The ability to afford and the ability to buy is indistinguishable in nowadays. Those that cannot afford still buy with help, and harm, of credit. Because of a lack of credit education, Those that can afford buy when they need to, and don't buy just because they can. Anyone can have nice things, but not everyone owns the nice things that they have. That is the distinction between financial freedom, and financial imprisonment.
Aim to Own Everything and Owe Nothing
When a person owes nothing, they own everything. When something is bought on credit, that item is not owned until the charge is paid off in full. A family could have lived with the same furniture for five years without owning it. A computer can be bought on credit for $1,000 and crash two years later. That person goes out and buys a new computer, and then they are making payments on two computers, one that is dead and one new one that will cost exponentially more than it's worth when it's paid off.
Don't Buy a Need Based on a Want.
The way to avoid spiraling out of control with debt, or to start climbing the spiral staircase to get back out of debt, start making decisions based on what is needed, without letting wants get in the way. For instance, a person needs a phone. They want a phone that takes pictures, has internet, and has lots of cool apps. So they end up choosing a need based on wants. What they needed was a phone that made calls and that's it. Period. They could have gotten one for free, and just had to pay the plan.
Now they have a phone they paid $200 for and are paying an extra $30 a month or more for a data plan. That is an initial $230 more than what the person could have spent, plus $30 a month for however long they have that phone. A data plan can add an extra $360 per year to a plan. Most people don't need any of those extra features, they just want them. This person thus is spending an extra $560 per year to fulfill a need and satisfy a want.
Filtering Out Needs Versus Wants
Here is the answer: If it feels good when it's bought, it's a want. Think about all the needs a person has. Shelter, food, electricity, water. It doesn't feel good to pay a mortgage, not that fun to go grocery shopping, and nobody gets a kick out of paying their utilities bills. Even that new cell phone bill with the data plan won't feel good once the initial thrill of purchasing the phone is over. Wants are all about thrills. They feel good at the time. It feels great buying a pair of new shoes, a new movie, a trip to Hawaii. But imagine how much better it would feel to buy those things with a debit card, a check, or cash. It is always worth it to pay outright for what you want. Never finance fun!
Categorizing needs versus wants and making decisions based solely on need will get a person out of debt and keep them away from it as well. Better choices make smarter consumers and a healthier society.
Carmen Sofia Grant - Carmen is a social media marketer, freelance writer, and blogger. Her favorite blogs are MomCrunch and Social Media Examiner.com
