The Myth of the Payment Mentality
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“Have this new car now for only 48 monthly payments of $399.99”
“This shiny new widget can be yours for only three payments of $29.99”
You’ve likely seen or heard these sound bites or ones like them before. Why do we see them over and over? Because they work! People, myself included in past years, get lured into thinking that because we can “afford” something then it must mean we should spend the money to make them ours. What this has led to in our culture, is a payment mentality. The myth behind this payment mentality is that if we can conjure up the cash, the item in question should be ours, whether or not we can truly afford it.
What the Payment Mentality Does
Let’s face it, having payments and the payment mentality bring about one thing…debt. Not only is it debt, but it obligates you to making a payment every month to pay down something you wanted. The problem with these payments is that they’re generally, when summed up, going to be much more than the original price of the item in question.
You can argue that not all debt is bad and I would agree. We have a mortgage, much like many others have mortgages. While some would consider a mortgage “bad” debt, I really don’t. That could be seen as rationalizing, and maybe it is, but you have to take a look at the value received. Buying a house is likely the largest investment many of us will make and will hopefully grow in value over time.
Having a payment mentality, on the other hand, is not focused on growing your wealth, but instead growing your number of things or having more stuff. Essentially this payment mentality gives no thought to the future, but only to the present to satisfy desires or felt needs as opposed to being prudent financially. If that last statement is true, then I believe it could be argued that you really can’t afford the item in question but instead are willing to enslave yourself to payments in order to get what you want.
Marketers Trick Us
This is not meant to ridicule consumerism by any means. We’re all consumers, whether we like it or not, at some level but believe there is a difference between mindless consumerism and being a wise consumer.
That said, one of the main culprits behind this payment mentality is marketers. Many of our regular readers know that my wife and I run an advertising business. Much of that advertising is business to business, but a good chunk of it is business to consumer. Businesses know that they can trick us to falling for the idea that we need whatever it is they’re hawking at us. Ultimately, it’s their job to do so and they get handsomely rewarded for making their advertisements more convincing.
They do this in a number of ways, such as:
- Telling us comfort can be found in a shopping trip
- A long day calls for the family to go out and enjoy a nice meal together
- A vacation is not a vacation unless you go overseas
- You have to have that new car smell
That is but a sampling of the ways and the majority of these things are financed through either a credit card or a monthly payment. If you’re not paying your credit card off each month, then face up to reality in that is a monthly payment as well. So, I guess my point is to not make their work easier on them but to be mindful about your spending habits and not falling into the trap that financing something is always a justifiable means to get what you want.
The Alternative to Payments
With it being Financial Literacy Month I didn’t want to end on a negative note, but give options to avoid this payment mentality and still allow you things you want. I could easily say that being content with what you have and delaying gratification are the ways to overcome taking on more payments, but they aren’t very actionable.
This isn’t exactly earth shattering for most, but the simplest way to get beyond a payment mentality is to save for what you want. Riveting, I know, but so much of it does boil down to saving and budgeting for what you want. How does this apply to something like buying a car? I know for many it would take them too long to save up money to pay cash for a new or used car, and financing is the only option. That is fine, but just think of what you can save in the long run by saving 10, 20 or 30% for that car purchase and putting it as a down payment? Not only will that shorten the amount of time you’re paying for the car, but significantly reduce the amount of interest you’ll pay.
Beyond that, my favorite way to combat this payment mentality is to create a fund that allows you to buy whatever the heck you want. Make it personal to what your preferences are, but the point is to make it something that excites you. In our family, we love to travel, and in order to do that we need money…usually a lot of it. While we do like to travel for free through travel hacking we know that may not always be an option and so we save. That gives us motivation to save and allows us to enjoy our travel guilt free without nasty debt attached to it. As a reformed spender, there is nothing like this feeling of doing what you want without taking on more debt and is not something our society preaches. I encourage you to go against the grain of the payment mentality by financing things yourself instead of at the expense of your future self.
How quickly are you to take on more payments? What is one way you can suggest to break the payment mentality? What is one thing you save for so you can do whatever you want?
Photo courtesy of: Morgan
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.