We’ve all come to a crossroads in our lives where we have to make an important financial decision that could impact us for years to come. Whether it’s selling a home, buying a new car, investing in the stock market, or anything else, you don’t want to make an impulse decision when possibly hundreds of thousands of dollars are in play.
It’s important to step back for a second before any big financial decision. Before signing your name onto anything that will put you on the hook for years to come, here are five things that you need to remember first.
5. Do You Need It?
There are a few things that people need in life: food, water, clothing, and shelter. Only one of these is typically a major financial decision (though clothes can be pretty pricey), and that’s shelter. When looking at homes, make sure you’re looking for something within your means.
Do you need two spare bathrooms? The same can even be applied to those other necessities. Not every meal needs to be five courses, and not every piece of clothing needs to be a designer brand.
4. Check Your Savings
Savings accounts are offered for a reason, and that’s for making a big financial transaction. Every time that you get paid, make sure some of that is going into your savings account after the bills are paid rather than to your checking account. Over time, your savings account will grow and create a nice little fund for these big decisions.
Savings accounts also accrue interest, with larger accounts earning higher percentage yields. When thinking about a major financial decision, always look to your savings account first. If there’s enough in there where you can pull the trigger on a decision and still have plenty left, it will make your life much easier.
3. Compare Prices
The first offer that you’ll get for something major like a home or car may not be the best offer that you can get. In fact, more often than not, the first offer may end up being the worst. Always make sure to shop around before making a final decision, and see if you can haggle on the price of a big-ticket item.
Cars and homes especially are able to be talked down into a more buyer-friendly price. When sellers are competing against each other, then the buyer ends up the victor in the end, so don’t jump at the first offer.
2. Assess Your Career
There was once a time when someone would go to work for a company right out of high school or college and remain with that company up until retirement. Those days are long gone, though, with people bouncing around from company to company for more money (and for good reason).
Before making a big financial decision, ask yourself where you’re going to be in a few years’ time. Do you see yourself in the same position, same company, or even the same city? These are all important to think about.
1. Consider Your Standing Debt
A lot of people assume that just because they can easily make their monthly payments on existing debt like credit cards or car payments they’ll be able to take on another major financial transaction. However, taking on even more debt can have adverse effects. For starters, your credit score will likely decline sharply if you take on another major debt, while your monthly payments may end up being more than you think.
It will be hard to keep up with interest on several different loans, so the best thing to do before making a major financial decision is to make sure your debt is mostly free and clear beforehand. For example, those that have a lot of credit but aren’t using any of it are going to get a much more friendly rate on major financing like a mortgage.