There are several questions to ask yourself before spending money. If you're interested in keeping cash in your pocket, it's smart to adopt this practice. It doesn't matter whether you're trying to build an emergency fund or pay off debt, thinking before pulling out your cash or credit card can alleviate a lot of frivolous purchases. Here are seven questions to ask yourself before spending money.
1. Do I Need It?
This is one of the best questions to ask before spending money. I don't know about you, but I've purchased many things over the years that I didn't need — mostly because they were on sale. But regardless of whether an item is discounted, buying items that you don't need can take a chunk of your extra income, and make it harder to reach other financial goals, such as building your emergency fund.
2. Is There a Cheaper Alternative?
For every name brand or popular item, there's probably a generic or cheaper version. For example, rather than buy a Keurig, you can purchase a Mr. Coffee single-serve coffee maker for about $30 less. To locate these cheaper alternatives, you’ll have to do your research, and you’ll need an open mind.
3. Is the Item on Sale?
If you're buying an item that you need, wait until the item goes on sale to get more bang for your buck. Understandably, you might be excited to buy the latest season’s fashions. But if you wait just a few weeks, retailers will begin discounting this merchandise. And sometimes, retailers email coupons that can be combined with a sale, resulting in additional savings.
4. Can I Get It Cheaper Elsewhere?
Whether you're buying shoes, clothes, electronics or household goods, chances are that you can find most items cheaper elsewhere. You might have to shop around, but the savings can be a Godsend if you're on a tight budget. As a general rule, I always look online before purchasing anything, and often times I’m able to find exactly what I’m looking for at a cheaper price.
5. Could I Borrow the Item?
If you need an item for one-time use, or the occasional use, you're better off borrowing this item from a friend or relative. Therefore, you don’t have to run all over town comparing prices, and you don’t have to spend money unnecessarily. Items worth borrowing might include cooking supplies, clothes, books, tools, etc.
6. Will the Purchase Affect My Budget?
This is a good question to ask regardless of your income level. Most financially savvy people have a budget. And in order to stay within your budget, you need to count the cost before making any purchase. Therefore, consider whether buying an item will complicate your finances or make it difficult to pay other expenses.
7. Can I Pay with Cash?
To improve your finances and avoid credit card debt, pay for everything with cash, if possible. If there isn't enough money in your bank account, and you’re tempted to use a credit card, only do so if you’re able to pay off the balance in a month. If not, the purchase isn’t worth the interest charges.
It's easy to get caught in a spending frenzy and spend money that you don't have. But if you ask yourself these seven questions, you can avoid unnecessary purchases. What are other questions to ask before spending money?