Financing purchases

[Vespasian]

I'm wondering how wise it is to finance smaller purchases.

Obviously, the financing scheme that's growing in popularity is driving people into poverty because the calculus for things that were previously too expensive is, "well, I'll just pay small amounts over time, so I'm practically not spending as much! Now I'll get a car, tons of clothes, or TVs, etc., because I'm paying so little."

But say I'm getting a new pair of shoes that I would get anyway — financing seems like a more sturdy option.

[AxelHeyst]

I can't think of why financing smaller purchases would be wise unless you have access to literally zero dollars, the thing cannot be thrifted, swapped, bartered for, or gone without, and it is a vital bit of gear necessary to a strategic aim. For example, I could see financing a pair of shoes if you have zero money, no friends or family with shoes or money, and you need shoes for a job interview so that you can get some money.

[Scott 2]

But say I'm getting a new pair of shoes that I would get anyway — financing seems like a more sturdy option.

I'm confused. What's the upside? Are these zero interest loan terms? Teaser rates or something?


Lately I've been churning credit card sign-up bonuses. My household will clear maybe $2k from it this year. That's in addition to the typical 1-5% cash back via credit card rewards. As well as the added 0.5-1 month of interest I can collect on my spend, before the bill is due. I suppose that's a form of using small finance for financial gain. Of course I pay the credit card in full every month.

[Stahlmann]

What do you mean?

In my country local ebay (for things like shoes, some nice things for 100 USD, but you need a bit of them even if you are hardcore ERE-type minimalist) or most physical household appliance stores (like for washers, ovens.. the big think you gonna spend 100h what to buy, because it seems practical to let's say save 200 USD on 600 USD purchase) offer 0% interest rate on everything (they cooperate with some banks). This financinalization of even cheapest products come rather from the West, just another trick to keep GDP higher and higher (and also perpetuates notion that growing GDP is only and the best way to measure economic success and happiness). From saver without ability to successfully invest (and seeing herd mentality success in solution like going all in VITAX; being personally very concerned about SWAN), this is very PITA :veryangry: :insane:. because everybody pays for this cooperation between platforms/stores and banks, even if you pay upfront with bloody hard cash. On this flip side this getting normies closer them to thier personal bankrupcies (if we create strawen of irrational consumer who buys "egg fryer 9000" to boils eggs...) We live in creative destruction and dog eats dog world and it will enable to buy their depreciates assets for cheap price.This boils also down to: "Are businesses here to solve problems permanently or to build recurring cashflows to have money for their existence?". In moments when I'm feeling like Sthalmann The Saviour, this also perpetuate world's resource depletion with polluting it with non repairable things.

As @Sclass once (or @jacob repeatedly) said it's about seeing world as different variables or gears and knowing yourself and them to putting effort in specific elements to get best overall result. Like him, who could let's say focus saving additional 500 USD month and then after heavy day of work, being able to study the markets to have overbeat them in long term and going closer to as we say over here "Gram of trade is better than tonne of production" (or being exploited wage slave, of course if you know how to trade successfully... for some and maybe their mentality it's better to stay in workforce, maybe even on societal scale..). Real Ubermensh/sigma male grindser style, cheers to you Uncle @Sclass. Why don't you have kids to propagate such good genes (I know about reversion to mean in heredity of genes...) and what will happen to your estate (or @jacob, how about you)? Give a bit to poor Sthalmann's please You, know we here are like family in Fightclub (if anybody have deteriorated old house, I also wouldn't mind in leading it or inheriting in to provide underground fights to masculate future men).

BTW, give also thought to ghettoization of possible problems, like buying cheapest running shoes (even best will be dead in months) and simply buying new cheapest (not even from stores, give try to Salvation Army or dumpster diving) in next 6 months. Or go hardcore EREmite style and learn to live bare foot style (don't start too quickly though).

Or just get born rich and/or take aristocratic ERE blackpill (living within the system propagate current agenda, even if you try outplay it, you feed it as in ying yang dynamics or elites control even revolutionaries just to feed some outsiders [there hasn't been many revolutions where the new ones killed the old ones]) or take whitepill.

I think that on personal it's simply to accept this world of different players and their contradicting actions and take some real life action.

Stage 5 people see that conflict between structures is inevitable, but unthreatening, since each structure has its own set of founding axioms, which may directly contradict another structure’s set of founding axioms. This contradiction is obvious but untroubling because the stage 5 person no longer identifies their own self with their one true structure.

http://theoryengine.org/fluid-mode/summ ... rinciples/
also called as Self-Transforming mind (1% of the adult population) - nice to be 1%er in something , but they don't pay for this

End of crazy thought process, if you found this even a little bit amusing buy me a coffe man gotta eat.

EDIT: ops, it has started on simple question on buying stuff, I like things I learnt on this forum, everything much becomes simpler in real life

[ducknald_don]

But say I'm getting a new pair of shoes that I would get anyway — financing seems like a more sturdy option.

One of the problems is these deals always have penalties in the small print for defaulters. You only need an administrative mistake to end up paying more.

Personally I don't think it's worth the effort for small items. For larger items like a car you are better off trying to find a cheaper deal without the offer.

Someone somewhere has to pay for the finance.

[Seppia]

I would consider that people aren’t 100% rational all the time.
Normally if one’s a saver, after forking out money for a purchase there is a natural tendency to be thriftier in the immediate aftermath.
Not sure that positive effect would manifest with financing.

In General I don’t like financing even when available at zero interest.
I am instinctively reluctant to build debt

[Frita]

@Vespasian. What exactly do you mean by “financing” for said shoes?

When I started college, students did not apply for credit cards as credit was only extended to people with dependable, living wage work. Debit cards weren’t a thing either. So it was cash, check, money order, or traveler’s check. My senior year both became a thing. I got a debit card and found it a little too easy to withdraw funds to buy “important” things like trips to the salad bar, lattes, clothes, and craft supplies. After a semester or so, I realized having easy access without self-control was problematic. I then got a $500 credit limit secured credit card from my credit union, making purchases and paying off in full each month. That was workable and continues decades later. I saw friends get multiple cards, maxing out one and just getting another. This put them on a treadmill of debit, interest, and a wage slave mentality.

[Vespasian]

I'm confused. What's the upside? Are these zero interest loan terms? Teaser rates or something?

I guess just freeing up a month/bi-month budget. Allows a little more leeway buying higher quality food, etc.

@Vespasian. What exactly do you mean by “financing” for said shoes?

A lot of sites allow purchases to be paid off over a few weeks or months. Clothing sites are starting to do this. Instead of $100 now, it's $25 for the next four months. Debit cards work.

[Scott 2]

I can see that would introduce immediate breathing room, for someone with a pressing cash flow issue. Better than paying 25%+ interest on a credit card.


Someone is going to pay for the loan though. I'd be nervous about a trick and hesitate to take on the mental overhead. So I'd look at my other options. Could I get a better price from a vendor with no financing? What if I bought the object used? Could I repair or repurpose something I already have? Could I borrow it? Could I cut expenses in another area? What's the annual sales cycle look like? Can I wait until bigger discounts are available?


The theme here is to lower expenses through development of skills and capital resources. Once those building blocks are in place, small changes in monthly cash flow don't matter. A $100 shoe purchase is noise in your bigger plan. It's likely spend will vary by $100's per month, maybe more, as you take advantage of opportunities.

[Toska2]

Even if it's at 0% interest, that company now has free advertisement in your head every time you make a payment. Then there is the other psychological part, people tend to justify their purchases. Every time a payment is made, you tell yourself, "That was a good purchase.", because of your ego. Do you want companies to own that part of your headspace/focus?

[jacob]

There's a drive to turn products into [subscription] services. It's the latest financial innovation in the attempt to turn consumers into dependable cash flows. Instead of buying a pair of pants, one gets them on a lease. Buying at "0%" is the first step towards that model.

[unemployable]

I've been doing the opposite, in a sense, and have run into a couple problems.

I've gotten into the habit of paying ahead, or at worst simultaneously, on my credit cards. This lets me account for liabilites in real time and, as it has evolved into paying a fixed numerical amount every day onto one card in particular, forces a sort of spending discipline as I don't like outspending my payments. Losing the float/interest doesn't matter as much as reducing my liabilities to zero does.

I do this with two credit cards, the only two I hold.

Card A changed issuers about a year ago and now won't let me overpay and run a credit balance. If my balance is $21.64, I can't pay more than $21.64, and can't schedule another payment until the first goes through. Never mind I may have pending charges for much more than that, or would like to anticipate purchases. They just don't want more from me than what I owe them, period.

Card B, not to be confused with pop singer Cardi B, was the one I was in the habit of paying the same amount every day on, because unlike with Card A, I could. Except a few weeks ago I apparently let the credit balance get too high for their liking so they decided to send me a check. To my "permanent" (summer) address, from which I'm having mail forwarded for another month or so as I'm traveling. In the meantime the statement cutoff date passed while I've continued to buy stuff, so I went from being a couple hundred bucks ahead to a similar amount behind. So this has become a REAL pain the ass to get rectified. Two calls so far, an empty promise to stop the check from getting sent, another that the credit will show up in "five to seven business days", which to me only affirms the day I'll have to be on the phone with them next.

Card B promised it won't happen again, they put some sort of alert or notification or whatever they called it to leave credit balances on there... yeah sure. Now I get to play The Price Is Right with Bank of America, how much can I bid without going over. And... what if I build up another credit (or simply get the balance down to zero) when all of a sudden the credit finally posts and triggers another check to be sent? Thanks for the free side order of existential crisis over $164, guys.

So, the system wants you to finance. It assumes you will finance to the point there isn't much of another way. I thought I was working within the system, doing them a favor even by not using any of my 30-60 days of float, but apparently pushed the system's boundaries too far. Not that the amount of money is a big deal; in terms of my net worth it's very small. But it shatters a habit I had comfortably adopted.

[theanimal]

@unemployable- Why not just use a debit card? Are you trying to take advantage of rewards/points?

[mathiverse]

The consumer protections are much better with credit cards. It's easier to get money back from a fraudulent charge on a credit card than a debit card.

[unemployable]

@unemployable- Why not just use a debit card? Are you trying to take advantage of rewards/points?

That's part of it. Also:

• It's available credit if I ever do need it

• As unpleasant as my recent experiences with the credit cards have been, debit tends to be worse if I need to do a chargeback

• Without a job or traditional income I'm loath to change my card situation

• Average age of accounts is around 20 years on each one, so they help my credit score, again if I ever need it

In fact I have a debit card tied to my brokerage account, but only use it a handful of times a year to get cash back.

[take2]

I recently did a 0% finance on buying a new phone. I needed one anyway as mine was about 7 years old and crapping out on me. Normally I would just buy cash, but in this instance 0% finance is literally just free money. In this case (and all such cases I would consider) I have the money upfront but it’s cheaper for me to take the offer so the rational decision is to take the offer.

If it’s anything more than 0% my natural inclination is to say no, but depending on the quantum and the rate it may make sense. For example my mortgage is 2.83%. I could clear the balance tomorrow but my money is earning more than that so why bother?

I think if you have the ability to be rational (which is not easy or common) then it’s strictly just math. If you think you’ll start to justify “oh well I can afford that if it’s just this much per month” then you’re fooling yourself.

None of this stuff is really that complicated. It’s human emotion that tends to introduce the complication. If you know yourself well and can manage that then it’s just math.

[take2]

I actually used to do this years ago when I first started working. I hated the idea of being in any kind of debt but ultimately realised it was a bit stupid to be in credit with the credit card companies. I just checked and my card indeed no longer allows me to be in credit either. I just pay the balance each month and don’t worry about balances that aren’t yet incurring interest. From a personal finance standpoint I just use cash accounting in that I assume the moneys already been spent even if the cash itself is delayed by a month.

[kloquer]

I think if you have the ability to be rational (which is not easy or common) then it’s strictly just math. If you think you’ll start to justify “oh well I can afford that if it’s just this much per month” then you’re fooling yourself.

This is key. If you can keep yourself (and spending) in check, credit/financing utilization can and should be just another tool in the chest to deploy in pursuit of your goals. A lot of people get stuck in the “Oh no, I have debt!” mindset without realizing that debt can be used to your benefit, if used correctly, without emotional attachment.

Example: Buying a property with a low interest rate to use for income generation, as opposed to buying it all cash. The money you’d spend to buy the property outright can be used to improve the property and get a higher valuation, which would enable you to pull out the newly created equity and purchase another cash flowing property. So for the same amount of money you’d spend on one property, you could have two. The only difference is being smart with the capital deployment and your emotions.

[Salathor]

I would say, conversely, TANSTAAFL. There Ain't No Such Thing As A Free Lunch. There is no leverage in the world that juices returns without also increasing risk--that risk can come from life events preventing you from covering debt service, from margin calls of various sorts, from expected returns not being realized and missing out on returns due to carrying costs, etc.

Debt MAY be useful sometimes, but borrowing cheap to buy an income generating asset is NOT always a surefire path to profit, even if the deal appears to be good.

[kloquer]

Debt MAY be useful sometimes, but borrowing cheap to buy an income generating asset is NOT always a surefire path to profit, even if the deal appears to be good.

I was certainly not implying it’s foolproof or simple. It’s all about calculating risk, of course. But most people (at least in my family circles) write it off nearly out of hand because they don’t understand it well or its potential usefulness. It takes a certain discipline, understanding and time commitment (well up front) to truly understand and leverage it with the least amount of risk possible.