Are you the frugal type, or do you like to live a champagne lifestyle on a beer budget? Unless you are one of the uber-rich, most of us need to watch our pennies to make sure that we can get by and will have enough to retire one day. Many overspenders will justify their purchases as “an investment” or “spending money to make money.” But several big purchases are rarely, if ever, worth it. Here are five purchases you should think twice about making:
A Brand New Car
A new car depreciates the second that you drive it out of the dealer’s lot. Most new cars lose 20% of more of their value in the first 12 months. Financially, it is much more sensible to purchase a one or two-year-old vehicle that is still under manufacturers’ warranty at a more affordable price. If you do insist on buying new, then look for a run-out model or end-of-year sale and carefully research your finance options to compare cash loans, dealer finance and car loans.
A Super Trendy Sofa
I know that the lime green sofa with spiky metal feet looks unlike anything you have ever seen before and would be a standout statement piece in the middle of your lounge room.
But are you going to hate it in 12 months? A good rule of thumb is to choose a neutral style and palette for the larger, more expensive furniture items in your house, and bring in color and panache through cushions, artwork, and throws. These accessories cost less and are easier to swap over if your style evolves.
A New Wardrobe of Clothes for Every Season
Your wardrobe is another area where you shouldn’t always blindly swipe your credit card for every new trend that comes along. Buying a whole new wardrobe of clothes each season is wasteful, not just for your wallet but for the environment. In the US, around 21 billion pounds of clothing and textiles end up in landfills each year. Instead of buying bags full of new items each season, why not shop thoughtfully and invest in quality pieces that will last? Avoid synthetics like spandex, polyester, and nylon in favor of more sturdy fabrics such as cotton, denim, and leather.
A House With a Mortgage Just Within Reach
In many cases, investing in a family home is a sensible decision. But before jumping the gun, it is essential that you do your sums and figure out the mortgage that you can afford. Too many people borrow to their absolute maximum capacity and then end up in financial strife when they have unexpected bills, switch over to one income to have babies, or lose their job. Make sure that you give yourself a buffer.
A Jet Ski When You Don’t Live Near the Lake
We all daydream about a different lifestyle sometimes. Maybe you imagine moving to the country and growing all of your vegetables, or going jet skiing on the lake every weekend. But buying expensive equipment will not make your dream come true. Some people end up with a garage full of canoes, motorbikes, racing bicycles, snowmobiles, skis, and surfboards, but end up watching Netflix or sitting down for a drink with friends instead. Try to rent these items instead. If you do find that you are going skiing regularly, calculate the cost of renting against purchasing to check that it will be worth the investment.
By making the right decisions on big purchases, you will have the money you need for the things that matter to you!