Always Consider The Long-Term Consequences Of Your Purchases

My friend regrets buying the car they currently have, which is close to being repossessed. They're not only facing repossession, they're also facing imminent eviction.

A few months back, I recommended getting rid of the car.

Here's why…

Cars are useful but also largely unnecessary in many cases; there are creative ways to get by without one. I currently don't have a car, which means there are a few things I can do to get around:

• Rent

• Uber/Lyft

• Hitch rides

• Batch errands and outings

• Walking to your destination

• Biking (I have considered this)

There are people all around who live in non-walking cities and find ways to get around. Some scoot their way to places, some walk, some temporarily switch to a more virtual lifestyle, and some use family vehicles.

The cost of a car is not worth it if it will negatively impact your present and future finances negatively.

The #1 thing people forget after pulling the trigger

What happens if you lose income or a job? Most people don't have a robust emergency fund, which causes them to be at a severe disadvantage if they lose an income source. Not only do they not have an emergency fund, but they also lack additional investment resources or substantial liquid resources in their bank account.

My friend forgot about the concept of foresight.

If you plan to make a large purchase, set yourself up to do financially well if things go awry. Set yourself up to successfully manage payments of any financing you previously committed to.

I don't recommend making a purchase unless you can handle the risk involved. For example, are you prepared to handle 30 years of mortgage payments? Are you prepared to handle five to seven years of car payments?

Here are some things to consider in the subsequent section.

Before You Make A Large Purchase

I have had many opportunities to purchase a house, but I hold off. This is mainly because I don't need one, and there is no benefit to having one for now. It sounds nice but unnecessary since I appreciate flexibility more than permanence.

I need a new car, but I am largely delaying the decision for as long as possible. 

Most people make decisions immediately and think, ""Oh man, I don't have a car, I need to buy a new one."" or ""Oh man, I'm x age. I need to buy a house.""

Wrong. Assess the impact and ensure it makes sense first, not only financially but for your lifestyle. Moreover, assess your budget, how much you'll be sacrificing from your investments if you pull the trigger, and how your day-to-day finances may or may not be impacted if you make the purchase. 

Here are a few questions to ask yourself before you make a large purchase (e.g., house, car, college education, big trip, etc.):

• Am I on track with my investments?

• How much debt am I currently managing?

• How will this purchase affect my finances 1–3 years from now?

• How long do I plan to keep this purchase in my possession?

• Will this purchase be for an asset or a liability?

• Will this liability increase in value, hold its value, or decrease in value?

• If I didn't have a job or income source today, would I be able to afford this purchase?

• How much do I have in savings today?

• Do I have a six to twelve-month emergency fund?

• Do I have to force this purchase to work or is this an easy purchase for me to make?

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.

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