If you ever wondered why we are in debt up to our eyeballs, it is because we buy many things today with a zero investment in them.
“Zero down.” You can buy cars, furniture, appliances and many advertised products with nothing down and delay payments in many cases for months. Or, as many products advertise, “pennies per day or a few dollars per month or the infamous no interest for 36 months.”
Zero down and no money for years seems attractive until you read the fine print. You can pay nothing for 36 months while you enjoy your new sofa or living room set until, and there is always an until. Until the balance for your purchase comes due in full. Finance companies love it as it lulls unsuspecting consumers into a “debt coma” that hits them like a ton of bricks when the accumulated interest plus principal comes due. The accumulated interest in many cases can double the amount of debt as it is calculated on the outstanding balance.
“Minimum payment” You can have your retractable awning for only $24.00 per month. Now this really sounds attractive until you start to do the math. The $24.00 per month may go on for as long as 120 months which in most cases exceeds the purchase price by hundreds if not thousands of dollars. One product that comes to mind is the senior citizens bath tub which advertises a low payment of $150.00 per month but runs for a period of 10 years or $18,000 for this fantastic product that should actually cost only about $8,000 dollars.
“Affordable payment” Car financing is now close to exceeding the life of the automobile purchased. Sixty months is very common today with 72 months becoming an option. So you finance your car for 5 years and the warranty expires at the end of three years. A little simple math will tell you that you are on the hook for repairs on this vehicle for a period of two to three years or more while you continue to make that “affordable” payment each month.
“No payments until” This wonderful phrase is used a lot in retail. You get to enjoy your new purchase for months before that very first payment is due which can be many months away. Again it sounds great provided you have the income to handle the payment when it is added to your monthly debt burden. With wages not growing like they did years ago, many consumers fool themselves into thinking that they will have the money when the new obligation hits their mailbox.
Surviving in today’s economic quagmire is not easy. With many consumers not putting aside anything for a rainy day, many unplanned debts end up on a Visa or MasterCard compounding their already “stretched budget.” Be cautious before jumping on the attractive debt wagon.