Financing pitches can spell doom for your dollars

Sales pitches are everywhere. Emails, advertising mail, text messages, telephone calls and good old-fashioned knocks on the door can bombard us with offers from alternative sleep-enhancing accessories to buying a zip line adventure. Chances are, if it’s a sales pitch you didn’t ask for, the pitched thing isn’t something you need.

You’re on a budget. You know how much you planned to spend this month on the things you need. Then, all of a sudden, an ad blasts your email with a sale on that phone you’ve had your eye on. It has all the latest features, a larger screen, and a special color for discerning individuals. Now, that amazing phone is $200 off for a limited time. Instead of paying the new low price of $1,000, the cellular service provider will also finance it for you for a low monthly fee.

Visions of how you’d impress your friends, relatives, and social media followers with the new phone begin to fill your mind. A sale on the thing that will update your social status? Sold! Well, not quite. There is the small matter of signing the financing plan first. And there’s the catch.

Businesses with expensive products often pitch financing to make something expensive seem more affordable than they really are. That $1,000 phone is still $1,000, whether you pay it in a lump sum or over time. That $1,500 couch is still $1,500 even if you pay it off over the next three years. That vacation is still $3,000 even if you pay it in installments.

Financing plans can act as smokescreens to hide the true cost of the thing a business is selling. If the thing isn’t something you need and the cost makes very little financial sense, ignore the lure of easy financing plans.

“Can’t afford it? No problem! Get instant financing with easy approval today!”

Someone might think to themselves:

  • What’s $40 a month for the latest phone?
  • $390 per month is perfectly reasonable for a new car. I can handle that.
  • My family loves movies, and that new 85” television for $55 per month is worth it.
  • Now that COVID-19 lockdowns are over, my family deserves a great vacation, and $120 per month for financing it is worth the price. 

And those easy financing plans stack up. With just the few purchases above, the cost amounts to $605 per month. Add rent, utilities, food, gasoline, and other monthly expenses, and that $605 gets harder to manage, especially when something unexpected happens.

Cars get flat tires. Pants get rips in their seams. Shoes fall apart. Children break windows while playing. Any number of things can happen, and if a person stretched their income across too many payments, something is going to break.

The best way to avoid getting into a payment trap is to avoid them in the first place. If you don’t have the money for something you want, avoid buying it unless it’s essential.

What if you have to buy something essential when you don’t have the money for it? Buy with a limited budget in mind, and don’t let anyone talk you into upgrades.

A car might be essential to go to work, but does the vehicle have to be the latest model with all the right features or will an older, less expensive model do? If your television breaks, do you have to buy an 85” replacement or will an inexpensive 42” model do? If you drop your phone in the toilet, do you need a $1,000 replacement or will an older, less feature-rich model work?

Too many people fall for instant credit and payments over time as excuses to buy things more expensive than they can afford. They accumulate one after another, stacking them up like playing cards. And if the wind shifts just right on their cards, the whole stack comes tumbling down. Avoid becoming a victim of ads pitching payments as ways to buy expensive things and you’ll have a much easier time balancing your budget.