8 Tips to Manage Your Finances Before a Big Spendingby Fintech News Singapore January 12, 2023
Learning how to manage your spending, saving money, and managing debt, are all a part of your financial journey. During your journey, there might be “speed bumps” like a sudden change in income that you weren’t expecting. Additionally, you may have to manage major purchases such as financing a home or a vehicle.
One of the most challenging aspects of making a large purchase is overcoming the mental hurdles associated with it. The investment involves a large portion of your hard-earned money, and you may experience cold feet once you decide to proceed. So, how do you make the process easy for yourself? The following tips will assist you in managing your finances before you make a big purchase.
1. Improve Your Credit Score
You’ll need a good credit score for large purchases to qualify for a loan with a lower interest rate. According to MoneyHub, New Zealand lenders extensively look at customer credit histories when assessing loan applications. Lenders know that past behavior (such as timely payment of bills) indicates future behavior. A late payment or missed payment and default may affect your ability to obtain a loan.
2. Acquire a Loan
Loans are getting more common than you would think. As per the Association of Magazine Media New Zealand, the number of personal loans granted in August 2022 exceeded $500 million, marking a 10-month high.
You can also get a low-interest personal loan if you have a high credit score and a stable financial situation. However, new credit inquiries – especially many of them simultaneously – may lower your credit score. Staying with a few lenders and comparing their loan products is advisable. You can get personal loans from Nectar, a New Zealand-based digital lending company. Their NZ online loans make personal financing more accessible and convenient.
3. Check Your Financial Situation
Most importantly, you must assess your earnings, expenditures, and other financial obligations.
Establish a monthly budget for your household and determine how the money is spent. Be sure only to include your net income, which is your income after taxes. Understanding your overall financial picture helps you make big purchases.
4. Prepare a Purchase Plan
Is there enough money in your savings account to make a decent down payment on a home or automobile? Do special financing or promotions generally become available at certain times of the year? It is critical to determine the optimal timing for taking action; having a solid plan in place can make a huge difference.
Also, if you are planning to purchase a home, ask your family or friends for a referral for a real estate agent. Besides that, having a trusted real estate lending officer on your side can also assist you in understanding your options and knowing what warning signs to look out for.
Are you satisfied with the dealership’s assistance and advice regarding a car purchase? Have you researched the make and model of the vehicle from a reliable source? These are some things you need to consider.
5. Analyze the Opportunity Cost
There is an opportunity cost associated with every purchase. Some aspects of opportunity cost are evident. For instance, a significant investment in a new house would prevent you from making other worthwhile investments, such as saving for your child’s education.
Some opportunity costs are more subtle than others. A large purchase may have more non-financial implications than you expect. To accommodate the purchase, it may be necessary to alter your daily schedule and purchase new products (for instance, low-quality, cheap products).
6. Negotiate the Price
It isn’t easy to negotiate a price reduction on an everyday purchase, but you might be able to negotiate a discount on a home or vehicle purchase. The first step is to assess the vendor’s personality. If they appear friendly and courteous, you may be able to sway them to your side. Conversely, vendors who are stubborn or quiet will probably not appreciate your efforts to change their behavior.
Be professional, remain calm, and use the knowledge you have gained over the past few weeks. The following are some additional strategies that may be helpful:
- Request an inspection
- Get in touch with your agent/advisor
- Comparing similar products’ prices as a reference
- Profit from the eagerness of the seller
7. Plan Ahead And Begin Saving Early
The information you have obtained so far should allow you to establish a timeline for the purchase. It is, however, advisable to begin saving as soon as possible, even if you have plenty of time. If an unexpected obstacle arises, you need to be able to adjust the timeline accordingly. Meanwhile, you can save money by using these proven methods:
- Take a percentage of every paycheck and set it aside
- Set up an automatic deposit into your savings account
- Follow the 50/30/20 rule (50 percent for essentials, 30 percent for lifestyle, and 20 percent for savings).
8. Put A Deposit Down
The final step in the purchase process involves making a down payment. Most deposits are refundable under certain circumstances and typically range from 1% to 2% of the purchase price of a home. When purchasing a home, this is an indication that you are a serious buyer.
New car purchasers may be asked to make a deposit. However, do not pay anything until you have agreed to the vehicle price in writing and are confident that you wish to purchase the vehicle. Be prepared to present your financing to the dealership so that you will not be pressured into making a large deposit too soon. As the buyer, you control your purchasing journey, not the seller.
A large purchase is a significant investment. To avoid ending up with an amount of debt you cannot repay when you purchase a home or a car, you must plan, budget, and save.
Debt and a limited salary may need to be considered when considering this kind of purchase. However, if you plan and approach the purchase carefully, the affordability issue may be mitigated.
Featured image credit: Pexels