Over the past 15 years, we have seen countless numbers of people put themselves in real financial trouble by using credit cards to charge items that they really couldn’t afford at the time they bought the merchandise. I can remember growing up as a kid that many of the department stores offered something called a layaway plan, but I really didn’t understand it at the time. With Wal Mart’s recent announcement of layaway plans this year, you may see this trend come back en vogue as an alternative way to purchase merchandise.
Layaway is really a nifty way to obtain merchandise or products without needing to have the entire balance of money at the time of purchase. It is really an entirely different process from credit cards in a significant way. The main reason is you don’t get to enjoy the item when you make the down payment. You only get to enjoy it when you actually pay off the item.
Layaway programs typically run for somewhere between 8 to 12 weeks, with you being required to make a payment every week and then be completed with payments at the time you need to use or gift the item. One of the major drawbacks of this program is that there could be a cancellation fee if you don’t complete all of the required payments. However, most of the stores that do these programs will issue you some type of store credit but it is important to read the fine print of the layaway program. It would be unusual that you could lose all of your money if some unforeseen circumstances come up that preclude you from completing the program.
Typically, these programs were designed at low income shoppers but I think all kinds of shoppers may want to consider these types of programs going forward because you are actually PAID OFF with the item when you receive the item. What a novel idea . . . build a program to force yourself to be disciplined to save money (make payments) so you can afford what you buy. This is why you may see more stores bring back these programs along with some nifty marketing campaigns.
Years ago, banks offered programs like Christmas Clubs where you could save money during the year so come holiday time you could have the financial resources in your hands to pay cash for the gifts you would give over the holidays. However you decide to plan for the holidays here in 2011 and plan your overall finances for 2012, here is one smart money moves tip. If you can’t afford it, don’t charge it! Wouldn’t it be nice to layaway in 2012?
Visit www.oxygenfinancial.net to request a free consultation with the leading financial experts for Generation X in the country.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves for Gen X & Y.
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