Monday, September 22

Is impulse spending okay?

I think the answer to that question is pretty obvious, but I stumbled upon an interesting little piece on Yahoo! Finance called "Buy Now, Don't Regret Later."

The author talks about times when we become too frugal. When we deny ourselves and end up regretting it later.

He is obviously quite fond of being budget-conscious, but I think he wants to point out that sometimes we go a little too far.

As I was reading, I couldn't help but agree: Any system, however smart, can box you in. It can lead to decisions based on knee-jerk reactions rather than logical decisions. And, as my fourth-grade teacher was so fond of telling us, often your first answer is the right one.

This really resonated with me, but not because I have some would-have-bought item I pine for. I have moved a lot in the last 12 years -- between college dorms and various housing scenarios, it's in the double digits. So I'm usually too busy wrangling the things I already have to yearn for something I didn't get.

But the same frugal impulse -- to quash "unnecessary" spending -- has led to my own dilemma. It's a tad ridiculous, actually, because the answer is obvious; but I can't quite bring myself to act.

Tim and I have a promotional 0% on the biggest card. That amount runs out after October, at which point we will have to either pay the interest (15% on just under $9500) or transfer the balance.

I sat down with various credit card offers recently and read them through. (Our other cards don't have any particularly good offers, at present.)

  1. There's one that's a 7.99 percent, not an introductory rate. But, of course, you never know if that's what you'll really get until you apply.
  2. There's a 12-month 0% offer. This would give us a lot more breathing room while Tim figures out what he'll train for, how long schooling will take, etc. But the 3% balance transfer fee has no cap. In the past, the cap was $75, making it a no-brainer. This time, it'd be closer to $285.
  3. There's a 0% 6-month offer with a balance cap, but the limit would be too low to transfer the whole thing over. And chances are, Tim will still be in school when the offer ends.

I looked through all this and did the math. Even with the 7.99%, we'd be paying more in interest. In fact, by the six-month mark, we would have paid the same amount as if we transferred over to the 0% card. The clear answer is option #2.

So why am I reluctant to do it? Well, a few reasons, actually.

  1. I'll have to open a new card. In this economy, that can be dangerous. Some articles warn that this may cause current card companies to downsize your limit or up your rate. I doubt this would happen, but it's a concern.
  2. It will have an effect on my credit score. Not huge, but not great, either.
  3. Most importantly, it's the psychological impact of putting more debt on the card. I know, logically, that the funds will end up there, whether by balance transfer or by interest. But it's still a hard thing to do.

And it's the impulse in this last one that is so frustrating. I know that it's the right thing to do. But I can't do it. I don't want to put more money on the card, even though I know it will eventually end up there anyway. These are the situations that make staunch, unquestioning frugality a dangerous thing.

But there are necessary transactions that are harder because it's easy to slip into the fast mindset of not spending anything. Ever.

In fact, this mindset is problematic in more ways than one. Tim's natural impulse is to spend without worry. Mine is to quash spending automatically. Neither is a very fun or happy way to live. (Though, admittedly, Tim's is probably more fun in the short term.)

As my mom likes to say, "Moderation in all things -- including moderation." Any mindset that asks for 100% unwavering commitment is pretty unrealistic.

And so Tim and I both make adjustments and try to move toward a healthier center.

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Blogger Who are we? Well... said...

If your husband is in school, have you thought about getting a student loan? You could use the money to pay off your debt. Student loans usually have a cap of somewhere around 8% for undergraduate loans and 6.8% for graduate ones. Plus, if you qualify for subsidized loans, the government pays the taxes while you are in school. This way you could have a 0% balance while in school and possible pay off some of it in the meantime. Hope this helps.

September 22, 2008 at 3:56 PM

Blogger Abby said...

Well, that's certainly something I hadn't thought of.

I think a lot of it depends. We're trying to get the state to help pay for some worker retraining, which would only be a year, max. We have to take a closer look at some programs, which is on the agenda for tonight. Then figure out what's feasible, what works best for our situation (he wouldn't be starting until winter, probably, but his unemployment runs out in March) and so on and so forth.

September 22, 2008 at 4:48 PM

Anonymous Anonymous said...

I hope you find the right card for your needs. I had forgotten that the advertised rate isn't necessarily the rate you get! That stinks.

September 22, 2008 at 7:06 PM

Blogger Abby said...

Yeah, blueviolet. I'm pretty sure I could get the advertised rate. But man I wish there was less uncertainty in this world.

September 22, 2008 at 7:50 PM


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