Monthly Payments

Posted by in Reach Your Financial Goals

We Americans are falling into a horrible trap.The trap is thinking of our finances in the short term.We think we can afford something as long as we can pay the monthly payment; house payment, car payment, furniture payment, boat payment, credit card payment, motorcycle payment, etc.We no not consider that the financing companies are stretching the length of time we have to pay for something longer and longer.I have heard of 50 year mortgages and 10 year motorcycle loans.The monthly payment is very small but each time you add more time to your payments the interest rate goes up.So the financing companies are playing a trick on us.It looks like we are paying so little because we only look at the short term impact.Now if you take a look at what you are paying over the long run it is sometimes double what you would have paid if you bought it outright.The financing companies are slowly draining your bank account over your lifetime while keeping you from ever being able to save up enough to build wealth.

There is a way out.You need to begin ask what is this going to cost me, total, not monthly.Each little bit that you pay to the financing companies is a little less you have to build wealth.This concept actually goes back to some of my previous posts on goal setting.You need to decide what you want down the road and then ask “does purchase fit into what I want to have in the future?”In my case I want to retire wealthy and stress free so I never want to have a car payment again.To accomplish this, my wife and I are saving up our money because we know that she will need a new car soon.By the time she needs a new car we can buy it with cash, and we get to save our money to build wealth.