Pay Now or Pay Later
Whether you’re making financial, day to day or big life decisions a concept that I have used in my considerations has been the notion of “you pay now or you pay later”.
What do I mean by this?
There are many decisions we make in our daily lives that will have consequences, repercussions or impact the future. These can be good, bad or indifferent, however when I apply the Pay Now or Pay later maxim it makes sure that I am taking into consideration what the decision may ‘cost’ me NOW (either in time, effort, inconvenience or money) or what it may cost me later;
Situations to apply this to could be:
Whether to buy a new or used car
Getting a loan or saving up to buy that car.
Fly or drive to your next holiday destination
Buying cheap tools of trade that need replacing often or invest in a quality tool of trade once only
Eat nourishing food – to support your immune system and reduce the likelihood of illness
Get to bed early so you don’t PAY for it in the morning when your kids jump on you at 6AM!!
Drive the car or catch public transport - (especially important if you are heading to the pub!)
So how do I apply this?
You like to use your credit card for your daily expenses instead of Cash because of the points you’re collect
Do You?
Just use cash or your debit card, pay off the balance in full, or pay off double the minimum repayments.
Pay Now?
You have a set amount of cash for your daily living expenses, its great, because you don’t have to micromanage your expenditure on things like groceries, fuel, coffee and dining out, but once its gone its gone! You don’t tend to overspend and don’t have to worry about paying the lump sum to close out your credit card.
Pay Later?
You are diligent and only spend on your CC what you know you can pay off at the end of the month; the benefit of this could be three fold:
you can keep cash in your account earning interest (albeit very low atm);
you aren’t carrying around wads of cash; or
if you have a mortgage offset account (an account that reduces the interest you pay on your mortgage) you are reducing the interest you pay on your own home!! Win Win right?
This is only win win IF you aren’t paying a huge annual fee to have the credit card and IF you are paying the CC off by each and every due date. Credit Card companies expect you to be paying interest, so if you aren’t paying that CC off clean every month, then you aren’t getting anything for free.
So….
Pay now? May not result in reduced interest on your mortgage, but will ensure you aren’t building up credit card debt you are paying HIGH interest rates on! Pay Later, may save you some mortgage interest, earn some ‘points’ but could also cost you in annual charges and interest if you spend more than you earn!
Your car is due for a service, however you’re too busy at work, have school runs and need the car for a road trip interstate
Do You?
Wait until after your road trip to service your car or you bite the bullet and book it in at the mechanics, rearrange your work schedule and organise a car pool for the afternoon pick up.
If you…
Pay now? –You get the car serviced so it’s in good condition for the road trip, and you know when you are back from your holiday you don’t have to worry about booking it in while catching up on work;
Pay Later? – The oil is low on the road trip so the car breaks down; you use more fuel because the tyre pressure is too low; or Its one of those cars that if its not serviced at the correct mileage that the warranty is void….or goes into ‘limp’ mode…
Now, your car could be perfectly fine and your car is out of warranty anyway – but these are important considerations to ensure you don’t end up with a towing bill, painful road trip and no way to get your kids to school and you to work when your cars getting a new head gasket fitted (or worse still, you’re up for a new car!).
You are searching for a new bike for your fast growing 6 year old and don’t want to spend much.
Do You?
Head to big generic retail store and buy one in a box (or maybe you are lucky and manage to grab the demo model off the floor) or; check out a few of your local bike shops.
Pay Now? You expend more time visiting 3 local bike shops, however the salesman has worked out WHY your son needs the bike for….(ie, is he using the skate part, dirt jumping, riding to school …...who knew there were so many options!!) and the correct size that will last him through his next growth spurt.
The bike is $300, but it’s the right size, been expertly and safely put together and is fit for purpose…,(you might get some free spokey dokeys and in 99% of cases the first service is FREE!).
Pay Later? You spend $120 and ½ the day trying to put together the boxed up bike and cannot get the brakes to stop rubbing on the rims. So you take it to the local bike shop who charges you $50 to ensure it’s been safely put together and stops the brakes rubbing. You get it home and when your 6yr old jumps on it, it’s too small…….
A good bike shop will always look after your best interests because they know that if you have children or aren’t bike literate that they will be the first place you go to for help! Best of all you can ask them a thousand questions and get free advice from the experts.
You can also check out gumtree and ebay for second hand bikes and know what you need to get (remember the free advise you got from that local bike shop) – then you can support the local bike shop with servicing or upgrading a helmet.
This is just one of the tools in my decision making toolbox and it’s served me well. I’d love to hear how this may have applied to your very own situations….what has worked, what hasn’t? Will you use it?
- Coach Rach
