Money saving is a national obsession at the moment with Gordon Brown telling us all to clean our plates at the end of meals – and rightly so given that the cost of living seems to be sky rocketing.
Sometimes however big purchases can’t be avoided – if you’re getting married for example then taking the hit and shelling out for a wedding ring is unavoidable.
Lindsay Lohan was the recipient of some serious generosity when her latest romance, Sam Ronson bought her an £11,000 Cartier ring. While few of us are likely to throwing this much money around on a single purchase there are a few financial tips to bear in mind if you’re going to buy big.
Putting it on the plastic
While we’re often discouraged from putting too much debt on a credit card there’s a good reason to make big purchases this way. Buying with plastic will mean that you receive a basic level of insurance cover in most cases.
The average level of coverage on those credit cards which provide insurance is around £1500 although the majority of cards offer insurance up to around £1000. This will normally cover you for accidental damage or theft, things that aren’t normally covered by a product’s warranty. Virgin and Abbey both offer cards that cover you to this basic level while Nationwide credit cards can cover you up to £15,000.
By putting the purchase on a credit card you can also pay off the debt on an interest free basis, if you shop around. At the moment Halifax offers a card which gives you 10 months interest free on purchases while Capital One is offering a huge 15 months.
Remember to make repayments regularly to clear this debt however, otherwise you’ll end up paying 15% interest or more on your purchase. If you get to the end of the offer and haven’t yet cleared the debt then search then market for a new card and transfer your balance to avoid this situation.
Safe as houses
If you are going to be making a big purchase such as brand new stereo then you may start to feel nervous if you take this home without proper home contents insurance. Contents insurance can bring peace of mind that you’ll be reimbursed if the possessions that matter to you get damaged or go missing.
The average contents policy costs between £150-200 but this can vary a lot depending on the value of your possessions and the cover you need. When it comes to insurance price should be a big factor in your decision making but so should the level of cover. Making a claim to find that you’re underinsured could be a nightmare so read the policy details carefully before you sign up to any provider.
Safe with savings
Ideally making a big purchase shouldn’t result in any debt, short or long term. While many of us may not have the salary or the savings to fund nig items regularly, if you have something in mind then it’s certainly possible to get saving.
A regular savings account such as Lloyds TSB’s 1 year monthly saver will allow you to put away money each month and earn rates of interest up to 4.55%. These accounts discourage withdrawals by lowering interest rates if you do so. This form of saving can be very rewarding when you make it to your target figure
Balancing the books
If you can foresee a big purchase on the horizon then it’s important to start planning in advance. Work out just how you’re going to pay for it and be sure that you have the necessary insurance in place.