Here’s the problem with commitments, they take time and time is a finite resource. Personally, I need to learn to not overcommit.
More and more, I see products promoting themselves with financing options. Everything from a mattress to a stationary bike is being marketed with long term financing options. Something with a $2,500 price tag might seem too rich, but a $60 monthly payment over 3 or 4 years becomes more palatable. Our culture has begun to create “luxury” everything and these price tags for these “luxury” items are meaningful. If lump-sum purchases were the only option, the demand would shrink. What happens is that these seemingly “micro” commitments compound, and as one accumulates more commitments, they begin to place an even greater burden on their cash flow.
These commitments do not only come in the form of financing large purchases they also surface as subscriptions. Subscriptions to everything from streaming video services to theme park memberships. These subscription models make sense from a business perspective because businesses want predictable and sustainable income. For you, the consumer, this means that you have a defined amount of your income that has already been spoken for.
Here’s where I want to encourage you to shift the way you think about subscriptions and financing. When you choose to commit to something today and plan to pay for it later you are choosing to allow your “current self” to enjoy the utility of your purchase and you are committing your “future self” to pay for it. Naturally, we have a tendency to derive the greatest enjoyment from a new purchase at the beginning, yet the cost lives on.
Links mentioned in this episode:
Trevor is a Partner, Director of our Private Wealth Advisor Group, and Author of Thoughts on Money.
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