Make your Monthly Payments or Else!
It is a lot easier to buy things when there are very manageable monthly payments involved rather than one lump sum payment. You can justify a few extra bucks a month a lot easier than you can justify dropping a few hundred or even a few thousand on something before you even take it home with you. Unfortunately, a lot of people fall victim to this flawed thinking.
Racking up some debt is OK for some instances, mainly when the cost of not having something is greater than the cost of having that desired item. For example, if you could get a much higher paying job by financing a new car, it would be considered a good investment. Yes, you would have to me making the monthly payments on your new car, but at the same time, you will be making a lot more money at your new job. In the end, you will benefit financially by taking on the additional responsibility of the additional monthly payments.
Also, it would make sense to take out a mortgage to buy a house. You are going to have to make monthly rent payments anyway, so why not be paying down a mortgage on a property that is hopefully increasing in value while you live there? Makes total sense to buy unless you absolutely cannot afford it.
However, does it make sense to buy that new big-screen plasma HDTV with the surround sound that you always wanted? You would have to have two thousand in cash to buy it outright at the store today, or you can select the financing option and not pay a dime for 6 months! After that six-month period ends, you will be paying double for the set through your monthly payments. How is having the nice TV going to pay off financially? Unless you were planning on charging people to watch it, this investment won’t be paying off financially.
This is what we call a luxury item. It is not purchased as an investment in hopes of making extra money. It is not an living essential that we will need to survive and stay healthy. It is a toy; it is an unnecessary item that we could live without. It is a want rather than a need.
So what happens if you rack up a little too much debt and you cannot make your monthly payments? Well after you get a bunch of nasty letters in the mail, someone is going to come to your house and take your nice new TV away. Even after they take your TV back, you will probably still owe a considerable amount on the loan. Don’t think that just because they have the TV that you are off the hook. They will still come after you for the bad debt. They might even pass you off to a collection agency who will continue to pester you with letters and nasty phone calls.
If you still don’t make the monthly payments, they will report it on your credit and lower your credit score. The next time you want to finance a TV, it might be a little more difficult. Even if you want to use financing to make a good investment (a house), you are still going to look bad for that defaulted TV loan. What a bummer!
Tags: Payments Montly
