You don’t have to be a financial guru to understand the importance of credit repair. If you look hard enough, you’ll find examples in the unlikeliest of places. I discovered a recent example during a trip to buy furniture. While my initial goal was to furnish my home, what I found was the perfect metaphor for the struggles facing every consumer on a daily basis: the pressure of high prices, temptation from outside forces, and the need to budget effectively. Take these lessons with you the next time you’re faced with a challenging financial decision. Their morals apply to more than furniture.
Lesson #1: Value is subjective.
What makes an item expensive? Is it the material? The quality? More often than not, it’s the hype. Modern manufacturing allows companies to mass-produce products at incredibly low prices. If you’ve ever grumbled at the $150 price tag on a pair of Nikes, you understand this concept. Here’s the good news: value is almost entirely subjective. In this case, I visited a national chain furniture store in search of a sectional sofa. Two weeks later, the same sofa was marked down by 20 percent. There’s no mystery behind this reduction; stores participate in promotional sales throughout the year. That said, the rationale isn’t enough to refund 20 percent of the purchase. When you’re unsure of price, ask yourself the following question:
If this item were reduced by 20 percent tomorrow, is it worth paying full price today?
In simpler terms, forget about market value. What is the purchase worth to you? How would a discount aid your credit repair efforts? Does a 20 percent discount represent a few dollars or several hundred? The lesson: Spending is all about sacrifice and balance. Decide how much you’re willing to bend on both (without letting credit repair out of your sight).
Lesson #2: There are always discounts.
“I wish I could lower the price, but we can’t provide a discount on this piece.” Ah, the stonewall approach. Whether you’re buying furniture or buying a car, be assured, there are always discounts. In my case, I was asking for a deal on desk at a local furniture store. When they refused to reduce the price, I went home and found the same desk for 35 percent less from an online retailer. I printed the sales page and drove back to the furniture store.
“I’d rather do business with a local company,” I said. “Are you sure you can’t match this price?”
The result of my efforts: A desk delivered locally and 35 percent in savings. The moral of this story is far-reaching. Credit repair is best accomplished with strategic budgeting and smart savings. Consider the same scenario when buying a car. The average person relies on financing to secure a new vehicle. Paying sticker price means increasing your debt-to-income ratio, credit utilization ratio, and worst of all, paying much more in interest over the life of the loan. Do yourself a favor and get involved in the pricing process. It’s rarely cut-and-dry.
Lesson #3: You can’t afford everything.
Don’t let the sales associate fool you with their 12, 24, or 36 month payments plans—some things are too expensive. Consider the following example:
Saba and Jon are shopping for a new dining set. They visit a high-end furniture store and find the perfect style to match their home. The only problem? The table and six chairs cost $3,600. “Don’t worry about the price,” the sales associate says. “We offer 24 months of zero-interest financing. I’m sure you can afford a monthly payment of $150.”
There are some fallacies associated with the notion of monthly payments:
- They make buying easier
- They reduce the burden of the purchase
- They eliminate budgetary risk
People often confuse “convenient” with “easy.” While it may be convenient to pay $150 a month, Jon and Saba are still on the hook for the full $3,600 for their dining set, a significant burden for their budget. To that end, it’s important to understand that payment plans are not the same as affordability. If Jon and Saba have a combined gross income of $2,500 per month, their dining set will reduce their cash by more than six percent over the next two years. This means they’ll have to cut back on things like entertainment, essentials, and even food to be eaten on their expensive table. The purchase will also prevent them from eliminating an existing credit card balance of $5,600. The bottom line: If it isn’t easy, it isn’t affordable. Don’t allow the want of things to overshadow the importance of safety. Limit your credit repair vulnerability by applying these lessons in your daily decisions.