
Catholic Money Talk
Welcome to Catholic Money Talk where we talk about all things money and finance. Many times we look at financial decisions and money matters in a vacuum. But here we try to look at these same items through a Catholic lens. If God made us to know him, love him, and serve him in this life so that we can be happy forever with him in the next, we need to determine how we can know, love, and serve him with our finances. We tackle topics like debt, home buying and other large purchases, insurance, budgeting, generosity, saving, and investing as well as educating our kids with good financial principles that will benefit them for life. We acknowledge that all we have belongs to God and we want to be good stewards of all that he has blessed us with.
Catholic Money Talk
Episode 79 - Three Questions to ask before making a large purchase(original date 8/21/23)
Replay of Episode 26 - Large purchases have the potential to easily derail our financial plan. Ask yourself these three questions before making any large purchase or any large financial decision.
Get in touch with Paul
Monthly Subscription to Catholic Money Talk
Paul, Welcome to Catholic money talk, where we talk about all things money and finance, and we try to do it through a lens of being Catholic, where our ultimate goal is to one day be in Heaven with the Lord. I am your host. Paul Scarfone, thank you for being here today, making large purchases can be a challenge if we do not have a good decision process. So today we're going to talk about three questions that I recommend you ask yourself, and if you're married, you and your spouse discuss before making a large purchase, or really any large financial decision. But before we do that, let's start with a prayer in the name of the Father and of the Son and the Holy Spirit. Amen, Heavenly Father, we thank you for this day, we ask You for all the grace and wisdom that we need to face the challenges or circumstances that we find ourselves in. We know that you love us and that you have a great plan for us, allow us to yield to your Holy Spirit. We ask all this in Jesus name, amen, in the name of the Father and of the Son and of the Holy Spirit, amen. When I talk to people, I find there are typically two areas, or two main areas, that derail them from achieving their financial goals. One area is that they just don't keep track of their spending, and little by little, they slowly overspend here and there, and that all adds up to creating a bit of a financial hole. The results can be credit card balances, debt, or maybe it's underfunded savings and unfunded retirement accounts. The other area is an area that creates, or has the potential to create, thoughts of guilt and regret, and that is making large purchases. It's usually the result of an emotional or an impulse. Many times these large purchases, they're not easily undone, like buying a new car, a real estate purchase or even a vacation that we didn't properly discern in any financial decision. We must pray first and seek the Lord's wisdom in the moment. That's the ultimate first step. But then I find that answering these three questions can prove to be immensely helpful and save you 1000s of dollars and save you years of regret. So if you want to save money annually, you must ask yourself these three questions before any large purchase. Here's question number one, how does this fit into my long term financial plan? Now, if you don't have a plan, don't make the purchase first, develop your goals and put a plan together, then ask yourself, How does Thus, this fit into my financial plan? In other words, does this support my goals. I always tell my clients their monthly budget, it should reflect their goals. If you want to know what's important to you, look at where you spend your money. The same can be said about our time. We spend time doing what is important to us. If we're constantly on social media, that means social media is important to us. If we spend a lot of time with our family, that means family is important to us, and so it is with our money. In Matthew six, verse 21 it says, For where your treasure is there, your heart will be also, if we find that we are putting a lot of our treasure in, going out to eat, spending a lot of money going out to eat, then eating out. Well, that's important to us. If we're putting a lot of our treasure for putting a lot of our money into savings, then savings is important to us. And if we find that we don't like what seems to be important to us, if we find we're wasting our money on items that are not our priorities or that we've realized shouldn't be our priorities, we need to make some adjustments. We need to make room for our goals to be our priorities. And we need to prayerfully discern that when we're looking at a large purchase, we need to ask ourselves, how does this fit into our long term financial goals? Can this be part of the plan? And there are two great ways to determine the answer to this question. The first is to speak with someone who knows us. If we're married, obviously it's our spouse. If we're single, we should have a trusted friend, someone who can hold us accountable to our goals. Ask them what they think of you for considering this. They might respond with, it's what we've always wanted or dreamed about. Maybe our spouse says this is perfect, it's what we've been saving for. Well, that'd be great. Or they might say, where is this coming from? I've never heard you mention thinking of this. See, it will help us determine if this is an impulse or a desire we have had for a while. The second thing to do is to sleep on it. Some large purchases are proposed to us by sales people. Sales people who are trained and they know how to sell. They know how to read our body language and impact our emotions. They know how to create an environment that cooperates with their goal to sell us something. I'm thinking of card. Dealerships, timeshares, and yes, even some realtors. We need to completely remove ourselves from that emotion of the transaction, get a full night's sleep and consider every angle the deal before we move on it. We need to intently consider how this purchase can impact our long term financial plans and our goals so many years ago, before we were on top of our finances, we had done a Disney vacation. We were attending a pitch on joining the visit the Disney Vacation Club, that's the Disney timeshare, and in exchange for hearing their pitch, we received, I don't know it was like 100 or $200 gift card. We going into it. Knew we knew we weren't going to buy the Vacation Club, so we went and boy, were they good at selling. After everything they said to us and all the fun and excitement we're having at Disney, we bought into their ideas. Why would we ever not want to join the Disney timeshare? Don't we love our family, don't we love to have fun with our family. So we signed up, we gave them the deposit, and we were nervously excited. As soon as we left and got back to the hotel we were staying at, we started to look up more information about it. I was struggling to get a good night's sleep knowing that we had just signed up to have a new, permanent monthly expense, forever. Yes, forever. The next day, I started doing more research, and I found that it's it's actually really hard to unload a vacation club membership if you ever change your mind in the future. And then I found a whole nother market where people listed their unwanted vacation clubs so that others could rent them, and those were so much cheaper than ever. Buying one the next day, I called the sales guy back and we canceled. There was like a three day, you know, no obligation free cancelation you could, you could do. He was so disappointed in me, that's what he said. He tried to put me on a guilt trip about being someone who doesn't keep their word. I mean, this guy was really a piece of work, but thank goodness, because there was no way that the Disney Vacation Club was going to fit into our budget. We were already underwater, and I think back that was like might be 12 years ago. We haven't been back to Disney, right? Making that decision in the heat of the moment with their salesperson reading us like a book was only going to result in a terrible decision for us. Getting out of that bad deal was very important. I'm so, so grateful that we did. So the next question we need to ask ourselves is regarding opportunity costs. So here's question number two, if I say yes to this, what am I saying no to? So what are the opportunity or opportunities that I'm going to miss by doing this? For every financial decision we say yes to, there is another area or areas that we are saying no to the best way to understand this is just to give you a simple example. Let's say we received$10,000 maybe. Let's say it's a tax refund. We received a$10,000 tax refund. We could sit and list all the things we could do with the money. We could put 10,000 towards paying off our mortgage, but then we wouldn't be able to use it for a $10,000 vacation if we decided to spend the money on a new living room furniture set. Well, then we wouldn't be able to invest it. If you're managing your money well, if you're being a good steward of what the Lord has given you, you should have a plan. You should have a set of goals and a way to achieve them. If something pops up that you want to say yes to, that isn't part of the plan. You need to determine what in your plan can you say no to? In order to make room for this item, you have to determine which items rank higher than others in priority and our plans. They're allowed to change. Our priorities can change, but we want to make sure we're looking at the whole picture to see how each of the decisions affect each other. We want to be intentional, because financial decisions can easily have a domino effect. I regularly meet people who have overspent on their home purchase, and they find me years later when they the wheels or when they feel their wheels are just spinning and they're stuck in their particular situation. Many times it can be traced back to the home purchase they had stretched themselves to buy, the home they fell in love with, and it was at the cost of future vacations, it was at the cost of retirement, and they find themselves saying no to so many things that they never considered because, because they said yes to the house. This happened to us. When we bought our first home, we weren't budgeting. We had spent way more than we should have on the house, and I thought we could, we'll just make more in our you know, make more income, make more money. And our friend. Financial problems would disappear, but as our income grew, so did our family and so did our monthly expenses. We were unable to be as generous as we wanted to be, because we had said yes to the house. The house decision spilled into other areas, and we had found ourselves growing in debt. When we finally learned how to manage our finances, we had to spend years saying no to vacations, no to going out to eat, notice so many things, until we got the situation corrected. We had to say no to those things so that we could say yes to paying off the debt. But we had developed a plan. We learned how to weigh decisions and look at the opportunity costs. Now, when we're making decisions, we can peacefully say yes and no to different purchases, because we can quickly see how the decisions will impact the various areas of our plan. So asking ourselves, if we say yes to this, what are we saying no to is an important question to answer when making any large decision. And here's question number three, is there a compromise, or is there an alternative to making this purchase? I find many of us don't love a yes or no question. We love to have multiple options, but sometimes we need to create a new option, one that moves us from the two extremes of where we thought the decision would end. So is there an alternative to what I've been considering? That is a great question to ask. So I have an example. About five years ago, I wanted a pickup truck. Why? I had a bunch of different excuses, but we had a minivan and a 15 passenger van, and if I needed to make a run to the home improvement store, I was having a pull out seat set up a drop cloth or tarp to protect the inside of the vehicle. It was just a hassle. And there, there were some other reasons as well. But my wife, she liked to drive the minivan, and for me, driving a large 15 passenger van around town for basic errands was not a simple thing. So we made a plan. We saved up $10,000 and I started shopping for a pickup truck. I quickly found that $10,000 for a pickup truck, it's a tough price point. They either had mechanical problems that needed to be fixed, or they were coming off a construction site with basically a poured concrete interior just terrible, terrible condition, and the high mileage ones I was looking at had a ton of rust, and the body was in poor condition. I had thought that I might need to save up to 15,000 or $20,000 to find something decent, but I didn't really want to do that. I kept my eyes open for a few months, looking online and calling the phone numbers for ones I saw on the side of the road or different places, nothing seemed to be a good option. Then, through my faith community, I saw an advertisement in the bulletin that it was actually a friend selling one for $5,000 I decided to give him a call. I went to check it out, the the body of the vehicle, the pickup truck. It was in great shape, not a bit of rust, and it was 14 years old. It did have over 210,000 miles on it. The friend I was purchasing it from, he had rebuilt the engine at about 160,000 miles, and he had it in great mechanical shape. It was everything I wanted, a full size pickup, complete with four doors, two rows of seating. I was excited and grateful that I had taken the time to wait and I hadn't rushed to buy something. Yes, it was higher on the mileage than I wanted, but the rebuilt engine, the price point and the no rust, those were perfect trade offs. I also negotiated a slightly better price. I think, I think I ended up paying 4500 for it. So it was$5,500 under the original budget we had. And the truck, it's still running well, I've had a few minor repair items on it in the last few years, but it's still well under spending the original 10,000 I thought I was going to do. I was so grateful to not have saved more to spend more. It wasn't a need, it was a want. So I did not want to pause or derail some other element of our financial plan just to fulfill this want. And there are so many more questions that you can ask when making a large financial decision or a large purchase. And again, the number one thing to do. The first thing we do, it's pray, pray before every decision, and maybe pray a little bit longer before a bigger one. Talk to your spouse and communicate clearly. Agree on priorities. These are so important. But then once you've prayed, once you and your spouse are communicating well and you've got a list of priorities, then ask yourself these three questions, what was the first one, how does this decision fit into our financial plan and support our goals? The second one, if we say yes to this, what are we saying no to? And the third one, is there a compromise or an alternative to making this decision? Question. I promise if you ask yourself these three questions before any large purchase, you're gonna find yourself making good decisions. You'll probably find yourself saving money on a regular basis. I hope this has been helpful. Thank you for joining me today. God bless you. Foreign Thank you for listening to Catholic money talk. I hope you join us again next time, please click Subscribe on your podcast app to get notified of new episodes. God bless you and have a great day. You. I.