A cousin of mine had to make this choice recently. He was working a nine to five, was staying with his parents. He had gotten to a stage where he was looking to move out. He also wanted to buy a car because commuting via public transport was becoming stressful for him. The only thing was that- he did not have enough money to do both- he had to choose one. The question then was- which one should he choose?
Well if you are in the same predicament as my cousin, then asking yourself these 6 questions will
Which one is completely critical?
Your accommodation can be critical if you stay with people who have given you an ultimatum to move out. If you are also squatting with a friend or sleeping from one random house to the other, getting an apartment can also be critical. Buying a car in any of these cases is foolhardy as you can’t continue to live a car for too long.
Which will become more difficult| Expensive to to get if you Miss the Opportunity
Let’s say you get a deal to buy a car for half the usual price because the owner is in dire need of money- that’s an opportunity that if you pass up you may need to pay more. What if you get the chance to rent an apartment without having to pay any of the extra costs of agent fees, agreement etc that is another type of opportunity you can get. The question is- which option would cost you more if you pass the opportunity up? This should aid your judgement
Opportunity Cost:
If you don’t do it now, would it cost you more? If you rent a house and not buy a car, would it cost you more to keep commuting? Using my cousin’s example, he still stays with his parents and his reason for wanting to leave is probably because he needs his space and independence. Therefore, if it is more inconvenient for him to jump buses than it is for him to live with his parents then I’d rather he bought a car.
Are there Good Substitutes?
Is there an alternative? For the car, can you get a less expensive one? From the house can you choose a less expensive apartment or neighborhood? Examine the reasons you want each item and see if there are alternative ways to meet those needs. Who knows? You may end up being able to get both or save enough money to get the other pretty soon.
Which Gives You Peace of Mind?
Just because you are trying to make a good financial decision doesn’t mean that you should make yourself unhappy. Do what gives you peace of mind.
