Is it an asset or a liability?
Before making a big purchase, it is essential for you to find out if what you are buying is an investment or will it take money out of your pocket. For example, if you purchase a parcel of land, this is considered an investment because the value of the property tends to rise. You may be considering building houses for rent or even your own home on this piece of land, later or now. Whatever the use or even if the property will lie idle for some time, it is still an investment. A car, on the other hand, does not fall under the asset column. This is because it will always remove money from your pocket. This is a fantastic read on making big purchases.
Can you afford it?
It is important to look at the cost of your big purchase and any associated costs and ask yourself if you can afford it. It would be unfortunate for you invest all of your money in this purchase and be left with nothing to live on. Of what use will a car be to you if you buy it just to park it? Many people tend to be attracted to the physical features of a vehicle then they suddenly have an epiphany on how much it costs in its maintenance!
Your age-factor
Whether we like it or not, there is no way we can grow younger. If you are looking to get a business loan, ask yourself how long you will be making repayments and if you are pegging the loan to your paycheck, will your retirement find you when you are still making repayments? Do you have a retirement plan that will be able to take care of the loan when your paycheck stops coming? If not, it is best to re-evaluate your situation and find alternatives that will work because if you are retiring in 10 years and may still have a few years to clear the loan, this is a recipe for disaster. This is a fantastic read that will guide you in making the right decisions when it comes to age and big purchases.
Do you need it?
Do you need a ten-bedroom house? What will you be using all that space for? Will you be able to go up comfortably and down the stairs as you age? What will happen when the kids grow and leave you with this big house? Will you turn it into a business property or will it remain for personal use? Will you be able to afford to maintain the large lawn? So many things come into play when making big purchases.
