When it comes to spending money, we all need a little guidance sometimes so I’ve put together 5 questions to ask before spending! It’s my hope that this series will provide you with practical questions to ask when preparing to spend a substantial amount of money (or any amount of money). Hopefully, these practical questions will help you truly understand the enormity of the decision and help you make the decision that is best for you and your family.
Let’s review questions 1 & 2:
QUESTION 1: Is this a want or a need purchase?
QUESTION 2: Will this item INCREASE or DECREASE in value?
QUESTION 3: Do I have the money to pay CASH for this item?
It’s a great feeling when you can pay cash for an item and not have the weight of debt, financing or interest looming over your head.
I wrote the “I Was Broke” part of my book, I Was Broke. Now I’m Not. (you can check out all the details HERE), by always financing things. My car, truck, next truck, engagement ring, wedding ring, honeymoon, credit cards, college student loans, furniture, and many other things were all financed because I didn’t stop and ask myself this question. The day I started asking myself this question, my family moved one step closer to winning with money.
If I do not have the cash to pay for it, I’m not buying it UNLESS it’s a house or an asset that will increase in value (like a business, rental house, etc). Even then, the answer is still usually “NO!” unless I have all of the money available to pay cash.
QUESTION 4: Will this purchase generate or take away income?
What an incredible question to ask – and what a difference it will make in the way you think about money! I used to earn money and then immediately begin pondering which fun item I was going to buy. I rarely (if ever) thought about the fact that I could use the money to buy in to a small business, purchase stocks and mutual funds, start a small business or purchase a rental home.
Even more, I didn’t truly realize the ACTUAL cost of many of the items I had purchased. I had purchased a new car (a smokin’ hot Chevy Cavlier) and I only thought of the bank loan as my “cost” to purchase. In actuality, I also added the costs of insurance, property taxes, license tags, maintenance, repairs, and additional gasoline consumption.
Before spending money, just stop and ponder the options available to use those resources to generate more income for you in the future.