For most of us, the biggest purchase we’ll ever make is a home — whether we’re talking about a condo or a mansion, housing is the largest portion of most of our budgets. There are plenty of opinions on whether that’s a good situation, but the fact of the matter is that, here and now, most people are interested in owning their own homes.
Considering Transportation Costs
But while a house is typically the biggest purchase we might make, there are a couple of other sizable purchases that many households make over the years. The second largest is most often an automobile: the cost of purchasing a car is generally sizable and it also has extensive upkeep costs that an owner must pay over the years. A vehicle is not absolutely necessary, especially in big cities, but they have become incredibly common. The U.S. Department of Transportation estimated that there were 254.4 million registered passenger vehicles in the U.S. in 2007 — that’s more than the number of licensed drivers in the country.
Personal Choices and Purchases
Once we move past costs that are generally necessary (housing and transportation), we have to start looking at purchases that may be more of a question of personal preference. A good example is a piano: for most families who purchase a piano, it’s the third largest purchase they make, behind their house and car. Of course, the question of how important such a purchase is incredibly variable: there are many piano owners who would happily sell their house before considering a situation where they did not own a piano.
Those variables mean that when each of us is considering making a big purchase, it is important to consider our own needs, wants and priorities. It’s easy to get into the habit of keeping up with the Joneses: They have the fanciest washer-dryer set on the block, so you need to catch up. They have an SUV, so you need to replace that perfectly practical sedan. The list continues.
Of course, the neighbors aren’t the only variables when it comes to making purchases. Something as simple as choosing to buy with cash and avoiding credit can dramatically change our buying habits too. That sort of decision can focus your options on a very specific set of purchases. You may want to save up for the car of your dreams, but in order to get to work, you may need to make a purchase long before you can pick up that sports car from the lot.
Lastly, it can be incredibly difficult to get a clear picture of our needs and priorities. On paper, we can tell ourselves that we want to save up for something that sounds good, like buying a piano — after all, that sort of goal can make us sound incredibly cultured — when, in reality, we may look at our actions and see that we’re actually interested in buying the biggest home theater system on the market. We have to dig deep to figure out why we make big purchases, preferably before those purchases dig a hole for us.
So which purchases have you already made, and which ones are on your wish list?
{ read the comments below or add one }
Are you kidding me? Health insurance (self & spouse, individual policy) costs vastly more than our car. The premium costs more than our mortgage and property taxes combined (on a swanky waterfront condo in Seattle, no less). The year-over-year residual value of those policies is precisely zilch, but as a young cancer survivor, I call them “mandatory”. In fact, the cost of health insurance is so high that being an entrepreneur is what’s starting to feel “self indulgent”. Don’t tell our sub-contractors I said that…
I would say education has been one of the biggest expenses in my life so far (after house and car.) If you count the value of our employer provided health insurance, that would have to be up there on the list as well.
familymoneyvalues makes two good points and the fact is much of what we value about America is financed by taxes. I remember hearing someone say that half of our taxes are wasted but no one can agree which half it is.
I think the biggest purchase I will ever make will be retirement. Same for most of us, particularly if we do not have a defined-benefit retirement plan. In fact, it’s looking like people are going to work later into life than ever in order to be able to retire and, even then, some will have to die on the job because they didn’t get it done.
surely we are lucky to have such a wide variety of choices which suits our needs & monetary situations completely.
We are so lucky to have so many choices and opportunities. But sometimes we allow all the options to get too much of our cash. One gadget comes out, and before we know it a newer, faster, better one is in the stores. That’s great for the company, but not for our pocketbook. We need to be more careful in how and when we spend our discretionary dollars–especially when it comes to upgrading electronic gadgets, TVs, even cars and appliances. Maybe we will appreciate more what we have if we have to wait longer and have to save to buy the item. It is OK to buy some things on credit or loans, but not everything – and I think that is especially true of our ‘toys’.
When I read your post, what struck me most was the thought “Gosh, we are so lucky to have the choice about what we want to purchase and the way we want to pay”.
Because of the efforts, intelligence and perseverance of our for-bearers, Americans have incredible choices and options available to them. Isn’t it great that we even have gizmos like automobiles, lending options like 30 year mortgages and advertisements so we know what our choices are.
It seems imperative that we teach ourselves and our children the benefits of delayed gratification and the drawbacks (as you noted) of keeping up with the Joneses – to avoid drowning in all of the goods and services that are available. Once the money is spent on a purchase, other choices you could have made for that money are gone. If you postpone the purchase, you can imagine buying different things, and may even change your mind about what it is that you really do need or want. Plus, by plunking down the cash, you avoid all those nasty interest charges and actually have the money available to add to your emergency money if needed.
As to my own most expensive purchase over my lifetime, it is hand’s down, payment of federal income taxes. Over my earning life, I estimate that income tax paid amounts are at least 5 times any other large purchase. Now that is NOT a fun purchase.
Your point about how lucky we are in having the choices in the first place is a great one. Many of us are so stuck in the “blaming someone game” that we often forget that we should feel lucky the choices are even available in the first place.
Totally agree on the buying home and buying a car thing. I’m looking to buy my first home and offered my parents cash for their oldest junker of a car. Since I’ll be doing a lot of future home repairs and have a larger living payment (mortgage > rent). It made sense to get a used car rather than buy a new one (and thus have to take out a car loan).