New Grad’s Guide To Major Purchases

As a young adult with a new college degree in your hand, you may feel as though the world is your oyster. You may have limited financial obligations coupled with a great salary from your first post-college job. Now that you are finally earning a sizable income, you may be thinking about making some major purchases. For example, you may be thinking about buying your first home, upgrading to a more luxurious vehicle and more. Before you rush out and make these purchases, you should consider a few key points.

How Major Purchases May Affect Your Budget

Many new graduates will make major purchases without considering the full financial commitment associated with that purchase. It is easy to think that if you can afford to make the monthly payment on a car loan or home mortgage that the item is affordable for you to buy. However, there are often other expenses associated with these and other similar purchases. For example, when you buy a new house, you will also be committing to paying property taxes, property insurance, higher utility bills and more. You may need to purchase additional furniture, invest in lawn equipment and tools and more. Further, a home often requires you to pay for plumbing repairs, electricity repairs, new carpeting or appliances and more. Before you make a significant purchase, you should pause to consider fully how a purchase will affect your budget.

A Look Down the Road

When you are young and fresh out of college, life events like getting married and starting a family can seem remote. Other factors like heading back to school to earn a higher-level degree or sending those not-yet-born children to college may seem like they are too distant to even start planning for. The fact is, however, that many loans and financing options that you take advantage of now will have long-lasting effects on your budget. Consider that a boat loan may have a 10 or 20 year term and a home mortgage may have a 30 or even 40 year term. Making financial commitments now can effect your finances when you are married, when you are trying to raise a family and more. With this in mind, you should consider only taking on financial commitments that are very easy for you to manage now.

The Benefit of Paying Off Debts

One of the great things about your budget right now is that you do have so much extra spending money. This is, after all, one of the reasons why you are considering making major purchases. You may be able to easily manage the minimum payment on your student loans and credit card, so you may not be in a rush to pay them off. However, you may consider delaying the purchase of major items for a few months or years while you pay your debts off. If you are like most adults, your budget will become more burdened by child expenses, home expenses and more over the years, and paying these debts off later can be more difficult to do. Further, your budget will be easier to manage later if you don’t have to contend with your current debts.

The fact is that it would be easier for you to make a major purchase today, but there are several good reasons why you should carefully think through each purchase you make. Consider these points fully before making a major purchase in order to enjoy a more comfortable financial future.