Sometimes debt makes sense. Unfortunately it’s your definition of sometimes that will determine if you are going to have an easy or a hard financial life. As you know, an easy financial life is a paradox. In order for your financial life to be easy, you need to make hard decisions. If you take the easy way out when it comes to decisions, then your financial life will be a struggle. The longer that you transpose the easy and the hard, the longer you will struggle financially.
There’s no better opportunity to flex your financial muscle than when it comes to avoiding unnecessary debt. Your ability to do the hard thing will serve you well forever. The easy decision often shows its ugly face when you are shopping. If you can avoid going into debt while shopping, then you are ahead of the curb. Here are the three items that you should never go into debt to buy.
- An engagement ring- Have you heard the radio commercials telling you that you can finance your jewelry purchase through your local jeweler? Yeah me too. Jewelry is a luxury. Debt is the opposite of a luxury. Why would you combine the two to put yourself in a terrible financial situation? Why would you enter a marriage by making a poor decision to go into debt? Call me unromantic if you want, but I don’t think you want to marry someone that would put you in a terrible financial situation to start the marriage.
- A television- “But my old TV just broke.” So what? Do you want to know exactly what a terrible decision looks like? It looks like someone that buys a new TV on credit, because their old TV broke. There’s a much simpler strategy to employ which will still accomplish the goal of buying a new TV: save the money first before you buy the TV. Novel concept, right? The more often that you can pre-fund a financial goal, the better off you will be.
- New furniture to replace old furniture- People love buying new furniture. Do you have a dusty couch from the 1970’s? Yeah, get in line. Are you still able to sit on it? Good, then don’t go into debt to buy a new one. Furniture stores have become masterful at teaching you how to make poor financial decisions revolving around furniture. Every time that you buy a couch on credit, an angel loses its wings. While the interest is racking up, you are literally sitting on your bum bum not earning the money to pay for it. Get off the couch, and make some money to pay for the couch.
Don’t make these three brutal mistakes. It will set a terrible tone for the rest of your financial life.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
I have no reservations about putting appliances, like TV’s, on my best buy credit card when there are no interest charges as long as you pay it off in 18 months. I always pay the monthly charges and pay it off within the deadline. I not only get rewards $$ but also I look at like they are paying me interest. My money is earning interest over 18 months as I am paying the minimum amount. If I paid the amount in full, I would loose the time value of money earned with interest. I’ve had my current television five years and had Best Buy price match to the lowest advertiser Circuit City. They did 18 month financing, and I received at least $50 in rewards dollars. I did the same concept for buying my furniture, but had none at the time. Everyone needs a bed, and something to sit on. If you’re just starting out, you are going to need to put these things on credit, but not go overboard.
Engagement rings should not be financed, and I would not want to enter a marriage with the other having that kind of debt, because the bride would be paying for that debt, and to me that does not make sense. Women need to learn to not expect like $10,000 engagement rings and be satisfied for something $500-2k. That’s too much money to spend on jewelry folks.
I am still wearing the $10 sterling silver ring my fiance-turned-wide bought me at Wal-Mart 10 years ago.
And I just bought my first brand new TV (with cash, after much saving and several overnight shifts) in as many years.
The leather couch, though, we put on credit, because dusty couch from the 1970’s was making wife sad, and happy wife = happy life. Happy wife was worth a year of payments.
It’s hard when an item is broken down to minimal monthly payments in their advertisements – a $3000 tv for only $45/month, and the ‘new’ tv that is bought on a store credit card, doesn’t feel so new by the time the last payment is mailed in 3 years later (even worse if it breaks along the way!). It teaches discipline to save up and THEN buy the item.