How to Pay for Large Purchases And Still Become Financially Free
Today I’m going to tell you How to Pay for Large Purchases And Still Become Financially Free.
Thinking of paying for a car, braces a house or other large purchase?
It may be surprising that these purchases are often what sets people back years from Financial Freedom IF they are not done with Financial Freedom in mind.
So, let’s get right into how we bought our 2 condos, braces and other large purchases all while still having a lifestyle that we choose and desire.
First, don’t use a credit card. Pay with Cash (and bargain the price down) or get an interest free installment plan.
You might be wondering why I would say not to use a credit card, and there are plenty of reasons.
I know you probably get points or miles, but hear me out.
I recently did a credit card vs. cash spending experiment with my husband and the results were shocking (see the full experiment here).
Jomel spent $216.72 with cash during our challenge. The month prior he spent $598.49 with his credit card!
Jomel spends 176% more with a credit card than with cash!!!
For our joint spending, we spent $431.90 with cash during our challenge. The month prior, we spend $759.44 with our credit card!!!
In our joint spending, we spend 76% more on joint expenses when use a credit card instead of cash.
Why is this?
It’s because people tend to overspend when they are using a credit card.
In fact, they overspend so much that the points or miles you are receiving are really nothing in comparison.
So cut up the cards and stop using them.
The benefits of using cash is that you know you have the money (please don’t spend money you don’t have!).
Another benefit is that a lot of vendors will negotiate the price down if you are going to pay cash.
This is true of buying cars, property and braces.
Just ask what the price would be if you paid cash, or give them a price you are willing to pay below asking with cash.
Cash solves a lot of processing issues, it saves them time collecting money, it saves you a headache of payments, and it eliminates a lender as the middle man.
It’s a win for you and the vendor.
If you don’t have enough cash for the whole payment, ask for a ZERO interest (or very low interest) installment plan.
Usually dentists, doctors, cell phone services and car dealers have these installment plan options.
Our cell phone installment plan has a ZERO interest rate.
Understand the Terms of Payment
It is important that you fully read through the fine print and understand the terms of payment.
This is a large purchase so you can take the time to research it properly.
Do they have a fee if you pay off your purchase early?
Is there an application fee?
Is there an activation fee?
Will they waive the fees?
Are the terms what you want?
Is there a phone trade in bonus?
Are there any late fees and what are they?
Make sure you understand thoroughly and payment plan that you agree to.
This is especially true of large purchases!!!!
If you Buy Property, Make Sure Your New Monthly Payment Is the Same or Less Than Your Rent
This one is going to help you avoid that first time home buyer shock, where people buy a home and their expenses shoot through the roof!
You need to make sure that the home you are purchasing has a monthly payment that is comparable to your current rent, or at least comparable to rent for that type of property in your current market.
This will probably make it more challenging to find the property that you want.
You may decide that the market is actually overpriced, and that you need to wait for a market adjustment (like now, where prices for the condo we bought 2 years ago are going down).
Home ownership has a lot of costs so be sure you understand them all!
Condos have maintenance fees which some people don’t like, but they do pay for services like gardening, painting the building, getting a new roof, security, repairs and so on that you would have to pay out of your own pocket if you owned your own house.