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Exploring BNPL, effort, and energy

Welcome to the Intentional Dollar weekly newsletter — great work taking this small step to move your money forward. I’m Logan, a Certified Financial Planner™, and I’m excited you’re here!

What’s inside?

• One tool to experiment with

• Two quotes from others

• Three questions to dig deeper

• Four lines of poetry for the point

Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.

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_{One tool to experiment with:}

BNPL:

There’s a mean shark swimming in the financial waters near you. Circling with temptations of easy money and affordable luxuries, enticing you to reach out and grab for the things you shouldn’t; it’s the buy now pay later option, and it’s become an unwelcome, sticky visitor.

Dangerous because it acts a little different than a loan, or a credit card in that it induces spending on unnecessary items; dangerous because it leads us into overcommitting our future dollars.

For cars, homes, and pricey needs, spreading costs through a loan is a valuable tool. It would take an enormous amount of time to save cash for a house, so we get mortgages.

That’s what loans are for. They are financial bridges to help us connect the things we need now with a means of paying for them later. When we spread cost over time it’s flipping the savings curve. Instead of toiling for five years to buy a car with cash, we buy a car with credit and then pay it off over the next five years, with the added cost of interest, or a cost to use someone else’s savings to buy our stuff. That’s what borrowing is. You use a little of my savings, I use a little of yours. The bank just facilitates this capital trade.

When we enter the trade we give up a lot more than the face value of the cash that leaves our pocket for the payment each month. We give away an Intangible asset, flexibility. Loan terms obligate us to make payments, the same fixed payments until the debt is repaid.

Buy now, pay later programs are tricky in that they don’t appear like credit cards that we use for daily purchases. There are often no credit checks, less interest (if any), and they’re very easy to use. This sounds great right, so what’s the deal?

BNPLs get us to spend more on the mid-luxury items, they allow instant gratification and delayed payment pain. We use them to buy Items that we wouldn’t put on the credit card and pay off over one month, and items that are too small for a standard loan structure. The $800 espresso machine is accessible because it only costs $200 a month for four months on after-pay. We apply a mental discount rate to the remaining $600 chunk because it’s in the future — and we should have the cash to cover.

As you know, anytime you take a loan, you face a fixed risk for the payoff term; a rigid obligation you owe until you’ve discharged the debt. And until the debt is clear, you don’t own the thing, it owns you.

Stay away from BNPL unless you have the resources to successfully navigate the underlying risk, and remember, five months from now that new thing will lose its luster.

_{Two quotes on effort:}

Sometimes money improvement doesn’t require any new tricks — just a little more effort than you’ve historically put in. You can’t fail if you don’t try, so avoiding the effort is a dangerous biological self-protection mechanism.

_{Three questions on energy:}

1. What tasks am I spending big draining efforts to complete?

2. What if I did this task on a smaller but more frequent scale?

3. How can I be more efficient with this task?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let me know which one shined light on a previously dark cave.

_{Four lines of poetry for the point:}

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Disclaimer: This is not investment advice. These weekly posts represent my simple thoughts, a few quotes, and some questions — for educational purposes only.