Avoid Financial Disaster – Test Drive Your Payments

Like stepping off a cliff…..

That’s the way it feels when facing a large purchase like a new car or new home. The jaw dropping anxiety. The constant second guessing yourself. The process can be pressure packed.

Adding to the pressure – we often consider the largest house or most luxurious vehicle we can afford. Miraculously, we try to figure out how to shoe horn the expensive monthly payments into our meager budgets.

Yes, perhaps if we eat out just a little less, or take our lunch to work everyday, or skip that yearly vacation – we just might be able to make it work!

Unfortunately, its just this type of thinking that got many homeowners in trouble when they bought houses too large for their budgets. In the end they become all too familiar with the word FORECLOSURE.

So how do you know if that new car payment, new mortgage, or more expensive rent is going to be manageable, or going to make you miserable?

Take it for a test drive. No not the house or the car. The payment. Take the payment for a test drive. Try it on for size. See how it feels. Can you deal with it?

Simply estimate the monthly payment for any new car, house, or other major purchase you’re considering. At the beginning of each month stash this amount into a savings account while you live on the rest of your income. Now see how easy or hard the rest of your month goes. Try it for two or three months.

Are you miserable, just barely scraping by, trying to make ends meet? Do you have to severely deprive yourself – forgo your favorite movies, social events, and things you enjoy? Have ramen noodles become a frequent dinner time meal?

On the other hand, perhaps you’ll discover that you can afford putting away the payment money without a major crimp in your lifestyle. Maybe all it takes is for you to cut back a little bit here or there.

Either way, the benefits of a payment test drive are undeniable. Can’t handle the estimated monthly payment of a new car or home – you’ll still have the money in the bank you tucked away during the trial period. Better yet, you’ll have averted potential financial devastation down the road.

Find out you can handle the payment without severe financial strain – Again you’ll have saved money in the bank during the trial period. This money can now be used for an even larger down payment, which in turn will lower your monthly payments and save you money on interest costs.

Either way you win.

Do you have tips for determining whether or not you can afford a new car, house, boat, or other expensive item? Leave a comment below. We’d love to hear from you.