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Can I afford it? This should be the first question you ask when reaching for your credit card. If you have to borrow money to make the purchase, then you probably can’t afford it. Another strategy involves calculating how many hours, days or weeks at work it’ll cost to pay it off.

Is this a need, or a want? Before making the purchase, create a mental list to see how much use you’ll get out of it and whether this is a need or simply a want.

Are there hidden or ongoing costs? Often the spending doesn’t end with the initial purchase. For example, buying a car involves extra costs such as registration, maintenance and repairs. Be aware of how these will add to the total cost.

Will this purchase appreciate/depreciate? New gadgets such as mobile phones often depreciate, so sometimes it’s better to wait before grabbing the latest model.

Is it good value? While the cheapest option is tempting, it doesn’t always pay off. For example, if you spend less on a dishwasher or washing machine, you may end up paying more in regular repairs.

Will it pay itself off? An investment property can create a rental income, which can help to pay off a loan. Consider the big picture when making decisions – sometimes you need to spend money to make money.

Source: BT Financial Group

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