9 WAYS to purchase your race horse… or holiday, pool, new car, renovation – or whatever!
Gone are the good old days of ‘lay-by’ – remember that? The ‘olden days’ of buying something you couldn’t afford. It was the original form of delayed gratification and budgeting for things we wanted – something our children and grandchildren will never know anything about. Perhaps even some of our Gen Y readers?
Do you have a big ticket item you would really like to purchase but you’re not sure about how to pay for it?
Let’s take a look at a few ways, starting with the most obvious:
Let’s face it, many of us really aren’t big fans of delayed gratification, however, if you are most comfortable with this method there is absolutely nothing wrong with that. In fact, more people should follow your example. Set up a separate savings account, ask your employer to direct a portion of your salary each week into the new account so there’s no temptation to spend it. Then watch it grow!
Most of us are more the INSTANT GRATIFICATION type. We just can’t wait. We want it and we want it NOW! So most of us will then…
Both of these options are going to get you that item right now.
The disadvantages?
Unless you pay your credit card off within the 55 days free interest period, the cost for both of these options will end up being much more than the ticket price in the long run.
WARNING: Both options would not be high on our recommended list.If your credit card has an interest rate in excess of 15% and you take 5 years to pay off the debt then your $20K holiday could end up costing you as much as $30,000 or more!
Of course, you MIGHT experience an unexpected windfall? You could…
Good luck with both of those options.
What about using your home loan?
There are several ways you can do this. You can:
or
The advantage of using your home loan?
Adding a large ticket item to your home loan is likely to give you the lowest interest rate available as the item is secured to your home. And let’s face it – interest rates are pretty good at the moment – it is the cheapest way of buying money today.
The disadvantages?
If you fail to make additional payments over a short period of time to cover the additional loan you risk taking many more years to pay off your home and can even pay a lot more than the original cost of the item.
The major risk? If you take a very long time to pay off the debt, you are increasing the total interest repaid – thus the total amount of the big ticket purchase. It could end up costing you a lot more than you really wanted to spend.
If you really want to make a big purchase this way, you MUST pay off all debts as fast as possible!
Regardless of the item you want to purchase, we always recommend you do two things: