I started reading another financial book called Financial Peace by Dave Ramsey. In the second chapter, Dave writes about the concept of “Dessert before Dinner”. This idea, that we have forgotten how to delay pleasure, makes total sense with America’s population.
People in the U.S. are too quick to make a purchase. Stores promote impulse buying and you can’t blame em’, their job is to make money. That is also the reason they will finance for you, you are more likely to make a larger impulse buy when you know financing it will be easy. While it is so easy to finance, we need to have the discipline not to. You can get financing for pretty much anything out there these days. Want a new house, finance it. Want a new car, finance it. Want a new tv, finance it. New computer, washer and dryer, clothes just finance it. Heck you can even finance breast implants. Some of these things, like a home and vehicle, sometimes make sense to finance. The other ones, in my opinion, are stupid to finance.
There are times that you can finance at 0% for some of the other stuff, and that is fine if you are disciplined to pay them off before the promotion period ends, but if you have the cash to pay for it, why finance it? Do you really need whatever you are going to finance or is it something you want?
Just like people like to choose dessert over dinner, they tend to purchase with financing rather than saving to pay cash to make the purchase. I am guilty of this myself. I purchased a desktop computer on 0% financing instead of paying for it with cash. We bought our camper by taking out a loan. Do I regret these things, no. At least not completely. I paid the computer off way before the promotion ended. The camper payment I am not very fond of either, but we sure do enjoy using it during the warmer months.
The main point of Daves concept is that people buy things they can’t afford. They want something and they want it now. The smart and financially savvy way to purchase things is to do it with cash money. We as a nation are way to impatient when it comes to “things”. 99% (made up number) of us are guilty of this. Why can’t we just stop the stupidity and impulse purchases? If we really thought about it for a day or two would we still want to make that purchase? Would we realize that it’s not something that we really needed and that it was just something that we wanted? I’m not saying to go out and live your life not buying anything you wanted, that would be a pretty boring and lame way to live.
An example of this is my vehicle. There is nothing wrong with it, its paid off, runs well and gets me from point A to point B. It would be awesome to have a brand new one, but it would also be really stupid and pointless of me to get one. I couldn’t buy one with cash right now, and would have to finance it which would probably cost upwards of $2-3k in interest over the course of the loan. If I keep my current vehicle and pay myself a car payment, by the time mine is no longer safely driveable I will have enough cash to buy a “nused” car without having to finance it. I figure about every 5 cars I do this with, we will have saved enough by not paying interest to basically get a free car.
Will I always make the smart decision and not impulse buy? Heck no. I know I will still impulse buy, but I have more discipline than when I was younger and won’t make as many stupid buys. Sometimes I like to eat my dessert before dinner. Our plan from here on out is to save cash for any big purchases, without taking a loan out.
How are you with impulse buying? Do you have the discipline to think before you make those larger purchases?