Notice the title of this post isn’t “Buy Now or Buy Later.” That’s because you’ve long ago made the decision to buy. Now, you’re trying to decide how long you should wait to pay for it.
Recently my wife and I were doing a little furniture shopping. We had been saving for a new couch and recliner for our living room for a while, and we had finally reached our goal.
Strolling through the store, I saw a couple talking to a salesman. He was putting their information into a computer, getting ready to process an application for credit. I realized that these people had no intention of actually paying for their furniture that day – they had decided to buy and charge it to a store account.
Then I saw another such couple. It occurred to me that maybe saving up for a purchase puts me in the minority of customers at this little furniture store.
You mean I have to pay for it?
You see, when buying an item, you have to pay for it. The money has to come from somewhere. I don’t think some people get this simple truth. Your credit card company or the store where you’re shopping will gladly give it to you today, but you’ll pay dearly for this money in the form of interest.
Paying later ensures that you’ll always pay more than the asking price. It also means your obligations will increase every month. Essentially, you’re relying on your future self to consistently make on-time payments until the debt is paid off. The problem is, our future selves aren’t very reliable.
The alternative to paying later is paying now. But this is tough. It requires you to sit out of the game for a while until you’ve saved up enough to make the purchase. Who wants to do that? It’s not the glamorous thing to do, and it certainly won’t win you any awards.
But it does offer you some benefits
First, it allows you to remain debt-free. We all know the benefits of being debt-free.
Next, it allows you to earn interest on your savings instead of paying interest to someone else. Your decision to pay now completely transforms the equation. You go from paying more than the asking price and being a slave to your paycheck, to having control of where your money goes. From the back seat to the driver’s seat.
It allows you time to shop around, compare features and prices, and make sure you’re getting the best deal. Do you really need the $300 blender, or will the $60 one do the job just as well? Could you find a discount code to get it down to $50? What’s the price on Amazon? Take time to think about which features you really need.
Finally, paying now gives you time to practice good old-fashioned delayed gratification (DG). As you approach your savings goal, you’re constantly denying yourself the pleasure of having the item. The more you flex your DG muscle the stronger it gets.
Either way you’ll have your item. Paying now, with your own money, sets you free from debt and ultimately puts you in control of your finances.
Photo by smithfurniturestore.com