Many people don’t recognize how one major upgrade can create a chain effect in their financials. That is usually a situation when they plan for months for a particular purchase, then at the last minute they decide to go with a bigger or a better option. Doing so can create an exponentially bigger problem within a limited period of time.
For example, if you’ve done your calculations and got a mortgage approval for a house, you may be tempted at the last minute to upgrade – if you find a nicer place and the bank agrees to the larger loan amount. What you may miss is that a bigger house would mean: a larger home-insurance payment, higher monthly mortgage payment, more utility and maintenance costs, etc. What appears to be a manageable upgrade can rack up hundreds, if not thousands, of dirhams every month that you didn’t plan for.
That is why it is important whenever you’re making financial decisions to stick with your original planning and avoid any last minute changes. If you’re really tempted to do so, keep in mind the following points.
Related costs
You may clearly know the difference in the initial price or cost or a particular item, but this may not be everything. As mentioned in the example above, sometimes there are many areas that will need your attention and new calculations based on the price change. You may need to go back to the drawing room, make new phone calls and collect data all over again to determine you actual costs based on this small upgrade and whether it is manageable after all.
In particular pay attention to any ongoing costs such as insurance, maintenance and utilities. Think of worst-case scenario: If you end up unemployed, will you be able to handle these expenses comfortably. This approach should apply to any major financial decision from taking out a personal loan or a credit card to purchasing a car or a house. The costs go well beyond the initial monthly payment. That is why it is important to keep track of the additional costs that you may incur by getting that more exclusive credit card, a better-performing car, etc.
Unrelated matters
When you’ve done a lot of thinking about an item, you probably considered how it fits within your lifestyle, how it appeals to you, etc. Last-minute changes can mean missing out on some secondary points that matter to you. Back to the car example, you may be getting the newer model that includes more and better features, but not in the color you wanted or even the style that you originally subscribed, too. That hasty decision may lead quickly to disappointment or what’s called “buyer’s remorse.”
Once you’ve time to think it over you may feel morally obliged to like the better deal, but it is still not what you wanted. To avoid this situation, it may make sense to just take your time and explore alternatives. If you do so and come up with the same result of being satisfied with the upgrade, you’re more likely to keep the item longer and avoid a sale that could lead to major financial losses.
Relevance
A newer or a bigger item may be promoted as better and providing more advanced performance. Not necessarily. If you’re looking at tech gadgets, for example, a newer item may have a couple of additional features, but not much really. Yes, it may be slightly better, but probably not to the level that justifies spending a significant amount of money beyond your budget.
Once you know what “better” really constitutes, you should evaluate for yourself how far these aspects matter to you. For example, do you need your mattress to identify your sleep patterns through an app on your phone and keep a log? If that doesn’t matter – and that is what’s adding substantially to the price – go to a lower option and save yourself some cash.
Rania Oteify, a former Gulf News Business Features Editor, is a Seattle-based editor.
