Resist The Urge To Splurge
By Dara Duguay
Many young adults expect to start life's journey with
all the worldly goods their parents probably took years to
acquire. A first apartment, for example, must be equipped
like their parents' home they just left. Sure, moving
into an empty apartment may be a shock after leaving a
fully furnished home. But this desire for instant
gratification can start risky financial habits that result
in a lifetime of overspending and debt.
Your parents probably started out with used furniture or
hand-me-downs from relatives. New items gradually were
added after taking the time to save the money needed to
make the purchases.
Today, because of easier access to credit at a younger age
than ever before, young adults are able to completely
equip their home with all that their hearts desire. Credit
allows for instant gratification instead of the waiting
period required to save for the outright purchase.
Anyone can visit a home furnishings store and secure an
immediate line of credit, allowing the purchase of lots of
new "stuff." No more need to suffer with used,
damaged or (heaven forbid) out-of-style furniture when new
stuff is so easily acquired. Unfortunately, it comes with
a hefty price tag after interest payments are calculated.
The story of Janelle illustrates this point. Janelle had
no intention of purchasing lots of furniture when she
first entered "The Ultimate Furniture Store."
She was on a mission only to find a dresser, which she had
planned to pay for with money she had saved. However, the
salesperson informed her that she could fill out a credit
application and qualify for up to $5,000 on the spot.
Janelle was encouraged to take five minutes and complete
the application because that was the only way she would be
able to receive a 10 percent discount on her purchase.
Thinking it foolish to pass up any chance to save money,
Janelle completed the application. Her buying expectations
suddenly broadened. Why buy only a dresser if she could
qualify for $5,000 worth of additional furniture? Besides,
she needed a better couch to replace her old worn one. Why
miss the opportunity?
Emboldened, Janelle also bought a new white leather couch. It almost
filled up her entire studio apartment –- but what a statement
it made when her friends came to visit! Everyone said they wished they
could afford a couch like hers.
But when Janelle took care of her friend's German
shepherd for a few days, the new couch was totally
destroyed. The dog chewed the wood legs, ripped holes in
the leather and pulled out most of the stuffing. The couch
was beyond repair, and would have to be replaced.
When the friend returned from her vacation, she was unable
to pay for a replacement on her meager salary.
Furthermore, since she had no savings, she had charged
more than $1,200 on her credit cards for the trip. Janelle
would need to buy another couch on her own.
To make matters worse, Janelle still owed money on her
destroyed couch since she had charged the purchase. In
fact, in order to afford the monthly payments and keep
them low, Janelle had stretched out her loan for three
years. Not only did she have to pay for another couch, she
was stuck making payments on a couch that was no longer in
This story illustrates just one way young adults choose to
enjoy immediate gratification. There are many more
examples, such as:
Financing a new car instead of buying a used car
Having kids too soon
Choosing a two-bedroom apartment instead of a
Buying expensive electronics instead of lower-end
items, such as a plasma wide-screen TV rather than a
small-screen regular set
In our fast-paced world, you may feel that your
parents' practice of saving for a purchase has become
old-fashioned. The culture now says, "You want it,
you got it!" But before you reject your parents'
philosophy as hopelessly outdated, consider the benefit of
paying cash for a purchase rather than simply charging it.
If a $1,000 television is paid for with cash, it costs
$1,000. However, if the same TV is purchased with your
credit card at 18 percent interest and you decide only to
make the minimum payment each month, it will take you 12
years to pay off the balance! And you will have paid
double the original purchase price, since an additional
$1,000 would have been added through accumulated interest
Resist the urge to splurge! Take the time to save for a
purchase instead of financing it, and you will
dramatically reduce the cost. Buying with cash involves
patience, but the price of patience is well worth the
# # #
Dara Duguay is Executive Director of the Jump$tart Coalition for
Personal Financial Literacy, a non-profit organization promoting financial
literacy, and the author of several self-help financial books. Her most
recent is "Don't Spend Your Raise: And 59 Other Money Rules
You Can't Afford to Break." Her books may be found at www.amazon.com or at any major