Six questions you should ask before you buy anything

Life is very, very fast. It seems to get faster all the time. Money isn’t impervious to that speed. How many paychecks seem like they’re already spent before you’ve even cashed them?

The heart of good money management is having the confidence to make smart money choices. But what’s the key to making smart money choices? It’s knowledge and experience definitely, but it’s also the ability to slow down your financial choices – even the small ones.

With that in mind, here are the six essential questions you should ask yourself before you take out your wallet, sign a check, or type in your credit card information.

Is this a need or a want?

Wants aren’t bad. Determining that something is a want doesn’t automatically disqualify it from being worthy of your hard-earned money. But understanding if a purchase is a need or a want helps when approaching the other questions you’ll be asking yourself. Plus, sometimes a proposed purchase is both a need and a want. (I need a new phone – I want an iPhone 5.) As you’re asking yourself the next five questions just remember whether this purchase is a need, a want, or a want disguised as a need.

Is this in my budget?

Have you already accounted for this purchase? Is this something you’ve been planning for or something that’s a weekly/monthly routine purchase? If you’ve shaped your budget to include this purchase that definitely makes things easier, but not having budgeted for a purchase doesn’t disqualify it either. It’s really more about considering the consequences of spending a particular amount of money on a particular good or service.

Will I have to sacrifice elsewhere?

If you’ve budgeted for a purchase then you’ve already accounted for its financial impact. If it’s not in the budget, then where is that money coming from? Standing there in the store or sitting there in front of an open laptop, you don’t have to know the answer per say, but you do need to think about it. Remember, the larger idea here is to simply slow down and think about where your money goes. So you might not have an answer yet, but consider the question, because that money has to come from somewhere.

Will I have to finance this?

Pretty simple question here – can I pay for this all right now, or will I be paying for this for months (or even years)? If you have to finance your purchase how long do you think it will take you to pay it off? Approximately how much interest do you anticipate it costing you? There’s nothing wrong with financing your purchases; the trick here is really just to think about life with this new debt you’re about to take on. How much debt are you already carrying? Do you feel okay with the ultimate costs of this purchase? Just think about it.

Is right now the best time to buy?

Some things cost what they cost and that’s what they cost all the time. Other purchases have seasonal fluctuations. Lots of purchases start out at the peak of their value and gradually become less and less expensive with time. So before you buy something, ask yourself “Will this be cheaper?” Maybe it will, maybe it won’t. Maybe it will, but not for a long time, and in the meantime you really need it right now. Like all of these questions, there’s no right or wrong answer. It’s just about considering your options and making the best decision for your situation.

Will I still want/need this next week/month/year?

Some desires are passing fancies. The point of mentally warping yourself into the future is simply to determine whether or not you’re about to drop money on a passing fancy. You’ve considered what the purchase will cost you, what you’ll have to give up in exchange – now imagine a future where you didn’t make the purchase. Still need/want it? Or are you over it?

When it comes to smart money management, there’s always a lot of talk about raising your “financial IQ” and that’s an important component. But your money consciousness is equally important and you don’t need any special courses to increase that – you just need to commit to thinking about your money more often. Think about where it goes and what you want it to do and you’ll find – simply through increased awareness – that you’re making smarter, better choices with your money.