Planning for Large Purchases

Making a large purchase can be overwhelming. It’s not called “sticker shock” for nothing! Large purchases can include anything from the replacement of an appliance to the purchase of a car or home.  While there are many items that qualify as large purchases, they generally have two things in common:

• People often get them only one or a few times in their lives, and
• They require more money that most people have leftover from their paychecks after taking care of regular living expenses and bills.

Often, large purchases feel like emergencies.  When a refrigerator, storm damaged roof, or car need to be replaced, people feel both urgency and panic.  It’s urgent because not repairing or replacing the items can make life very difficult.  Panic often because people do not have the money to deal with them.

Remember that all appliances, homes, technology, and cars will need to be repaired or replaced at some time. Even if they working today, they will stop working at some point.  And the older the item, the sooner you may have to replace it.  Here are some estimates on how long various household items are likely to work before you will have to replace them:

• Gas range oven—15 years
• Refrigerator—13 years
• Dishwasher—nine years
• Washing machine—10 years
• Electric or gas dryer—13 years.
• Typical roof made of asphalt shingles—20 years
• Aluminum windows—15 years
• Garage door opener—10 years

It takes some “smart shopping” to make a successful large purchase.  Consider both the price and quality of the large purchase.  You may decide that paying a little more for a high quality item or one with a good warranty is worth it.  Or you may chose to go with a lower price to make it easier on your cash flow.

You may also want to work on building [link to Credit Section 5, tool 5.1]or improving your credit, since large purchases like cars and homes often requires loans that are repaid over time. The better your credit history and scores, the less you will pay in interest.

Seasonal Purchases

For families with school-aged children, getting ready for a new school year may also require spending that feels like a large purchase. In addition to clothing and shoes, children will need school supplies, backpacks, coats, computers, and more depending on the age.  Even though school starts at the same general time every year, many families feel unprepared to for these purchases. Holidays may also include large purchases that cause stress for many families, even though their timing is known—it’s the same day, date, or general time every year.

Part of being in control of your household finances is considering these future needs and planning for them. In addition to an emergency fund, consider setting aside some of you income today to help pay for large purchases when you need or want to make them.

To jumpstart this savings, try:

• Using part or all of your tax refund
• Using part or all of a raise or bonus
• Selling one or more items you don’t need or want
• Getting a part-time job and saving all of the income
• Starting a small business and saving some or all of the income
• Making a budget to see if there are areas you can eliminate or reduce; save the money you are able to but from your budget