I can’t stress this point enough.  This is really how people end up in debt.  They never intend to end up overwhelmed with debt; it just happens.  It is very easy to get suckered into purchasing something that you cannot afford when the monthly installments seem so manageable.

What if you could finance a meal?  You want to get a good sandwich for lunch, but you only have 5 bucks.  You don’t want a subway footlong, you want that fancy deli sandwich thats ten bucks.  What if the deli said “Ok, you can get our fancy sandwich for nothing down, but 19 cents per month for the next five years.  That doesn’t sound like a bad deal at all.  So you end up paying $11.80 over 5 years for a $10 sandwich.  It seems like you are only paying an extra buck-eighty to get that sandwich upgrade.

Wrong!  Had you not had the financing option available in the first place, you would have had to settle for the $5 footlong, thus the fancy sandwich is costing you $6.80 more.  So not only are you getting dinged with the financing premium, you are buying more expensive stuff than you can afford!

Most people can see extra they are paying for the financing, but they don’t realize it is the fact that they are buying stuff that they can’t afford.  They scapegoat the super high interest rates and blame the credit card companies when they themselves are to blame for their dangerous spending.

So if you are in debt, the best way to get out of debt is to stop spending more than you can afford!  Change your spending habbits - delayed gratification - and your finances will fall right into place.

This entry was posted on Monday, December 15th, 2008 at 5:43 pm and is filed under Budgeting, Long Term Cash, Short Term Cash. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.