Can you afford it?

August, being perennially a wet month, is a lean season for retailers. This is why big malls schedule their mid-year sale at this period hoping to draw consumers to spend. The red-tag retailing has evolved making the 3 Day Sale a regular event on their calendar dates. These “SALE” events are tied up with credit making it convenient for consumers to purchase pricey items by means of installment.

One of my personal favorite “SALE” is the appliance and gadget madness. I can’t resist the urge of checking out the latest toys in the market. I also noticed that pricing of these products is critical since most of these items are identical in specification. Price seems to be a major differentiator.

During the sale period, the hook line and sinker for spending spree occurs. Money Tree suggests that before you splurge and burn your money, find time to think and rethink your position. Often many are led into an illusion that the item they buy is cheaper than what it actually is. How? Expensive items are often disguised and repackaged as “affordable”. Marketing geniuses mask the amount by subtly dividing it into monthly or even daily cost. A P100,000 television is expensive and will surely shun a buyer. But present the same cost on a per day basis (roughly around 277 pesos per day) and you’ll have many Juan’s lining up to purchase that tv set.

Be careful. This “affordable” purchase scheme will often be used to lure you to give in to your “wants” list. There’s always an instant justification to the action saying that the purchase is a steal with only a few hundred pesos per day to throw away. Reaching out for the credit card seems to be effortless and convenient. There is no feeling of guilt when you swipe that credit card and you go home happy with your new set of goodies.

Again, this type of spending causes a false sense of purchasing power. It makes you believe that you can actually buy more than what you can afford. Rule No. 6 in CNN’s Money 101 says:

“Spending beyond your limits is dangerous. But if you do, you’ve got plenty of company. Government figures show that many households with total income of $50,000 or less are spending more than they bring in. This doesn’t make you an automatic candidate for bankruptcy — but it’s definitely a sign you need to make some serious spending cuts.”

More often, happiness derived from this type of purchase is short-lived and it abruptly ends once the credit card bill arrives. It makes you realize that the “affordable” purchase you made is much more significant when it sits on top of your regular needs purchase. As you continue to touch base with reality, you find out that there is actually no additional income to support for the added expense of your new toy. It is a start of a financial horror story and you find yourself sinking on debt.

This is not a pretty site and one must be avoided at all times. I’m not against the purchase of the goods that we crave for. The key phrase is “planning the purchase”. I will not hesitate spending a fortune buying things that I like provided that this was planned beforehand.

So, remember, whenever you are verge of impulse buying … think … the price tag always more than meets the eye.