Buy Now Pay Later – Spend an extra $7,000 for stuff you already own.

Coupons must be one of the worlds most wonderful ideas.  First, one gets to enjoy a scavenger hunt in order to find the appropriate one, check the date, store, and brand, now figure out where you placed it.  Coupons arrive in the mail, newspaper, email, and are often dropped from airplanes.

Not only do they allow people to save money, but they allow people to buy things they never knew they needed in quantities large enough to stock warehouses.  My dad was especially found of the, buy 12 get 18 free, type coupons.

After a bit we noticed we no longer needed to heat the house in the winter as our paper towel supply was providing superior insulation, and as a bonus, any leaks from the roof and shower were quickly absorbed.  We had so much liquid bath soap that my sister began using it for art projects, making slim, and some type of paper mache.  In the shower, I started rinsing with soap, and washing with water.

And still our supply increased.

His real weakness was soda, he just couldn’t pass up a good soda sale or coupon.  Just last week, when I stopped by to pick up my son, I consumed a Team USA Coke that was labeled Atlanta 1996!  It was a little watery at first, and got progressively more sugary as I drank my way to the bottom of the can, but really it wasn’t too bad.

I think its just great that he hasn’t purchased any new canned beverages since the summer after my freshman year of high school.  Maybe he even saved some money, as older people are always commenting on the high prices these days, everything used to be cheaper, so they say.

Calculating the inflation rate, plus his opportunity cost of having invested in actual Coke products as opposed to company shares, minus the storage costs for all these years, is beyond my mental abilities and the scope of this article.  What I’m really here to talk to you about today, is the reverse of my fathers, buy it now, consume it later strategy.

I’m talking about consuming it now, paying for it later.  This strategy is as American as apple pie.  Surely, that Coke would taste a wee bit sweeter if I still had some money in my pocket.  I’d just put off paying for it until I was no longer thirsty, or had developed diabetes, whichever comes first.  Buy now, pay later options are available for all sorts of different products.

Interestingly, I have never considered this option for buying my appliances or furniture, but I’ve happily signed up when it comes to vehicles, college, and housing.  Really, the only difference is in the total cost.  Within the past year, my wife and I have been committed to eliminating our savings account, through unfortunate expenses, allowing for some interesting buy now pay later comparisons.

We started by demolishing our car so that we could purchase a newer one.  After the insurance payout was factored in, we still spent around $5,000 on our replacement vehicle, a 2012 Subaru Outback.  What a wasted opportunity, as we are in the planning stages of renovating our kitchen.  I could have financed the entire purchase, allowing me to keep $5,000 in my savings account, and deposit the $7,500 insurance payment for the crumpled metal ball we previously drove.  Surely a win win scenario, as now we would have much more money to put towards our kitchen.  I now see us installing top of the line wooden boxes to store our dishes, regular cabinets, I think not.

When is this Colosseum going to be paid off?

Next, came our over $5,000 dollar tree removal project.  The company we hired didn’t offer payment plans which seems like a missed business opportunity.  Like responsible fools, we wrote a check for this project.  If only I would have thought ahead, and placed this expense on a credit card, I could have preserved our bank account and spread the payments over many months.

Removing the tree wasn’t only a $5,000 problem.  The tree started the entire process by tossing an unwanted limb onto our roof, this limb cost $1,800 to be removed as well as caused $4,300 worth of damage to the roof and gutters.  Our homeowners insurance covered all of these expenses minus our deductible, which is $1,000.

My homeowners insurance mailed me checks for this mess, which I then used to pay the contractors in full.  Why would I pay for everything immediately, when I could have deposited these checks and again placed everything on my credit card to be paid slowly over time?  Instead of seeing my savings account shrink like a worm left out in the sun, I could have seen it grow.

Another missed opportunity.

Thankfully, when one door closes another opens; with the arrival of baby #2, we felt our broken dishwasher was no longer practical.  We also took the opportunity to replace our range as the old one was on its last burner.  These purchases were completed with a credit card, but like an over eager clown, I paid the balance in full.  Depending on your point of view, this $1,100 could be counted as already going towards the new kitchen, but either way, another 5 figure amount vanished from our savings account, and we moved one step closer to eliminating our savings account.

All told, so far in 2017 we have spent over $12,000 for a replacement car, $6,300 on tree removals, $4,300 on a new roof, and $1,100 on appliances.  To be fair, these expenses were mitigated somewhat by a little over $10,000 in insurance claims payments.  But imagine the financial ecstasy we could be experiencing if I’d simply deposited the insurance checks, and financed all these expenses, paying a manageable monthly amount.  Our savings account would be bursting with an additional $23,700.

$23,700 sounds nice, but how much would this credit spree really end up costing.  Let’s do some math.  The car, assuming a 6% loan for 6 years, would cost and extra $2,318 if financed.  All of the other expenses would have to be put on a credit card, so I figured those loans would total 18% over 4 years, allowing the tree to cost an additional $2,583, the roof, an additional $1,763, and the appliances an additional $451.  So, 6 years later, when everything is finally paid for, I would own everything I currently own, but I’d have spent an additional $7,115.

Now that is a coupon or sale I could support.  Next time you consider financing a vacation, jewelry, furniture or anything else please ask yourself if you are actually participating in a buy now pay more later sale?

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