Save Now or Make Payments Later

Forfeiting better options for the sake of impatience

Pause for a moment and imagine something. Imagine you start making drastically better decisions with money. You still spend money, but with different amounts on different things. And the success of those decisions is obvious. That’s a nice idea, Andrew, but how do I get there?


Well, you almost definitely started paying for things in full, up front.

Here’s how I got there from here.

Financing and payments are the easy way to get what you want. If you see something in a magazine this morning, you can order it today, have it in two days, and pay for it much later. This want-now-pay-later system encourages us to be impulsive and think short term.

Saving is quite different. If you want to take an expensive vacation now and you have no money saved, you are about six months behind on saving up for it. It forces you to plan ahead and see where you want to be months in the future. If you save $400 a month, you can afford to buy a newer used car in X months.

By allowing yourself the option to buy now — without the money saved — you forfeit the wisdom and perspective which come from waiting and saving.

If you instead saved up for a big purchase, you have plenty of time to find a better alternative to the product you would have purchased, which you never would have found otherwise. Or you may find a way to stretch the same money much further with a completely different strategy. Or you may decide the purchase is no longer important or relevant.

Or you may stumble upon a great deal and you are only able to jump on it because you have the cash in your hand.

No matter how you slice it, your financial decisions are better off with a bit of patience and time.

And cash.

Think of the last thing you financed (or were tempted to finance). If you had the entire lump sum of money in cash, would you still have made the same purchase? Why?