Saving Up For What You Want Is Still The Best Strategy
The savings rate in American has severely declined over the past decades to be virtually non-existent today. This means that many people across the nation are living close to the edge without any savings or are carrying debt because they have spent more money than they have earned. Instead of saving up for the things that they wanted, they placed the purchases on their credit cards to be paid off at a later date.
Although commercials continuously show that you can use credit cards to purchase all the things that you desire without physically having the money to pay for it, they do not show you all of the pitfalls that come along with using your credit cards instead of your savings to pay for what you want. Because of these factors, saving your money to purchase large ticket items is a better financial strategy than purchasing the item on credit.
Increased Costs
You will pay more for an item purchased on credit than you would if you had purchased that same item using cash. This is because of all of the additional fees and charges associated with using a credit card for purchases. In addition to the interest charged for placing the purchase on the credit card, there is also the annual fee for the credit card and any other expenses that occur from having a purchase on the credit card, such as late fees and over the limit fees. Although these costs are not directly assigned to a particular purchase, you are still paying them because of the purchases made with the credit card so a portion of these costs can be assigned to each purchase made.
Financial Issues
Debt has a way of quickly spiraling out of control if not managed correctly and avoiding debt is the easiest way to avoid encountering these problems. People that are not carrying debt and have some money saved in a savings account are better equipped to handle the small financial emergencies that can arise at any time. They have less risk of not being able to pay all of their bills or harming their credit score. These people are also better positioned to make large purchases in the future, as they will have an adequate down payment for their purchases. Saving your money to spend it is a much better strategy that using credit to make purchases.
Tags: financial management, money management, savings
