There is a general opinion that when you make a large purchase, you are better off financing it. However, this is not always the case. In fact, sometimes it can be a better option to pay cash. When might it be better to pay in cash? Here is a guide to keep in mind.
Saving Helps You Budget Better
One of the problems with financing large purchases is that it is too easy to spend money that you cannot afford. Many financial problems are caused by people simply spending more money than they earn, and spending your own cash helps you to avoid this problem. So try to practice saving up for the larger purchases that you want, and this way you can avoid buying something that you cannot really afford.
Business Insider has some great tips on saving, so check these out and see if they help you to save more.
Learn to Wait
It is good practice to learn to wait for something that will involve a large purchase rather than buying it with finance. While some things are necessary and you really do need them, in which case buying with finance can be a good idea, with many things you don’t actually need them right now.
And when you do need something, look at cheaper alternatives. For example, you may need a vehicle, but it may be a better idea to buy one that you can afford and then save up to buy one that you really want.
You may want to buy a new car or jeep like the Renegade 2016. If you can afford it now, great. If not, you may want to wait and save up for it.
Ask Yourself Two Crucial Questions
Before you buy any large purchase, ask yourself two important questions: Do I need it? And can I afford it? If you answer no to either of these, it may not be the right idea to use financing.
Learn How to Budget
When you do decide to make a large purchase, set a budget and know how much you want to spend. Salespeople are very smart and they will find ways to make it tempting to spend a bit more, so be strict and only spend what you can afford. It will be a lot easier to do this if you are paying with your own cash rather than on credit.
Spending Cash Makes You Spend Smarter
Simply spending in cash can make you spend smarter. When it is your hard-earned money before you, you may look for more ways to get a discount and you may haggle harder. In general, you won’t be so keen to spend more than you should when you can see the money in front of you.
Paying In Cash Sometimes Brings Discounts
When you buy a car, you may be tempted by a financing option, and they can often sound great. But if you check the small print, you may find that the vehicle is more expensive when you take out financing. If you pay in cash, you may well get a discount.
Always Consider Paying in Cash
Sometimes it really is a better option to finance large purchases, but often you may find that it is better to pay in cash. Always think very carefully about your options before you make a large purchase, and try to avoid rushing into purchases simply because you are offered financing.
Zara Hayward is a frugal Mom who knows where and when to save to give her family the best. She blogs about saving money and family life mostly for lifestyle and parenting sites.