When buying a cell phone, spending 1,400 euros at once is much more expensive than paying 39 euros per month. But the ease of fitting in a little money can make us accept an expense that compromises the budget for years.
Financial advisor Javi Linares addressed this difference in an interview with La Vanguardia, where he talked about the “quota trap”. He illustrates this with an example: “It may seem reasonable to pay 39 euros per month for 36 months for a mobile phone.” Doing the math, the cost of payments over three years adds up 1,404 eurosTo which must be added any additional cost of financing.
But this apparent ease of paying for certain items can lead us into a mistake: financing purchases that quickly depreciate or paying in installments for experiences that end long before they’re paid for. “It doesn’t make sense to continue paying month after month for something we already eat,” the expert said.
By financing several purchases, we can accumulate expenses for the following months without realizing it with the same clarity as with a loan. Just because each operation is small doesn’t stop the sum from getting a little money.
For example, buying a wide range of clothing in three payments and financing a phone for three years have very different calendars, so it can be useful to keep track of each charge, its date, and how many remain on a sheet of paper or cell phone note.
Another check is How much it costs to procrastinate. The Bank of Spain explains that interest-free financing may include commissions or costs. The nominal interest rate (TIN) can be zero and the annual equivalent rate (APR), which includes these costs, can be positive. If there are no commissions or fees, the APR will be 0%, and that’s exactly what we need to ensure.
If we already have several open financings, Linares recommends “prioritizing the high-interest loans” and reviewing the expenses that weigh the most on the accounts, which are typically homes and cars.
With the amount already mentioned, we can check what is left for the necessary expenses in the tightest month. If the new purchase only fits an additional income that is still uncertain, you can try it with a smaller budget or wait for other financing to close.
Through this Vanguard
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