Black Friday and Cyber Monday are coming, and you can bet that stores will be offering deep discounts and credit incentives on big-ticket items to try to entice you in the (real or virtual) door. But is it really the best time to buy?
There are no hard and fast rules about when to purchase big-ticket items. But there are some concrete things you can do to make big buys less painful for your pocketbook.
Remember, the definition of a “big-ticket” purchase will vary depending on your financial situation. For some, it could be anything over $100. For others, it might be $20,000 or more. In all cases, it’s important to plan and save in advance of the purchase.
Step 1: Ask yourself if the item is a "need" or a "want".
Sometimes big-ticket purchases are unavoidable. Maybe your car broke down, and you need a new one to commute to and from work. Or maybe your air conditioning unit or washing machine has gone out. These kinds of big-ticket purchases fall under heading of legitimate "needs". On the other hand, something like a Chanel handbag or the latest and greatest hi-def TV would be categorized as a “want”. Be honest and objective with yourself about whether the item in question is “need” or “want”. Always prioritize needs ahead of wants, and respect your household budget and regular savings plans.
Step 2: Plan and save for the purchase.
Figure out in advance how much money you will need to purchase the item. Of course, for urgent needs, you may have less time to save and prepare—in that case, you might need to consider dipping into emergency savings. However, the longer you have to plan and save for a purchase, the less strain it will cause on your financial well-being. Here are some quick ways to build up your savings pool:
- Open an interest-earning savings account or a Certificate of Deposit (CD) which allows you to withdraw money only at set times and, in return, earns a higher interest rate.
- Save a set amount each week by cutting out excessive unnecessary expenses. (Can you substitute your daily takeout for a home-cooked meal or a brown-bag lunch? Little changes can go a long way.)
- Place all extra income, such as bonuses, raises, or tax refunds, directly into the savings account. (You can’t spend what you never see.)
- Consider selling or trading in another big-ticket item to defray the cost of the new one.
Step 4: Research the best deals.
It stands to reason that impulse buying is a big no-no with big-ticket items. Even if you’ve been thinking a purchase for a while, it’s important that you do not buy the first thing you see. Instead, do a little legwork—either in person on online—to find the best deal possible. And there are other things you can do to get a little extra savings:
- Consider buying used. Yes—TVs, furniture, and appliances are actually great items to consider buying used, since they are often updated for aesthetic reasons, not because they stopped working properly. Just be aware of guarantees and return policies related to these items.
- Comparison shop. There are many websites that can help you with comparison pricing. Some, like Honey, will even show you the pricing history of online items, so you can tell when it’s the best time to buy.
- Use layaway. Layaway isn’t just for Christmas. Ask if the store will hold your item until you have paid in full.
- Bargain. Don’t just pay the full ticket price. Make an offer. Sometimes salespeople have more ability to give discounts than you realize. For items like cars, go online and find out what the dealer’s cost is, and get as close to that as you can. (And the adage holds: be prepared to walk away from a purchase if you can’t get the deal you want.)
- Be patient. Watch for special pricing. During big holiday sales such as Black Friday, stores often use high-demand items such as electronics as “loss leaders”. This means they underprice the item, hoping that you will feel so good about that deal that you’ll spend more money somewhere else in the store.
Step 3: Avoid rent-to-own.
This is so important. Making your big-ticket purchase on credit or at a rent-to-own store will more than likely end up costing you more money in the long run. The longer you hold outstanding credit, the more interest you end up paying over the length of your loan. If possible, pay cash for the item to avoid over-the-top back-end charges, which can sometimes cost more than the item itself. If the store is offering a credit incentive—such as no interest for six months—be sure to read all of the fine print and come up with a savings plan that will allow you to pay off the full amount well before the deadline hits.
Big-ticket purchases don’t have to be stressful if you plan ahead. However, impulse buying, especially with big ticket items, can be a surefire way to wind up over your head in debt. Be smart with your money, plan ahead for emergencies, and wait to indulge your big ticket “wants” until you have adequate funds saved and set aside just for that item.