Big Purchase Decision

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---
name: Big Purchase Decision
description: Evaluates whether a major purchase is financially sound using total cost of ownership, opportunity cost, and timing criteria. Use before any significant discretionary purchase.
---

# Big Purchase Decision

Big purchases feel like one-time decisions but are almost always multi-year financial commitments. This skill applies a structured evaluation before committing, because the time to analyze a purchase is before signing, not after.

## Define What Counts as a Big Purchase

Any single purchase above 1% of annual take-home income warrants this analysis. For most households, that threshold falls somewhere between 500 and 1,500 dollars. Apply the full framework to anything above that line.

## Calculate Total Cost of Ownership

The purchase price is rarely the real cost. Total cost of ownership adds: financing interest, ongoing maintenance and repairs, insurance changes, fuel or consumable costs, and registration or subscription fees. Divide total cost by estimated useful life to get annual cost. For a vehicle, this transforms a 25,000 dollar sticker price into a true annual cost that is often 8,000 to 12,000 dollars per year.

## Apply the Opportunity Cost Test

Every dollar spent is a dollar not invested. At a 7% average annual real return, 10,000 dollars invested today is worth approximately 19,700 dollars in 10 years and 38,700 dollars in 20 years. This is not a reason to never spend — it is a reason to be intentional about which purchases are worth the trade-off.

## The 30-Day Rule for Non-Urgent Purchases

For any non-emergency purchase above the personal threshold, wait 30 days before buying. Most impulse-driven desires fade significantly within that window. If the desire is still strong at 30 days and the purchase passes the financial tests, it is more likely to be a genuine need or a considered want.
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