While there are a number of things that are different about making a major purchase such as a home or business, there are also a number of very wise guidelines that apply to all types of major purchases from homes to cars to businesses. Here are 5 tips to help make your major purchase a success and not a nightmare.
Set a budget
Before you start shopping, it’s very important to know what you can afford. Your income is not going to be the sole determine factor of what you can afford, but rather your spending. When setting a budget you have to decide what you can and can’t live without. Some people may be perfectly happy taking vacations at nearby inexpensive places but don’t want to give up their daily latte, while others will happily cut groceries to a bare minimum if they can take their yearly luxury vacation.
Save, save, save
Major purchases like homes or businesses are always going to have a number of expenses, including maintenance and operating expenses. Make sure you not only have enough money for a hefty down payment, but also a good solid financial safety net.
Don’t spend more than you can afford to lose
Too often, people end up in bankruptcy as a result of overspending and over-extending themselves. While no one can prepare for every freak event that might happen, you can prepare for a number of changes in fortune. If you are a couple and both have jobs, only spend what you can afford on one income – preferably the lower income if there is a significant gap in income levels. While it may be frustrating for the person with the larger income to buy less than what they personally could afford, doing so can save you major heartache and pain down the road.
Don’t take on too much debt
If you are going to take out a loan to purchase a home or business, make sure you have all of your other debt paid down. While there is some debt that is acceptable, such as student loan debt, you don’t want to owe a significant amount on multiple cars, luxury items like boats, RV’s or motorcycles and have home or business debt on top of it.
Consult experts
If you are buying a home, make sure and get a professional inspection and consult a realtor and a mortgage broker. If you are thinking of buying a business, have an accountant go over the books very carefully and consult a business expert to be sure that you know what you are getting into. While it may cost you more op front to consult experts, it can save you a considerable amount of time, energy, hassle and frustration down the road and help you make more informed decisions about what you do and don’t want to get into.