What if you could instantly convert all of your impulse buying to impulse investing? That simple change could add tens if not hundreds of thousands of dollars to your retirement account.
As you would expect in a growing economy, consumer spending is on the rise. But, much of it has been driven through online shopping, with Amazon leading the way, at the expense of struggling brick-and-mortar retailers. In an effort to recapture their share of the consumer wallet, a number of retailers are introducing or reintroducing, an age-old form of financing known as “layaway.” Retailers are now retrofitting layaway as “point-of-sale (POS)” financing which analysts believe could be a new avenue for growth. However, with mounting consumer debt and plunging savings rates, could this new trend put consumers at even greater risk of falling short of their retirement goals?
What’s Old is New…With a Twist
Layaway financing was introduced by retailers, such as Walmart and Sears, as a way for cash-strapped shoppers to purchase big-ticket items by making interest-free payments over a period of months, and then taking it home after the final payment.
POS financing is also an installment plan but, instead of taking the item home after the final payment, shoppers can take it home with the initial payment. Under POS financing, there are no interest or fees as long as payments are made on time, which will be a direct challenge to credit card financing.
This new form of payment is expected to be a big draw for consumers whose spending power has been increasing alongside the job and wage growth of a booming economy. But, as household debt continues to surge to record levels while fewer and fewer people can afford to cover a $500 emergency, doesn’t this easy and instant financing foster exactly the wrong mindset at a time when most people are so far behind on saving for retirement?
Why Not Point-Of-Sale Investing?
Of course, we can’t prevent companies from coming up with innovative ways to liberate consumers from their money. Such is the nature of capitalism But, what if that same innovative spirit could be used to encourage consumers to invest in their future?
If we consider that the availability of quick and easy financing at the point of sale leads to more impulse spending – a behavior that is often detrimental to one’s financial health – what if we could redirect that impulse to encourage investment? Consider the possibility that, in addition to the availability of easy financing, consumers also had access to quick and easy investing.
Let’s say you are at the checkout mulling over the impulse purchase of the latest Apple iPad selling for $800 that you really don’t need because your older iPad works just fine. But, you could walk out the store with an initial payment of $100 and an agreement to make installment payments on the balance. Very tempting.
What if the checkout counter also had a point-of-sale machine that enabled you to invest that $100 in Apple stock and even set up an automatic investment of $100 for the next 12 months? The choice is between spending money you don’t have (otherwise you would be able to pay in full) and investing money you do have (the $100 initial payment) for the prospect of future growth.
What if you could instantly convert all of your impulse buying to impulse investing? The next time you see a product you would really like to have but can’t afford, why not make an investment in the company that produces it? The product might give you a couple of years of enjoyment before it wears out or becomes obsolete but you can benefit from your investment for the rest of your life.
Changing Your Mindset for Financial Success
Obviously, we’re not going to see any POS investing machines at our retailers anytime soon. But, you can create the mindset that, anytime you are tempted by an impulse purchase or the purchase of something you can’t afford, you instead drop another $100 or $200 in your investment account.
That same mindset can change the behavioral impulse to simply slip your next salary raise into your budget and, instead, increase your monthly savings or investments. These simple changes, which amount to increasing your savings rather than spending – can add tens if not hundreds of thousands of dollars to your retirement account.
It Starts with Having a Clear Purpose for Your Money
People who have no clear purpose for their money – some goal or ambition they want to achieve – tend to spend their next available dollar on the “pursuit of more.” While that may bring fleeting happiness, it offers no opportunity for fulfillment. With a clear vision of where you want to be in the future, you can turn that around.
In the days when Shakespeare wrote Hamlet, borrowing was epidemic among the gentry, who sometimes neglected husbandry to the point where they were selling off their estates piece by piece to maintain an ostentatious lifestyle in London. So, the great poet penned this historic line: “Neither a borrower nor a lender be.”
