Have you ever noticed how stores take all those nice things we can’t really afford and make it available for purchase in “affordable” monthly payments? It’s psychological marketing really, we see a new couch for nine hundred dollars and think “whoa, I can’t afford that”, but a new couch for a low buy it today price of forty dollars a month we instinctively say “I can afford forty dollars a month. I deserve this.”
For many years this was my Achilles heel, probably one of the biggest reasons why I ran us into so much debt. For a long time we lived beyond our means, pretending we could afford a “better” life than we could afford. It all started with needing a new car in college. I thought I was being frugal and bought a 3 year old vehicle thinking I could easily afford the three hundred and fifty dollar a month payment (not the best idea on a part time income in college). Soon after that we needed broadband at fifty bucks a month and on top of that all the credit card debt was running a couple hundred a month.
No worries, it’s just a few low monthly payments, right? Well, the problem really starts to compound after a while when this psychological marketing has you thinking you can still afford more and that you deserve better.
So, fast forward another 5 years… oddly enough my income had more than doubled since finishing college yet I was poorer than before college. Why? Adding up the low monthly payments of two vehicles, furniture and all the things I thought I needed pretty much ate up my entire month’s salary.
Those “low monthly payments” weren’t so affordable anymore. To make matters worse, all the debt… the real cost of these items… had taken a toll on my credit rating. This not only made my interest rates go up but then my insurance rates went up too. What a nightmare, all these low monthly payments were making me dirt poor.
This psychological marketing is just that, psychological. They advertise and hook you into thinking you need better material items than you do, that you need to keep up with the Jones’s. They show you the price tag and then convince you that you can easily afford the low monthly payments. The real tragedy here is what you end up paying in total with all your payments. You couldn’t afford a nine hundred dollar couch so you take the low monthly payments and end up paying two thousand for the same couch. Doesn’t sound so affordable now, does it?
So the next time you think you need material items you can’t afford, tally up those monthly payments and ask yourself if you can afford to pay that amount. See for yourself, the next time you see one of those pay by the week rent to own furniture ads… add up the payments and see how affordable it really is.
Turns out psychological marketing is just putting lipstick on a pig. Grandpa was right, if you can’t afford it, don’t buy it.