1. Do I have cash to pay for this item? 

This is the number-one question to ask when you want to determine if you can really afford a purchase. If you’ve got money socked away in long-term savings, it won’t help much. You need to have it available now.

You might have been trimming your budget just a little bit each month to pay for this item, or maybe you’re using a surprise work bonus. Either way, make sure you have liquid funds that can cover the cost of your item. Putting it on credit means you can’t really afford it, and you’ll be hiking up the price once interest is tacked on. Plus, you’re now going to be reminded of the purchase you may come to regret for a long time to come. 

2. Is this the best price I can get for this item? 

When making a large purchase – and what constitutes “large” will vary with individual budgets – it’s important to comparison-shop before plunking down your money. Check several online listings and hit some brick-and-mortar shops to find the lowest selling price. Visit CouponCabin.com, RetailMeNot.com and similar sites to look for available coupons and discounts. Spend some time researching the best season for purchasing that particular item so you’re not buying it just weeks before it goes on sale. Finally, consider buying your item previously owned for steep savings.  

Don’t spend any more money than you absolutely must. 

3. How many hours of work will you need to do to pay for this purchase? 

Nutritionists famously warn their clients that the calories in a single donut will take a 45-minute workout to burn off. This exercise helps dieters decide if that small indulgence is really worth the price.  

Adapting a similar approach to your finances will help you make the best choices. Calculate the total amount of hours you’ll need to work to pay for this “must-have” item. Then ask if it is really worth the price. 

4. How else can I spend this money? 

Think about the money you’re about to spend on this item. What else can that money buy? Can it pay for a few weeks of groceries? Would it go further on vacation, where it can fund a priceless trip filled with memories that will last your lifetime? It might even be enough to sponsor your child’s wardrobe for the season!  

Take some time to think of other ways you can spend this money before making your final decision. 

5. Have you splurged on any other large purchases recently? 

If you can afford it, there’s nothing wrong with an occasional pricey indulgence, even if you don’t absolutely need it. But when luxury purchases become a habit, it can spell disaster for your finances. Your standard of living will rise to match your choices and you might soon find yourself spending enough to go into long-term debt. 

When was the last time you bought something this expensive? If you’ve been super-careful with your spending for awhile, and you can afford this purchase, go ahead and enjoy! But, if you picked up a designer handbag just last week, you might want to wait a bit before buying the one that’s caught your eye today. 

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