With many retailers filing for bankruptcy and liquidating merchandise, you may be tempted to splurge on items from clothing to electronics. However, the Virginia Society of Certified Public Accountants (VSCPA) encourages consumers to make wise financial decisions during this economic crisis. Here are some tips to help you avoid overspending and make sure you purchase only what you need and can afford:
Take a closet inventory
Before making a purchase, take a look through your closet. Ask yourself, do I really need new clothes? Everyone enjoys wearing the latest fashions. However, before counting out last season's duds, check your closet to see if those khaki pants or that collared shirt still fit and are in good shape. Also, try organizing your clothes by season and colors. You may be surprised how many hidden jewels you actually have in your closet.
Set a spending plan
Before you head to the nearest mall, make sure you have your shopping list in hand. Without a pre-determined list of needed items, you could be asking for trouble. As part of your spending plan, figure out how many pair of pants, shirts and skirts you need. Remember, buying mix-and-match clothing may be less expensive in the long run than buying pants that can only be worn with certain tops, and vice versa.
Do the math
Beware of deals that advertise "free" interest or low monthly payments on large items. There are many "no interest for 36 months" deals out there. For example, you buy a $2,800 television for $1,800 and charge it to the store credit card. But if you do not pay at least $50 per month, or if you miss a payment within the 36-month timeframe, you may get penalized with a 24 to 28 percent interest rate on the entire balance due. Paying such a high interest rate could wipe out the amount you thought you were saving.
Make sure you are covered
You probably will not be able to return your purchase to the store if it is going out of business. Make sure the clothing item fits properly and has no stains or imperfections. For appliances or electronics, consider whether the warranty is important to you. If so, how would you get warranty service or a replacement, if needed?
Consider your savings
In a troubled economy, many companies are cutting back on jobs. Whether or not your job is in jeopardy, now is the time to set up an emergency savings fund. Simply open a special savings account and deposit as much as you can each week. A severance package and unemployment benefits are unlikely to cover all your costs, so this nest egg will come in handy if you need it. Virginia CPAs also advise consumers to use extra funds to pay down debt.
Take advantage of free resources
For more financial tips, visit Financial Fitne$$, a Web site created by Virginia CPAs to help you build a solid financial future. Also, the CPA profession offers 360 Degrees of Financial Literacy, a consumer Web site with free tools, articles and resources to help consumers make sound financial decisions at every stage of their lives.
A comprehensive financial plan is a great way to ensure you stay on track. Make an appointment with a CPA who can help you plan your financial future.