How to Maintain Healthy Finances Before a Big Purchase
How to :
maintain healthy finances before a big purchase
Making a big purchase can be both a fun and intimidating experience. Whether you are looking to purchase a vehicle, upgrade to a new home, or buy a boat, there are some things that you need to consider before purchasing. In order to allow your bank account to feel less strain in the long run, ensure your finances are in order prior to making your large purchase.
It is important to make sure that your finances are in order before you spend a large chunk of your savings. Maintaining your finances can seem complicated but there are a few simple things you can do that will have a large impact on your overall financial well-being.
Below is a list of ways to maintain healthy finances before making a big purchase-
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Refinancing your mortgage is a way for qualifying homeowners to get extra cash in their pocket, while at the same time lowering your overall monthly mortgage payment. When considering a mortgage refinance, there are some factors that you will want to be mindful of before you make your final decision. One is whether or not your credit score is better than when you originally purchased your home. If not, refinancing may not be the best option for you. Another thing to keep in mind is market trends.
The housing market has a tendency to change quickly so it is important to verify that the market is in your favor before deciding to refinance. Overall, refinancing your mortgage can be a great way for you to get some extra money to make your large ticket purchases.
Start a savings account
But not just any savings account. When looking for long-term financial stability you will want to consider using a high-yield or high-interest savings account. These are savings accounts that offer you a higher interest rate on the money you deposit into them.
What this means is that while your money is sitting in this account it is actually making you more money just by being there. A smart idea is to start the account as early as possible, and to deposit into them as often as you can so that you will reap the most benefits of the higher interest rates.
Something you can also try is investing. This is something I did when I had money left over. I ended up choosing an app like Webull and bought stocks. This is something you can do so that it the long-run, your money can grow.
Related Reads: My journey to saving up $10k
Cut down on spending
This may seem obvious, but it is actually the most effective way to save more money to make large purchases. There are hundreds of ways to cut back on spending without feeling the effects too strongly.
First, it is recommended that you start a spending journal. This will log all of the money you are spending within a weeks to a months time period. This journal will give you a visual aid to track your spending and where you can cut back.
Next, go through each day’s spending and find where you are wasting the most money. Do you really need to be ordering food and getting two coffees a day, five days a week? These little purchases add up quickly and can end up being hundreds of dollars a month.
Another great way to cut back on spending is to take some time to reevaluate all of your monthly bills and eliminate ones that you may no longer need. Many people sign up for trials of streaming services and forget that they even have them, and end up paying money for a service they are not even using. You may be surprised at the savings you find.
Related Reads: treat yourself! (without breaking the bank)
Consolidate your credit card debt
Lowering your overall credit card debt before making a big purchase will help the saving process feel like less of a burden. Unfortunately, falling into credit card debt can be very easy. Most credit cards have a huge interest rate that can make paying them down impossible if you are not paying off your full balance every month. A great way to tackle this problem is to take out a personal loan.
Using a personal loan allows you to consolidate and pay off large amounts of credit card debt all at once. You will only have one monthly bill with a much lower interest rate to help you pay your balance down more efficiently.
Pay bills on time
This tip mostly goes without saying, but it is important not to forget the importance of paying your bills on time. A few late or missed payments can be the difference between an excellent credit score and a poor one. Also, if you are missing your payments, they will add up, and eventually you will have a massive amount to pay off before you can break even. If you have trouble paying your bills on time consider enrolling in auto payment or using a bill tracking app. These will ensure that you never have a late or missing payment again.
Build your credit
When making larger purchases it is important that your credit is in good standing. Having a high credit score before a large purchase could save you thousands of dollars on interest and financing costs. Managing your score can be a difficult process and can take a long time to improve. But there are ways you can help yourself make this process easier. The number one thing you can do is to pay your bills on time which we already touched on above. The next important thing is to maintain a low debt-to-income ratio.
This means that the amount of money you owe is low compared to the amount of credit you have available to spend. You will also want to track your credit score during this process to make sure that it is in fact improving. Using an online personal finance calculator will help you track your credit score during this journey and also won’t cost you anything.
The journey to improving and maintaining your finances before making a big purchase doesn’t have to be difficult as long as you take some important steps along the way.
Cutting back on spending, saving money, and building your credit score are some simple ways that you can increase your overall financial success.
These tips will give you the freedom to purchase large ticket items without the uncertainty of how you will manage to pay for them.
Thanks for reading How to maintain healthy finances before a big purchase
Let me know if this post was any help for you! How do you maintain healthy finances before a big purchase? (Do ya kind of just CONVINCE yourself you NEED something because it simply looks cute, like a tv or phone or car? Yeah, because that’s what I do lol)