Pay Now, Buy Later?
The journey to financial independence begins with budgeting and saving. It might be helpful to think of that practice as “Pay Now, Buy Later”. It’s the exact opposite of “Buy now, Pay Later[i]” (BNPL) a phrase that has been popping up more and more which is precarious at best.
In his NYT Bestselling book “Atomic Habits” James Clear makes the case that “Your outcomes are a lagging measure of your habits[ii].” This certainly rings true for financial outcomes. Lenders are not in the business of losing money, but they certainly can help you spend it. BNPL is yet another way for lenders try to entice you to make short-sighted decisions without considering the true costs.
When your goals are long-term, the game becomes more about avoiding catastrophe than it is about perfection.
Over time, if you can spend less than you earn, you can be well positioned to accumulate wealth. You don’t even have to make a lot of money, just more than you spend. However, if you’re spending more than you make you are essentially borrowing from your future. BNPL encourages you to spend money you don’t have yet which is a slippery slope.
It’s not that it’s impossible to use BNPL responsibly; but it’s incredibly easy to use it irresponsibly. In fact, the reason companies are willing to offer it is because they know it will be profitable. Not long after the advent of money came lending and borrowing. This upended the status quo, now it was possible to acquire things that you couldn’t pay for yet. In a lot of ways this is great and important for economic growth but it’s not without its downsides.
Planning for the future requires tuning out the siren calls of capitalism by any means necessary to avoid crashing into the rocks. BNPL, is like a bad habit, easy to start but hard to escape. You’re just deferring the expense, and likely increasing it. “Put another way, the costs of your good habits are in the present. The costs of your bad habits are in the future[iii].”
Our human brains did not evolve to delay gratification. We want it now! It’s incredibly easy for people to make short sighted decisions that could be surprisingly costly for their future selves. “The road less traveled is the road of delayed gratification. If you’re willing to wait for the rewards, you’ll face less competition and often get a bigger payoff. As the saying goes, the last mile is always the least crowded.[iv]”
Prior to debt and credit your ability to spend was limited by what you had. The ability to spend money you don’t yet have added a layer of risk. The more types of credit/debt offerings there are the easier it is to slip up.
“A lack of self-awareness is poison. Reflection and review is the antidote.[v]” A good financial plan is like a medicine cabinet full of antidotes. With personalized guidance, behavioral insights, and regular reviews an ongoing financial plan can empower you to make more informed, deliberate choices that align with your long-term goals and help prevent you from making short sighted decisions that take you off course.
Photo by Jon Flobrant on Unsplash
