You can handle one low monthly payment, right? What about when one low monthly payment turns into several monthly payments? From cars to furniture, advertisers like to point out how their product can be yours if you can make an “easy” monthly payment. Looked at individually, these monthly payments can often seem very affordable. But beware! The costs of monthly payments can add up fast, leaving your finances in jeopardy.
Look at the big picture
When thinking about so-called “great deals,” looking at how monthly payments will add up over time can help put them into perspective. For example, you may decide to buy a 60″ TV and make payments over 36 months. A $120 payment each month may seem affordable, but over 36 months this adds up to $4,320 in total costs. Does the TV still look affordable?
Think about hidden costs
Of course monthly payments are only a portion of the costs for items like automobiles and mortgages. Insurance, maintenance costs and taxes are just some of the expenses conveniently left out of advertised monthly payments.
You also are likely to pay a much larger amount in interest when financing payments as a monthly expense. Many businesses also offer low or free introductory interest rates that only last for a limited time, causing monthly payments to balloon after an initial period. It can be hard to visualize the hundreds or thousands of dollars you may be paying in interest when it is rolled into one monthly payment. If the salesperson told you that buying that new TV would only cost you $120 a month, but that meant a total of $600 paid in interest, would you still think it was a great deal?
Don’t avoid this monthly payment
One monthly payment you shouldn’t skip is the monthly addition to your savings account. Growing your savings account at Horizon Bank can help you achieve future financial goals, as well as prepare you for unexpected financial setbacks. Call 888-904-2265 or visit a branch today and talk to an advisor who can help you setup a savings plan to work toward achieving your financial goals.