Budgeting for Major Purchases

Major purchases—car, laptop, refrigerator, furniture—require planning. Buying on impulse or financing poorly can derail your finances for years.

The Major Purchase Framework

Before Buying, Ask:

1. Need vs. Want? — Is it truly necessary?
2. Right Time? — Is now the best time to buy?
3. Research Done? — Have you compared options?
4. Can Afford? — Can you pay without financial stress?
5. Total Cost? — Including maintenance, insurance, etc.?

Planning for Major Purchases

Step 1: Define the Purchase

Step 2: Calculate True Cost

Car Example:

Step 3: Create Savings Plan

Target: ₹6,00,000 down payment in 18 months

Category-Specific Guidance

Cars (₹5-20 Lakh)

Savings timeline: 12-24 months

Budget allocation:

• Down payment: 30-50%
• Keep EMI under 15% of income
• Reserve for insurance, fuel, maintenance

Cost comparison:

Save ₹1,26,000 with 50% down payment.

Electronics (₹20,000-2 Lakh)

Smartphones (₹20,000-80,000):

• Save ₹3,000-5,000/month over 6-12 months
• Wait for festive sales (15-30% off)
• Avoid EMI for depreciating assets

Laptops (₹50,000-1,50,000):

• Identify actual requirements
• Consider refurbished for 30-40% savings
• Business vs. gaming specs matter

TVs/Appliances (₹30,000-1,50,000):

• Plan purchases around sale seasons
• Exchange old appliances for discounts
• Warranty extension usually not worth it

Furniture (₹50,000-5 Lakh)

Strategy:

• Phase purchases over months
• Mix new and second-hand
• Quality for frequently used items
• Budget for everything at once

Home Appliances

Priority order if setting up:

1. Refrigerator (essential)
2. Washing machine (saves time/money)
3. AC (if needed)
4. Others based on need

Financing Options Comparison

Cash (Best if Possible)

Pros:

• No interest
• Negotiating power
• No EMI burden

Cons:

• Large lump sum needed
• Opportunity cost

Credit Card EMI

Pros:

• Convenient
• Often 0% interest offers

Cons:

• High interest if not 0%
• Reduces credit limit
• Processing fees

Bank Personal Loan

Pros:

• Lower interest than cards
• Fixed EMI
• No collateral

Cons:

• Processing fees
• Interest adds up

BNPL (Buy Now Pay Later)

Pros:

• Easy approval
• Short-term financing

Cons:

• Hidden fees
• Can encourage overspending
• High penalties for missed payments

Dealer Financing

Pros:

• Convenient one-stop
• Special offers

Cons:

• Often higher interest
• Bundled charges
• Pressure tactics

The Sinking Fund Approach

Create Dedicated Savings

Major Purchase Fund:

Monthly contribution: ₹10,000

Allocation:
├── Next car: ₹5,000
├── Electronics: ₹2,000
├── Furniture: ₹1,500
└── Appliances: ₹1,500

When to Use

When purchase needed:

1. Check fund balance
2. Pay from fund (no EMI)
3. Continue contributions for next purchase

Sale Timing Strategy

Best Times to Buy

Price Tracking

• Use PriceHistory.in for online prices
• Set alerts for target price
• Compare across platforms

Negotiation Tips

For Cars

• Visit multiple dealers
• Negotiate on-road price, not ex-showroom
• Ask for free accessories
• End of quarter has more flexibility

For Electronics

• Ask for bundle discounts
• Request price match
• Check for corporate discounts
• Student discounts exist

For Furniture

• Negotiate 10-15% typically possible
• Ask about floor models
• Volume discounts for multiple pieces

Decision Framework

Cost Per Use Analysis

Example: ₹50,000 Laptop

• Expected life: 5 years
• Daily use: 4 hours
• Total hours: 7,300
• Cost per hour: ₹6.85

Payback Period

Example: ₹35,000 Washing Machine

• Laundry cost: ₹300/week
• Annual saving: ₹15,600
• Payback: 2.2 years

Total Cost of Ownership

Example: ₹10 Lakh Car over 5 years

Key Takeaways

• Plan 12-24 months ahead for major purchases
• Save at least 30-50% as down payment
• Calculate true cost including maintenance, insurance, etc.
• Time purchases around sales for maximum savings
• Avoid financing depreciating assets when possible
• Negotiate everything — prices are rarely fixed

Next: Budgeting for Festivals and Holidays — Managing seasonal spending spikes.