time to save, plan a budget and look for deals, it also means locking in a great airfare and hotel price.Don’t assume that because you have 10 days vacation you need to spend them all on an expensive trip. If you’re heart is set on an expensive vacation, go ahead and book it, but for fewer days. Remember: It’s your vacation, so the idea is to be happy. The best scenario is you having a great trip and not being stuck with a great bill afterwards.
Useful Tip: Treat a vacation as one sum expense that incorporates such things as your flight, amenities and food as part of the purchase. If you don’t include everything in your budget, you’ll likely end up blowing way more money than you expected.
Consider going places where your travel dollar goes further. For example, if you have your heart set on Europe, consider central and Southern Europe over say England or France.
take the time to plan it out
A big-ticket item doesn’t have to be a big headache. Yes, there can be lots of stress involved in making the purchase and it can be hard to stretch your dollar, but if you plan ahead and plan conservatively you should come out on top of the game.Resources:
http://www.savingadvice.com/forums/archive/index.php/t-87
www.fpanet.org
http://www.fool.com/car/car.htm
http://www.ourfamilyplace.com/homebuyer/budget.html
http://www.fpanet.org/public/tools/lifeevents/purchases-bigticket.html
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