Sketch Guy: Skip Credit Cards and Preload Monthly Payments Instead



Carl Richards

Let’s play a little game. Assume there is something you want to buy, and you will pay for it with a monthly payment plan. It could be a house, a car, tuition or something as simple as a new smartphone.

For this example, we’ll use a new phone. You’ve finally had enough of that old phone with the fading battery, and you’ve decided to buy the iPhone 7 using Apple’s new iPhone Upgrade Program. Let’s say it works out to $40 a month.

There are at least two ways to proceed.

The first way is how most people buy things. It’s an advanced technique I call “purchase and pray.” You decide you want something. You put it on a credit card. Then, you pray that you’ll have enough money to pay the bill in full. I’ve done this plenty of times. It’s simple and works at least some of the time.

The downside is that this technique is precisely how most of us end up way over our heads in debt. We fail to make sure our purchase fits in our monthly budget, mainly because we have never taken the time to build a monthly budget. But even if we have one, “purchase and pray” is how we blow that budget. Then, we feel huge buyer’s remorse because we rushed into a bad decision.

A New Way to Think About Budgeting

The Sketch Guy, on a simple method to avoid blown budgets when a new sparkly thing catches your eye.

Sick of feeling like a financial failure when this happens? Let me introduce you to the preload method.

You decide you want the $40 per month iPhone. You think you can afford it, and it fits in your budget. Instead of buying it, you preload the purchase by pretending to buy it. Set up a savings account and automatically transfer $40 a month to it. Places like Capital One and Ally Bank make this easy, but many other banks offer automated transfers, too.

Do this for a few months. You get to practice before you buy and see how it feels.

By this point, you’ve probably realized that using the preload method means waiting a few months to buy something you want right this second. This is part of my evil plan. Delaying the purchase will lead you to spend more of your money on stuff you really value and less on useless junk.

But I digress. This sneaky method of delaying gratification is just a side benefit. The main benefit is you get to see how it feels to have that money leave your checking account before you’ve made a commitment. This will lower the likelihood of blown budgets and buyer’s remorse.

And guess what? After a few months of preloading, you’ll have saved a nice chunk of money to put toward the purchase and lower your payment. That’s sounds like a win to me. Want to play again?

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