Select Page

When it comes to making big-ticket purchases, significant planning, budgeting, and saving are key. Big purchases such as a house or car are big deals and tend to freak people out. It is a way to enhance your living standards and reach those important life goals.

There are many questions that need to be answered when thinking about making big purchases such as should it be purchased with cash or cash and debt, will it be affordable, is it the right choice and what will be the ripple effects of this purchase?

How to plan for big-ticket purchases:


Identify Major Purchases

Make a list of possible big-ticket purchases and prioritise them from most to least important according to your needs. The purchase should be for a specific purpose so evaluate each purchase and determine what you want to achieve with this purchase. Establish criteria for the purchase and choose two to three different options. Identify the pros and cons of the purchase and decide what is best. Think about the risks associated with a purchase and the value it will add. It is also important to consider the commitment that is being made as well as the emotional investment. You should also consider how long it will take to pay for the item you want to purchase.


Credit Score and Affordability

Determine what each item or project is going to cost. Once you know the cost, determine how long you will need to save for a specific item and if this is feasible. Determine if a part of the purchase can be done with cash or if it would need to be done on credit or both. Find out what your credit score is. Credit providers and lenders will examine your credit report to amongst other things see how and when you pay your bills and how much debt you’re liable for. Your credit score may also be used to determine the interest rate you will receive on credit. Assess your affordability by working out your debt-to-income ratio. Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. Credit providers and lenders use this to measure your ability to manage the payments you make every month to repay the money you have borrowed. Big-ticket buys can be scary but with some planning, dedication and research it can be worth your while.