Big Purchases and Long-Term Value

Your long-term financial goals, including retirement, require you to save money. You need to spend less than you earn so that you are able, one day, to enjoy retirement and live the life that you deserve to. All of this means that you should be careful about spending, and that you probably shouldn’t drop a huge chunk of your net worth into one big purchase.

However, you’ll find exceptions. Understanding which big expenses are worthwhile — and perhaps even beneficial to your long-term financial situation — is crucial. So is understanding how to get the most out of whatever you buy.

When is spending big a smart move?

Generally, two types of big expenses make sense: ones that are essential, like vehicles that get you to and from work, and ones that will help you expand your wealth, such as real estate.

Let’s start with the obvious: You need a car to get to work, and you need a place to live. Paying rent and buying a car are expensive, but you need to do them. The key to being smart about these things is to put them in your budget first. Leave discretionary spending for last when you make a budget, and be strict with yourself so that you can save.

Eventually, you may be able to stop paying rent. That’s an example of our second type of smart big purchase: ways to expand wealth. We’re talking, of course, about buying a home.

When you pay rent, you are paying for a month’s worth of living space, and you can expect to keep paying your rent every month for as long as you live in that space. When you buy a home, you have to pay a big down payment — but, unlike with rent, your mortgage payments are going toward more than just a living space (they’re going toward this valuable asset you now own — your house) and will someday stop (when you pay off the full mortgage). Eventually, you’ll own a valuable asset and be living in it for free. That’s a big boost to your wealth.

And you can repeat this process with an income property. You could buy a real estate property and rent it out. Using good landlord software solutions to keep costs down while posting an attractive listing and free rental application, you could land the right tenant and start generating wealth from your real estate property. It’s not without its risks, but it’s a sensible way to use a big purchase to actually expand your wealth.

You’ll find other examples, too. You could invest a big chunk of change in your business, for instance, and use that to grow or acquire valuable assets that will increase your earnings and wealth. Whatever you do, remember this: Big purchases can be a big benefit when you choose them wisely!

Protecting the value of a big purchase

Whatever sort of big purchase you make, you’ll want to make sure that you maintain its value. Whether you are planning to ever resell your purchase or simply want to get the most of it, don’t let your big expense become a waste by neglecting it.

This means that you’ll have to invest in regular upkeep and maintenance for your home, vehicle, and other big purchases. Let’s use a motorcycle as an example. Your motorcycle is probably not an essential expense, but it can be a perfectly sensible one — as long as it lasts! To keep your motorcycle in top shape, say the experts at Chaparall Motor Sports, you’ll need to invest in reliable maintenance and repairs, brand-name motorcycle equipment and replacement parts, and great safety equipment. Be smart, and make the most of a big purchase.