Often our daily spur of the moment purchases are made
through emotion. We are in a store and
see that shiny new item that catches our fancy.
Because we have been trained through years of commercial advertising on television and through glossy ads which
promote our desire for new things, we often purchase that new item—whether we
really need it or not. If you have the cash in hand the impact on
your finances is limited. At least you’ve
paid for it outright. If however, you
put that purchase on a credit card and don’t pay it off within the month you
have taken a step back from financial security.
Think about that. The spur of the
moment purchase you made has moved you a step further into debt. A step further from paying for your child’s
education. Moved you a step further from
being financially secure.
Some of you are thinking, “That’s a little harsh. It’s only one purchase.” That may be true. But is it really? Chances are, if you have made one spur of the
moment purchase on a credit card, then you have made others. How about we look at a hypothetical
situation. Let’s say for example that
you see a good deal on a new television.
Spur of the moment you decide to put the purchase on your credit card. The total price of the television is
$1200. If you put that on your credit
card and made monthly payments of $20 (everyone can afford that without too
much trouble right?) and we assume an interest rate of 18%, it would take you 268
months to pay off the balance. Over the
course of the 22 years of the payment plan your television will cost a total of
$2531.11. The interest ($1331.11) alone
will be more than the original cost of the item. Will you even have that television in 22
years? Did it really provide you with
anything? Not such a deal now is it? What’s more… that’s only one purchase.
Whenever emotion enters into a purchase we end up on the
losing end of the deal. If you are truly
interested in improving your financial situation you need to practice delaying
your gratification. We all know how good
it feels to buy that item we really want.
That good feeling we get when we satisfy our desire is why we get into
trouble. By setting up some personal
financial rules to live by we can eliminate a lot of spending that is
unnecessary and harmful to our future. Some
examples of basic financial guidelines for your spending could be:
-- If you don’t have the cash (not debit card) in your
pocket, don’t buy it. (Debit cards allow
for blind spending. Cash makes you stop
and think before you buy.)
-- For larger items, if you don’t have, at minimum, twice
the amount of the purchase in your account, don’t buy it.
-- If the item is over $200 dollars, wait 4 days before
purchasing it.
-- Set a limit of $200 dollars for purchases on your debit
cards.
-- Have only 1 credit card.
-- If you can’t pay off a purchase on your credit card
completely within 25 days don’t buy it.
-- Ask yourself “Do I really need this?” and wait a day
before you purchase.
-- Don’t buy your fuel at the same place you buy fuel for
your car.
These eight rules will go a long way to helping get your finances
under control. Will it be easy? Nope.
Will it be worth it? You bet.
