You might have thought that making a large purchase could encourage you to save more. If you have a business, one thing that you quickly think of after closing a big deal is buying something big. Investing that revenue on something all at once is extremely enticing, but will it make you save money?
Think of buying a house. If you spend all your money buying a property, you might lose a lot. With home prices soaring high compared to last year, you might need to start saving up again after purchasing a new home with all your money. However, if you buy it on an installment basis, you can still use some of your money.
Spending big on something might not be applicable for everyone. You might need to consider staggered payments for an investment. If you’re still not convinced that this is the option for you, check this out. Here are the reasons why a staggered payment option for investments is more advisable.
Gives You More Leeway for Payments
It’s hard to earn money, and it’s equally hard to maintain a passive income. There’ll be dangerous instances when your business revenue is fluctuating. You can’t control the movement of your income.
Imagine buying something big, say a car, using all your earnings. Then the demand for the type of business you have suddenly waned. What’s going to happen with that car you just bought when you can’t even buy gas? Paying something in installments can give you enough time to pay something off. You can do this while having some of your money for other essential payments.
Helps You Manage Your Budget
If you buy something that’s payable in years, you can manage your budget easily. Fixed payments can give you a standard figure that you need to spare from your salary. This way, you can comfortably budget the remaining chunk of your salary for purchases you have to get. This can even give you the freedom to make payments that are more than the fixed amount.
Budgeting will never be easy if you’re paying something in a staggered payment plan. This brings us to the next reason why this payment plan is a good option for buying large purchases.
Allows You to Save for Other Things
Since you’re able to set the amount aside for your significant investment, you can save the rest of your income. You can then use this income to buy some other things that you need.
Let’s take a house purchase, for example. If you purchase a house in a lump-sum payment, you already have a new home. However, if something happens negatively in your finances, you might get in trouble buying other necessities. You might even find it hard to pay for utility bills. On the other hand, you’ll pay it in years if you buy a property, say through an attainable FHA loan. Therefore, it’ll give you more flexibility in handling your finances.
The moment you reserve that house payment, you’re free to save the rest of your salary for buying other essentials. That’s economically functional if you’re saving for other big things that you want to have.
Gives You the Option to Pause
One advantage a staggered payment plan can provide is giving you an option to take a break from payments. Some instances will force you to pause your payments on a big purchase. They could be emergencies or anything that needs to be prioritized first. If you use all your income for a large purchase, you won’t have enough money for unexpected circumstances. It can even cause you to borrow money first, which will incur interest over time.
Meanwhile, if you’re paying something in a staggered plan, you’ll have an option to pause. You can temporarily stop payments until your emergency is resolved. You can then use the money to finance whatever circumstance you’re in. A payment plan that can prevent a financial crisis is always a good option.
Improves Your Credit Score
A staggered payment plan can give you more flexibility in managing your finances. This is a big help in building your credit score. If you can designate the right amount for what you’re financing, you can manage your funds well. Paying your bills on time is one way to improve your credit score. You can only do this if you’re able to maintain excellence in handling your income. Paying something big little by little can help you maintain a good credit score.
These are the advantages of a staggered payment option. If you have a business you’re trying to expand, you need to think of ways to maximize the use of your revenue. Making a lump-sum purchase might not help you in the long run. Go for a payment plan that will give you enough time to pay for a big investment. Choose an option that can make you save some while paying off your huge purchase over time.