How to Decide If You Should Buy Now or Postpone

by John Thomson Financial adviser

It is not surprising to hear that you are often caught up in a dilemma whether you should buy it or postpone it. When you have to buy something, you generally have two options: you will, but you will put off the purchase.

It is not easy to come on the side of the fence or the other. You will have to analyse your current financial situation and the impact of your buying down the road. Most of the people do not take stock of their financial position while making a purchase. They buy an item using a credit card or with a small loan and then end up ruing the day.

It is crucial to scrutinise your financial position before you buy anything. Whether you want to refurbish your home or buy a small furnishing item, you should always consider your buying power.

If your pocket does not allow you to buy something, you should not. This is what a rule of thumb says, but what if you need it urgently. You often tend to buy an item in two scenarios: you need it, or you want. Under both circumstances, you should carefully assess the impact of your decision on your finances:

Case 1: you need it

If you feel that you need something, you should ask yourself if you need it as soon as possible or put it off. For instance, if you are looking to renovate your house, you may need a big amount of money.

Ask yourself if that is too urgent or you can postpone it. If you can put it off, you should not spend money on it. Wait for the opportune time. You may need to renovate it immediately because you want to sell it as soon as you upgrade it.

Next question you need to ask yourself if you will pay for it outright or you will take out £5,000 loans. If you can pay for it with cash, do it the. However, make sure that you have some money left in the emergency corpus if an emergency catches you up down the line.

If you do not have enough savings, you will need to decide whether you should borrow money from an online lender or use your credit card. Whether you fund it with a loan or credit card, you need to ensure that you will be able to pay it off on time in both situations. It is crucial to check your affordability.

If you eventually fall behind the repayment, you will end up paying much more than what you borrowed. Further, it will ding your credit score, making it harder for you to borrow money at lower interest rates down the road. If you think that you will not be able to repay the debt, do not buy. Start setting aside for it instead.

Case 2: you want it

If you want to buy something, there will likely be two reasons: it can give you some sort of benefit or want it because your friends have it. Many people buy things they do not need. They do it because they want it.

If you are sad or upset about not having something although you do not need it and buy that, you are just frittering away money. Likewise, if you are buying it to keep up with the Joneses, you will likely upset your budget.

Even though you have a fair amount of money in your savings, your decision will likely take a toll on your finances. What if you come up with any other significant expenditure down the line?

Many people do not hesitate to take out a big loan, for example, £10k loan for bad credit just to be sounded equal with their friends’ status. However, some people cannot be calm without having what their friends do have.

If you are one of them, ask yourself if it will hurt your current budget. If yes, do not buy it. If you think it will not hurt your budget, think about the need to be met more importantly.

If you are planning to buy a thing because you think it can give you some benefit – for instance, you decide to buy microwave although you do not need it urgently – you should ask yourself if you have another thing in your list is to be bought immediately. If yes, keep your money for that expense.

If there is nothing in your list, make sure that you do not already have an item similar to what you plan to buy. Otherwise, do not buy it. You should instead save your money for other purposes.

Further, if you buy it, check if you have enough money in your savings. Make sure that you do not dip into your emergency cushion for it. If you decide to use your credit card or take out a loan, make sure that you will not fall behind repayments.

Whether you buy something because you need it urgently or because it makes you pleased, you should buy only when you do not compromise with your savings for a rainy day. If you are borrowing money to buy it, make sure that you will not fall behind repayments.