This is not a ‘favourite thing’ however most of us face these choices on a regular basis. They may involve large amounts of money (vehicle – new vs. used, buy vs. rent) or small amounts of money (daily coffee – buy vs. home brewed, vacation). Either way, making smart and informed decisions gets you what you want and keeps you out of money trouble.

You may not even realize that you’re making a choice or that you should make a choice. To properly evaluate your options, you must have some information. What are the costs, risks and benefits of each option? What are the total costs of the item (purchase and ongoing)? Does it fit in your budget? If not, can you make room by changing how you spend your money? Is there an alternative? For example, buy used, rent, car co-op, buy dried pasta instead or fresh.

A friend wanted to buy a car and had her eye on a particular vehicle with a purchase price of $30,000. This was before tax, freight, insurance, etc. Between the loan payment and the operating costs (gas, insurance, tires, maintenance) the vehicle would cost well over $1,000 per month and she would be making loan payments for at least 5 years. For shock value, I suggested she look at a Yaris. That didn’t appeal to her and I think the words were “I’m not driving a Yaris”. When I suggested that the point wasn’t to drive a Yaris, it was to make an informed and wise decision. She mulled it over, looked at used cars and put off buying one for the meantime. This turned out to be a wise decision as she’s going on an extensive trip and won’t need a car for quite a while!

It’s important to acknowledge what things are important to you and worth retaining. This may be a nice coffee every day on your way to work and/or it may mean an annual holiday to somewhere warm. They are not necessarily mutually exclusive! Including them in your budget ensures you continue to enjoy whatever is important to you.