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Most Americans think on a monthly basis and that thinking is one of the key reasons that many people are falling further behind. Thinking on a monthly basis is a great wealth builder....for your banker, car dealer, electronics rental store, and anyone else that wants to profit from your shortsightedness. If you are going to be cheap you need to extricate yourself from the monthly payment mentality. How many times have you heard a person say, "I want a $400 car payment". That person will never ever become wealthy and will most likely fall further and further behind in debt. Easy pickings for a host of sellers willing to take advantage. The corporations love you because they can take a modest profit and expand it 10 times due to your ignorance.
To see how outrageous this is, lets take the example of buying a High Definition TV (HDTV). After researching diligently you find a 50" model that sells for $1,200. You decide to plunk it down on your credit card and 30 days later you pay your credit card in full. You score the 1,200 airline miles and you smile as you watch your new TV. You get the bonus of getting a great sales price on a weekend "We pay the sales tax event" and negotiate a couple of HDMI cables for free.
Your older brother however decides to buy the same TV but is short on the cash and leaves it on his credit card and pays the minimum payment which is 2.5% of the amount each month and carries an 18% interest rate. After 5 years, he pays off his credit card and it costs him over $1,900. He paid 60% more for the privilege of paying over time. He feels that it wasn't a big deal but you know that with the additional money he paid for the TV he could have gotten a Netflix account for free for those 5 years.
Your younger brother, who doesn't have a dime in his bank account, and has already maxed out his credit cards, heads down to the TV and Furniture Rental place. He can't find the same model as you but he gets last years' model which the salesperson tells him is just as good. The salesman tells him that if he pays it off in the next 90 days, the price will be the same as cash. The price: $1,999 and that is for last years which you know you could get for under $900. The 90 days come and go and he keeps renting at his "low" monthly rate of only $149 until after more than 2 years he owns it for more than $4,000! Your brother keeps telling you that he loves having the flexibility of renting since he can choose another model at any time. Of course he doesn't see the irony when he comes to you and is angry because his boss won't give him a raise which he desperately needs. You haven't gotten a raise in 2 years but seem to be doing just fine.
Now if you have never used one of those rent to own companies you might think that nobody could possibly use them knowing how expensive they are. Well, there are over 8,000 rent-to-own stores in America as we discuss in Rent-a-Center: A Cheapster's Nemesis.
Be cheap, be smart, and pay for your electronics in cash. If you can't pay for them in cash (or credit if you are paying your balance in full each month), try saving the money up first. Being an indentured servant for something that is optional never makes sense. Like this article? Share it on Facebook or more!
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