Make sure that you look into the background of the item you want. Doing your research helps you get the most bang for your buck and can help prevent buying an item that would break early which would cost your more in the end. For this budget type example, we'll use the purchase of a car as the goal. It could easily be a new television, a house or any number of things, each of which would have its own set of items to look into. The items below are in no particular order but all of them directly affect your budget.
- Do I want a new car or a used car? This is probably the most crucial decision your could make. You need to know whether or not it is important to have a new car with a full warranty, a used car from a dealer with a partial warranty or if you are willing to take your chances with a car that you buy from an individual. Buying from a dealer, whether it is a new or used car, could affect your insurance budget after your make your purchase. If you choose to buy from an individual, keep in mind that you will need general knowledge of how the engine and transmission work in order to get the best car possible or you will need to have a mechanic inspect the vehicle to note any possible red flags.
- What type do I really want and that suits my needs? Really think about this one. Do you want a sports car but have a wife and 3 children? If the answer is yes but that you already have a family car, then you're cool to move on the the rest of your planning as long as you know that you will never be able to transport your family in a sports car and that the family car will always be available to you.
- Is gas mileage important to me? Sticking with the sports car idea, consider whether or not you will be driving it a lot, whether or not you care about the amount you will be spending at the pump and how that affects your family and your budget after you make your purchase.
- Is regular maintenance going to be an issue? If you get a sports car that is convertible with electric windows and all the bells and whistles, it will need to be regularly maintained by your dealer and you could be spending money replacing the top occasionally depending on the weather in your area. Example: Convertible tops don't usually fair well in the Arizona summers. This will affect your budget after you have made your purchase.
- Do I know what company I want the car made by? If you do, that is half the battle. If you don't, you'll want to look into reliability, customer service and things like that for the different brands like Ford, Chevrolet, Hyundai, Toyota, etc.
- Do I want to make monthly payments? If you do not care about making payments monthly, you will need to decide just how much you want to spend a month. If you do not want to make monthly payments, you need to either buy a used car from an individual or outright from a dealer. Either way, you will need to know what the final amount is that you are willing to spend to plan properly. If you buy from a dealer for a new or used car, this will affect your insurance budget after you have made your purchase.
- How quickly do I want to make this purchase? This is a very important thing to know. Without setting a time frame for your purchase, you cannot set up your budget correctly.
- How much will taxes, etc. add to the total I need to budget for? For a vehicle purchase, you have to consider the amount that will be added to the purchase price in order to budget properly as this may affect which vehicle you get. If you intend to set your budget at $7,000, then you have to decide if that is the whole amount you are willing to spend or if you are planning separately for taxes and such. Vehicle purchases commonly come with the following extra costs: tax, title, registration, gap insurance, extended warranty, alarm systems, adding maintenance programs, etc.
Consider using an online calculator that will help you figure out which way you want to go. Edmunds has a suite of calculators that I like to use when financing a vehicle. You can find them here: Auto Calculators.
If buying a used car, you can call you local motor vehicle office to request an estimation for the amount you'll need for tax, title and registration/licensing. If buying a new car, you can do the math yourself. Edmunds has a great article on calculating these costs here: Simple Car Finance Calculations.
Kelly Blue Book has a host of tools that you can use to determine what is the best car for you to get and what you can expect to pay. They can even help you find it! You can visit their page here: Kelly Blue Book.
Edmunds can help you with reviews and awards for any given car as well as car buying guides and the ability to see what their editors recommend. You can go to their page here: Edmunds Car Review and More.
When working with a dealer, it is helpful to use the same tool they use. The National Automobile Dealers Association has a great research center. Every reputable dealer in the United States will be using a NADA Guide. Check out their page here: NADA Research Center.
I found a great article that really does help you when you are ready to start shopping for and eventually buying your car. Use the tools and tips on this page to really come out ahead of the game. The article can be found here: Car Shopping.
Remember to be an informed buyer, look at all of your options, never buy the first thing you set your sights on and its always a good idea to sleep on it when considering a major purchase of any kind.
Coming soon...
A template for this type of budget.
