Practice Before You Pay (PBYP). I realize this is not going to make much sense at the beginning of this blog but trust us, by the end it will be crystal clear. PBYP is a simple habit to pick up, but it will revolutionize the way you spend money. Consider, for example, the next purchase you wish to make, by monthly payments—and don’t worry, the purpose of this blog post isn’t just to artfully dissuade you from going ahead and buying the item in question.
Maybe it’s a house or new car that you have in mind, or simply an upgrade for your smartphone. The contract you is for a set amount each month; $50 for the latest in Android or Apple technology. Previously, you would go ahead and pay directly with your credit card or agree to monthly installments. You sign the contract, walk away with your brand new phone, and believe (hope) that everything will work out as planned for making the payment in full.
This approach does work—some of the time. But more often than not this is exactly how we end up in debt. Now, we’re not just making payments but earning interest also. We don’t ensure that this new purchase actually fits into our monthly budget—maybe worse still, we don’t have a monthly budget! It can take little more than an economic hiccup to completely derail our finances and the intended payment plan we had in the beginning.
Now try this approach. PBYP.
Set up a separate savings account and an automatic transfer from your salary for $50 a month (we’re still buying that new phone). Today’s banking capabilities make this super easy to do online.
Do this for a few months at least; set yourself a target number of 3,4,5, or 6. Can your budget survive the monthly payments? Still want the phone?
At this point maybe you’ve changed you mind (we promised not to try and dissuade you, but by delaying the purchase you should end up only spending money on things you really value), even if not, you will still decrease your chances of buyer’s remorse and blowing your monthly budget.
On top of that, you’ve now got a decent deposit saved up to lower the price of your original purchase. It’s win, win if you ask us.