Buy Now, Pay Later.

I have always found it amazing that we are a nation that loves the idea of purchasing what we want and not what we need. I was reminded of this when I saw a Saturday Night Live sketch called, "Don’t Buy Things You Cannot Afford" with Steve Martin, Amy Poehler, and Chris Parnell. The premise behind the sketch is that Chris Parnell is marketing one of those "Get Out of Debt Quick" solutions which are incredibly popular today. What makes the whole sketch so funny is that Steve Martin and Amy Poehler are confused by the plan that Parnell is marketing which advises people, "don’t buy things if you don’t have the money".
But the sketch, although intended for humor, had some points I feel people either ignore or disregard when they are making purchasing decisions or calculating their finances.
To start, if you don’t have money, don’t buy things. This statement is fairly straight-forward and easy to understand, however, I can’t help but think about the people that make little to no money or receive state assistance and purchase non-necessity goods, often neglecting to purchase necessity goods for themselves or their families. Do you really need that pair of Nike sneakers or that brand new cell phone when Junior needs baby formula?
Another point that was discussed in the sketch was buying expensive things with saved money. I understand there are some things that just cannot be paid for with saved money (especially when the need for them is immediate and cannot be postponed). However, for that flat-screen television you’ve always wanted or the new Mac Book that’s on sale this week, one should postpone those purchases unless the money can come from saved money.
On the same note, I have noticed that people will often make investment decisions that don’t make sense to me. I have noticed there are a lot of houses in Middlesboro that look run down but the owners have other luxuries; above ground pools, basketball courts, brand new cars in the driveway, trampoline, a visible flat screen television, etc., etc. These luxuries are often nicer than the homes the owners live in. We all know at least a few houses like this. To me, I can’t imagine spending money on a nice car and a nice pool when I could use that money to instead have a nice house. Personally, I drive an older car so that I have more money available for the finer things in life. I will literally drive the wheels off of my car before I get a new one. Why stretch myself further just so I can have a luxury vehicle?
Isn’t the purpose of a car to help us commute and travel to places? Do we really have to have a luxury vehicle or even a new car every few years? I knew a family like this once; they replaced a car almost on a 3 year schedule. Why not just keep the car and pay it off rather than continue to make car payments for new cars? To avoid paying for repairs as necessary? If a car requires repairs, on the whole it costs less than making a cay payment every month.
Forgoing those luxuries now will free up more funding today to help purchase nicer things later. But we are a buy now, pay later society. Our purchases of the past are coming back to haunt us today because the bill came in the mail and the payment is due (with interest). And we wonder why there’s a credit crunch; we can’t make our minimum payments anymore! We have consistently asked for what we want now rather than wait until we can afford it. This only helps to explain why we have a national deficit that is greater than a trillion dollars.
I’m not saying that people shouldn’t spend money. That’s not the case at all. In my column about stimulating the economy, I argued that people should be spending money today to capitalize on the buyer’s market (and lower prices) only if you have the money. The federal government wants to stimulate the economy, but we shouldn’t adopt their practices; deficit spending. In times of financial crisis, it’s only best to cut back a little to ensure you make it through the storm. Essentially, the solution is to buy now, pay now.