You are going to make some big decisions in your life, where to go to college, who your spouse will be, whether to move for a promotion, and all of these can be intimidating. Just like these decisions about how you’ll live your life, you will have to make big decisions on large purchases at some point. Whether it’s for a car, a house, saving for retirement or something else you’ll be faced with the prospect of writing a check for a huge amount of money. There are a few ways to deal with your most typical big purchases that will put your mind at ease and allow you to make the best decisions when faced with buying your big ticket items. Below you’ll find the top 7 most intimidating big purchases most people make and my tips for how to negotiate the process of buying these items.
1. Your Home
Purchasing your home, whether it’s your first home or you’ve moved several times can be extremely stressful and intimidating. There are so many things to consider when looking for the right home that you can quickly become overwhelmed and end up making impulse decisions that could cost you money in the long run. First, go to a bank and get pre-approved for a mortgage. Knowing exactly how much you can qualify for in a loan will help guide you in what type of home you’re looking for. After you find a home you like, do an inspection prior to closing on the home. You can uncover many hidden problems that you wouldn’t be able to see but for a professional they would recognize right away. Many times these types of issues could cost thousands to repair and you can negotiate a change in the price of the home or have the owners pay to fix them before you move in.
2. College Education
Many studies have shown that people who have a college education earn at least $1,000,000 more than those over the course of their career than those without. However, another unfortunate statistic is that the cost of completing college has increased over 12 fold over the last 30 years. Many college graduates are drowning in debt and say it has dramatically affected their choices in how they have lived their young adult lives. They put off purchasing cars, homes, and getting married because they don’t feel financially capable due to student debt. By planning ahead you can help your child defray the costs of college by starting to save very early and using tax deferred or tax free savings plans. You can also help by having a frank discussion with your child about the costs of college and helping them to decide if going to a more expensive school is worth the extra money up front, or if they can get an equivalent education at a state school.
3. A Car
One of the first big purchase you will make is typically a car. Maybe you were lucky and your parents gave you a car, or maybe you had to work to earn enough to buy a vehicle, but chance are that the prospect of spending thousands of dollars freaked you out at least a little bit. The best way to shop for a new car is to shop around extensively. Don’t just set your sights on a new car. Buying a used car allows you to avoid taking a huge hit on depreciation as soon as your car leaves the dealer lot, and most of the time used cars are much less expensive than new cars. Shop around and look for cars that are certified pre-owned vehicles as these come with extended warranties and can save you a bundle on repairs. If you are going to buy a new vehicle, consider heading out of your city to look for a vehicle and pit dealers against each other in trying to get your business. Do your research before going to the dealer and know what types of add-ons aren’t worth it.
4. A Wedding
Just like college, the average cost to have a wedding in America has gone up significantly over the last 20 years and is now almost $30,000. With so many moving parts, planning a wedding can quickly spiral out of control and wreck your budget. After you get engaged, sit down with your fiancé and write down the most important things about the wedding you want to have and start crossing the less important items off your list. Once you settle on the rough outline of what you want, look honestly at your budget and decide what the most you are willing to spend will be. By having a hard budget in mind when you shop for florists, caterers, venues and the band or DJ you can be sure that you’ll keep from overspending. Take special care on choosing food and alcohol as both of these items can be very expensive. Finally, do not go into debt to finance your wedding. This is one day of your life and there is no reason to start your new life together by knowing you’re now stuck paying hefty bills right away.
5. Retirement Investing
If you’re lucky you are working for the government or for one fo the few employes left that offers a pension. If you’re like the rest of us, you’re pretty much on your own in planning for retirement. Social Security was not designed to replace 100% of your income, so at minimum you’ll have to supplement your benefits with your own retirement savings. Choosing the right investing strategies early can help you immensely when the time comes to retire. If your employer offers a 401k with a matching program, max out your match! It’s free money that your employer is offering you and you should take full advantage. Choose your investment companies based not only on how their performance has been in the past, but keep a close eye on the fees they charge. If you invest $10,000 and your investment company charges 1.5% a year to invest your money, you’re looking at a minimum of $150 a year in fees which may be on top of “investment expenses” that are incurred by the funds they invest you in. Over time these seemingly small amounts of money have a big impact on the overall performance of your investments so try hard to find companies with low fees.
Nobody wants to think about their loved ones dying, but unfortunately at some point a loved one will pass away and you’ll have to pay for a funeral. In America, funerals cost on average $10,000. It’s very difficult to make big decisions when you’re grieving, and with the numerous choices for a funeral like coffin type, plot fees, maintenance fees, and religious needs all costing money before the funeral you might make a snap decision and end up spending too much. You can do your loved ones a favor and plan ahead for your own funeral by choosing and purchasing a plot while you’re alive and purchasing a small whole life insurance policy specifically to cover the expenses for your funeral. It won’t cost you that much today and will make a stressful time for your loved ones a bit easier.