What do I mean by budget?
It’s simple - dollars and sense. Ask yourself a few questions:
- How much do I want to spend?
- What is the maximum amount can I afford?
- How will I pay for it?
I believe the amount of money you want to spend will likely be linked to the maximum amount you can afford. Only you know how much money you want to spend on a new TV. You also know how much buying power you have.
Costs to Consider When Setting a Spending Limit
- Price of the television
- Amount of tax
- Extended service contract
- Other purchases related to TV
The price of a television is pretty straight forward. However, sales tax is something a lot of people overlook when shopping for a television. Depending on the purchase price, the sales tax could add hundreds of dollars to the final sale. Here is a basic breakdown of what to expect with respect to your local sales tax:
- Tax Rate of 8.0% = Tax of $8.00 per $100 = Tax of $80 per $1000
- Tax Rate of 8.5% = Tax of $8.50 per $100 = Tax of $85 per $1000
- Tax Rate of 9.0% = Tax of $9.00 per $100 = Tax of $90 per $1000
- Tax Rate of 9.5% = Tax of $9.50 per $100 = Tax of $95 per $1000
For example: If I purchased a TV for $1,500, I would pay an additional $123.75 in local sales taxes. So, my final purchase price would be $1,623.75. If my budget was a maximum of $1,500 then my actual purchase price would need to about $1,350.
Extended Service Contracts
An extended service contract is probably adds the biggest boost to the final purchase price. Because it is optional, you probably won’t decide on getting until paying for the TV.
The cost of an extended service contract is dependent on the price of the television you will buy. Therefore, it’ll be difficult to include a fixed cost into your budget. A safe projection would be $200-$500 with $200 starting at $1000 and adding $50 per $500.
Additional Charges Related to TV Purchase
Believe it or not, there will be additional charges related to the purchase of a new television. This is something that is best compared to buying a new dress or pair of slacks. Often, a charge related to buying a new garment would be buying a pair of shoes or shirt to match. This scenario compares well to a TV purchase, especially if you’re upgrading from an analog to digital television.
Additional costs include:
- Buying audio/video cables (Component, DVI or HDMI)
- Buying a new component (DVD player, Stereo receiver, Surround sound speakers)
- Buying a new TV stand, entertainment center or wall-mount bracket
- Subscribing to digital cable or a high definition package
- Buying or leasing a digital/HD receiver for cable or satellite service
Therefore, I recommend including a financial buffer of about 20-percent above your allotted budget. This means that if your budget is $1500 then you should allow for spending about $1800 when buying a new TV.
Paying for the Television
The best way to pay for a new television is upfront, like cash or check. Most of us won't be able to do that. Instead, we'll opt to use our charge cards (possibly for reward points) or store credit.
The thing to keep in mind with charge cards is the monthly interest that will increase the overall price of the television should you not pay it off before a new billing cycle begins. So, I don't recommend charge cards unless you have a very low interest rate or plan on paying it off within the no-interest grace period.
Zero Interest
Many stores offer some sort of zero interest financing. This is probably better than paying cash or check because it won't drain your savings immediately. The downside is that you'll get charged all accrued interest if the balance is not paid off before the no interest term expires. This could mean hundreds of dollars added to your final purchase price.
My recommendation would be to go no interest through the store then transfer the balance to a credit card before the no interest term expires. Preferably, a credit card that has a no interest grace period on balance transfers.
