Major Money Malady—Buying on Time

Updated insider information by Chellie Campbell, author of “The Wealthy Spirit: Daily Affirmations for Financial Stress Reduction”

261-September 18

“The quickest way to double your money is to fold it in half and put it back in your pocket.”—Unknown

We don’t pay for anything up front any more. When we want something, we get it. If we don’t have the money, we charge it. We buy everything on time. The longer the time, the more money we pay for the item. But the payments are so small, we forget.

Rennie Gabriel, in his book Wealth on Any Income, gives an illuminating example of the total amount we end up paying for products purchased on credit. He states that a dining set on sale at a department store for $648 (including tax) costs the store approximately $300. So if you pay in full up front, the store makes a profit of $300 (excluding tax).

But this dining set can be purchased on credit with payments as low as $12 per month. The interest rate charged to customers at most department stores is currently over 20 percent and in his example, the actual interest rate was 21.6 percent. At $12 per month, a person would be making that payment for over 17 years before the dining set would be paid for in full. And instead of paying $648 for your dining set, it would cost you at staggering $2,460! That’s a profit to the store of $2,160.

Of course stores want to extend you credit—they would much rather be paid $2,460 than $648. And you thought it was a good bargain because it was on sale…

This is a money malady that keeps us cash-poor, debt-ridden, and financially stressed. We feel the pain every month when the bills come in, but we pay our minimums and hope it’ll be better next month. But unless positive action is taken to control our spending and live within our means, next month won’t be any better. Most of the time, next month is worse because we have once again used those charge cards in a flurry of impulse buying. We live in denial of the fact we have a problem until we can’t meet our monthly minimum payments.

This month, why not start a savings account for the major purchases you want? Then you’ll pay only for the item itself and no interest. You’ll even make some additional money from the interest on the savings account.

If you can’t do the time, don’t borrow a dime.

Today’s Affirmation: “I am rich and pay cash for all the material goods I desire.”

Have you been paying down debt since ancient times?

Have you been paying down debt since ancient times?

If you can do the time, and have a reasonable plan and budget for paying off your loan, and it’s a sensible purchase, then it is great idea to take a loan!

No, I’m not negating anything I said on this page of The Wealthy Spirit. But you can go too far to avoid borrowing money, too.

You need to have a credit card in our modern society: to make an on-line purchase, to establish credit, to book a hotel room, or rent a car; to spread out payments over time for something that is a smart or needed purchase today.

Some people get so anxious about borrowing money that they cut up all their credit cards and only use a debit card. Oy! I think that’s a really bad idea. Look, if someone steals your credit card and uses it, you get a bill for the unauthorized purchase, you object to it, and it’s taken off your bill. But if someone steals your debit card, they can take all the money out of your bank account and leave you with nothing. Yes, the bank will give it back to you after the matter is resolved, but it can take 4-6 weeks for that to happen. What are you going to do in the meantime with no money?

Use credit wisely. Don’t have too much or too little.

The middle path is usually the right path, isn’t it?