重大采购的财务提示

Review Your Budget Know the True Cost Determine Timingof Purchase YOUR WE ALTH JOURNEY—NAVIGATING LIFE’S FINANCIAL MILESTONESFinancial Tips for Making a Major PurchaseAddress these financial considerationswhen purchasing a new vehicle or home Funding thePurchase Long-TermFinancial Goals When it comes to making a major purchase—such as buying a new vehicleor investing in a second home—you want to take your finances into consideration.From a budgeting perspective to how the cost will impact your long-termfinancial stability, there is a lot to think about. We have five tips to help you makethat next big purchase. Private WealthManagementwilliamblair.com Review Your BudgetWhat are your monthly expenses? How much are you Know the True Cost putting into savings each month? The 50/30/20 rule is aneasy budgeting strategy that can help you manage yourmoney effectively. It means spending 50% of your income onneeds (think monthly expenses, such as housing, utilities,insurance, childcare, etc.), spending 30% on wants (such asa luxury car or vacation home), and putting 20% in savings. When making a major purchase, you need to determinethe true cost of the item. That means accounting for theactual price along with any ongoing expenses. There areconsiderable costs that come with buying a second homeor a luxury vehicle, and not budgeting for expenses canimpact your long-term financial stability. For example: •When purchasing a new vehicle, you will have to coverthe cost of repairs, maintenance, insurance, licensing,and registration. Maintenance of a domestic car can bea fraction of what it is on a high-end luxury car.•Buying a house comes with the added expenses of utilities,property taxes, insurance, repairs, and maintenance.If you are purchasing a vacation home, think about notjust where property taxes are today, but where they willlikely be in 10 years. Before you make a major purchase, review your budgetto determine how your purchase will affect your lifestylespending and ability to save. You do not want a short-termpurchase to affect your retirement goals. Make sure youare able to maintain retirement plan contributions aftermaking the purchase. And if you plan to use emergencyreserves to cover the cost, consider how long it will bebefore you can replenish that money. Private WealthManagementwilliamblair.com Determine Timing of PurchaseThe more time you have to plan for a big purchase, the Funding the PurchaseDecide whether you plan to use existing cash you have accumulated or debt to make the purchase. This is largely aquestion of risk tolerance. Using cash is a more conservativeapproach, while loans carry risk since you are taking ondebt burden. When purchasing a primary residence, youmay want to be a little more aggressive, as this falls into the“need” category of your budget rather than the “want.” Asfor a second home, make sure not to overextend yourself. more time you have to do it in an efficient manner. Forexample, if you are going to liquidate some of your portfoliorather than assume more debt, you may be able to extendthe capital gains, and taxes associated with those gains,over several years. In the case of purchasing a home that you will use as yourprimary residence, align your mortgage or long-term debtobligations with the time you plan to be employed andbringing in an income. It’s probably not ideal to take outa mortgage at age 70 and have only your retirement fundsavailable to pay it off. When it comes to taking on debt to make the purchase, thereis a lot to consider. You will want to understand the terms(interest rate, amortization period, fixed versus variable rate,monthly payment) you can expect based on the type of loanand the total interest you will be paying over the life of theloan. Options to consider include: Home equity loans:Home equity loans often carry a considerable amount of refinance costs and upfront costs. However, this offers youthe opportunity to get a fixed rate, so you are locked in at alower rate over a long period. Cash-out refinancing: This may give you the opportunity to decrease yourmonthly payment or negotiate a lower interest rate;however, make sure to consider the added costs and feesassociated with refinancing. Personal loan from bank: While interest rates and fees associated with personal loansmay be higher than other lending options, you may find thatbanks offer more flexibility and higher borrowing limits. Private WealthManagementwilliamblair.com Long-Term Financial GoalsMajor purchases can threaten your financial goals if you Margin loan:If you are making a short-term purchase, margin loans do not prioritize appropriately. Your initial focus shouldbe on emergency funds and retirement funds, which arehigh priorities that you don’t want to compromise for amajor purchase. come with no upfront costs and can bridge a gap for longer-term debt. Margin loan rates are not fixed, so rememberthat they will fluctuate and could increase. Financing op