I vividly remember standing in the department store, staring blankly at rows of small kitchen appliances, and wondering, “Do I really need a new coffee maker? Should I buy one now or wait until the unit I have breathes its last gulp? How much money do I have to spend?” The sheer volume of brands, functions, sizes, and price ranges was enough to make my head spin. Added to that, I had absolutely no idea how much money was even left in the home furnishings portion of my budget.
That moment (and many more like it) became the reason that my husband and I created a series of questions that we ask ourselves before we make any purchase.
By honestly answering these questions, you’ll avoid wasting money, suffer from less buyer’s remorse, and stop sidelining your personal and financial goals.
Let’s get started!
Would you like to see and hear us give examples and break each of the four questions down into easy-to-remember steps? Watch the video.
Question #1: Do I need this?
Recognizing the difference between a want and a need is paramount if you are looking to live on a budget, save money, and meet your goals. We can generally sit in any room of our house and see dozens of items that we really don’t need or very rarely use.
As I get older I realize that there are a lot of things that I like and very few that I actually need. Recognizing the differences between our wants and our needs is a critical skill in today’s world. There are a good many things that are presented to us under the guise of “needs”.
I would challenge you to consider whether your purchase is actually something that you need. Is is something that will sustain you? If it something that you will use long or short-term? Is is something that you could rent or borrow? Is it a redundancy of something that you already own?
Inventory. Know what you have!
One way to avoid buying things you don’t need, is to know what you have.
Keep your pantry in order. Inventory your shelf stable items. Inventory your bins of hand-me-downs that you have stored in your garage, waiting for your kids to grow into them. I place each size in a separate bin and clearly label the size on the outside of the bin. I once read an article that said that disorder costs you money. I thought, “No, that’s not true.” But, then I became aware of how many times I bought an item merely because I was unaware that I already had it sitting on a shelf at home.
Question #2: Do I need this now?
As you can see, this differs from my first point in only one small aspect – the addition of the single word “now”. I have to make use of this distinction nearly every week. I feed a family of six on an average of $425 each month. Given this food budget, I often make a list of items that we need and then rank them in order of importance. I want you to incorporate this same system with every single purchase. When you are living under the median, it is imperative that you prioritize every item.
Years ago Larry and I enjoyed going to auctions. We would watch as bidders’ eyes glazed over when another bidder drove up the price of an item that they wanted. Their features would almost transform as they made battled it out to be “the winner”, at an often unbelievably inflated cost. When the almost opium-like rush of purchase-induced fever dissipated the next day, I’m sure that they could clearly see that they really didn’t need that item at all.
Question #3: Can I afford this?
Seems like a simple question, doesn’t it? But, how do you judge affordability? It’s more than just the price of the item. For those of us who live lean, we must remember at all times that we have goals, we have a budget, and we have an accountability partner. Yep! The knowledge that my husband sees the totals in every budget category on a monthly basis has kept me from spending unnecessarily on more than one occasion.
So, how do we gauge whether we make a purchase? For items like clothing and food, I recommend using a cash envelope system. I have been a budget queen for decades and this is one of the hardest things that I have ever tried to do! I kid you not! At the beginning of the month, place your money for clothing in an envelope. Write the amount available on the front of the envelope. While eying chat cute outfit at the store, simply take the envelope of cash out of your pocket and check to see how much money the envelope contains. If there isn’t enough cash, then put the item back on the shelf.
Stringently resist the temptation to steal money from another budget category to pay for that purchase. When you “rob Peter to pay Paul”, it will catch up to you in no time flat! If you are living under the median, then your budget is undoubtedly tight. When you take money from another category to indulge a desire, then you will inevitably wind up short on money for something critical when you need it.
Question #4: How will this purchase affect my goals?
The whole idea behind this final question is simple. You must have goals and in order to reach them you just consistently put those goals in front of your face. Period.
I have lived under the national median income for many, many years and I will be the first to tell you that having concrete goals for the future was not only hard, it sometimes seemed like an exercise in futility.
Without a list of specific, SMART, goals and a plan to achieve them, you never will.
I am a visual person. It helped me to have a pie chart which showed each goal and a timetable to the completion of each one. I color-coded the pie chart. It was really cool! Well, at least I thought it was.
Take a 3 X 5 card and write down each goal. Color-code your list if you want. Then when that cute outfit (or the perfect living room furniture) is screaming, “BUY ME!”, take that card out of your pocket. Remind yourself that you have self-control. You will embrace delayed gratification. You will wait. When you have a plan and you can see in writing that you will have enough money to pay cash for future goals, it’s a lot easier to walk away from what seems a bargain now.