Buy Now, Pay Later – Friend or Foe?
- Put yourself first
We often find excuses to not invest with one of the most common being “I don’t have enough money left over”
This is because we tend to spend what we have. As an example, if I am paid $1,000 per week, I will likely spend $1,000 per week.
However, if you pay yourself as soon as you get paid, you are not leaving it up to chance if you are going to have enough to save and invest at the end of the pay period.
This process is made even easier if you follow tip number 2!
- Automate your savings
Having an automated savings plan in place takes out any guesswork and human error. Most banks now allow you to set up automatic transfers between accounts which can make savings so much easier.
For instance, you could set up an automatic transfer from the account your wage gets paid into, to a savings account on the day you get paid so that you don’t even see it or have to think about it.
You can of course do this for multiple accounts and setting up transfers so that a split amount of each pay is transferred into different accounts. You might want to put $100 into an investment account and another $100 into a holiday account for example. This leads to tip number 3.
- Name your bank accounts
By giving names to your bank accounts, you are able to more easily decipher between your financial goals and know exactly how much money you have saved for each individual goal. You are also much less likely to splurge on things you don’t need if you know you have to take away money from your “Holiday” account.
By giving the account a name, you attach feeling to the money which helps you stay on track.
- Have a plan for the worst
While not as exciting as an investment or holiday account, an emergency fund could be a financial life saver.
Imagine you have saved diligently and have nearly enough in your holiday account to go on the holiday you have dreamt of but then your car breaks down. Without any saved-up funds for emergencies, you will be forced to dip into your holiday account to pay for this or worse, take out a personal loan.
- Buy Now, Pay Now
The rise of buy now pay later services has seen millions of Australians begin to spend money they do not have.
While these services do have their benefits which I discuss in my last article, at the end of the day, you are constantly playing catch up and this debt can easily spiral out of control.
Therefore, instead of paying later, save up and then buy it with your own money. While this may take longer, your future self will thank you. You can even use Tips 2 and 3 by automating savings to an account for these splurge type of expenses so you can continue to treat yourself – guilt free!
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