Apr 24, 2008

Bliss to pay

I've had a four-month grace period on the credit card I got to buy my new iMac with. I now have a choice: Pay the whole thing off, interest-free, or start in with monthly payments and interest.

There is definitely some Capricorn/Cancer in me because a part of me is saying "No!" to paying it all off because that will deplete my savings account! My wonderful fat-and-supposed-to-get-fatter savings account! It's going to take months and months to get it back up to today's level if I pay all that bill off now! And I'll lose interest! Whiiine!

Thank goodness for the voice of reason. I have no clue where it comes from or if it even has an astrological association, but I like the way it sounds, all calm and manly firm and reasonable. It's saying that if I owe myself the money instead, as it were, I won't be charged interest; I will instead slowly regain it, with interest increasing right along - a lovely win-win situation. Are you listening, Keera?

Yeah, I'm listening.

Finances. Before I was all into this business of having a savings account (started that when I turned 40), financial decisions were so easy: "Money come" minus "money go". If that little equation left me with no or some money, all was well. If it left me in the red, reduce "money go". I'm the sort of person who will spend $500 in a day if she has it, or make $10 last 10 days, if necessary.

But there's another side to finances: Attitude. And I don't mean the attitude to the math part, but the attitude to money itself in the first place. Like my whine above. What exactly is the problem? I bought an item I could have paid cash for at the time by dipping into the savings account then, and it is an item I really wanted and that is giving me a lot of joy.

I was discussing financial attitudes with friends in e-mail and told this story about one method I had for psyching myself into a generous and positive attitude about paying bills: With the electric bill, for example, I would imagine that some father of three worked for the utilities company and my check was helping him take care of his family. It is a far better fantasy than imagining I'm going broke every month. And it's not like electricity is a negative. Try to do without! In my home, it not only powers my lights and refrigerator and TV and cell phone recharger; it is the reason I can even blog - and nowadays pay bills because it's done online now.

I don't have bills to pay; I have bliss to pay.

8 comments:

Sparkling Red said...

I'm the same way. I resist putting my money into a higher interest savings account because I don't like seeing my chequing account balance decrease. Makes sense? Absolutely not! Money doesn't always add up.

Sravana said...

Of course, the proper answer would've been to put away some cash every month since you got it, and use that to pay it off now that 0% is over. ;)

I have no problem with paying it off post-haste from savings, as long as you'll still have an adequate emergency fund. If that's not the case, perhaps you can pay off the lion's share, and then make payments on the remainder. Just a thought!

alice said...

What's the interest rate on the savings account vs. the interest rate on the credit card? If the credit care interest rate is higher, then you'd pay more in interest than you'd gain in interest, so I'd pay off the balance. But if the interest rate on the savings is higher, then you'd gain more in interest than you'd pay, so then I'd make the monthly payments.

Does that make ANY sense?!? It makes sense in my head, but I'm not sure it translates to words all that well... :-/

Keera Ann Fox said...

Spark, I'm not quite that bad - fortunately!

Sravana, remember my tanzanite stone? I'm still paying that off, too, which is why no saving for the iMac before or after purchase. At any rate, the iMac is now paid for in full.

Alice, I have yet to hear of the interest rate on a savings account being higher than any interest rate on any type of loan (unless one is comparing a cheap bank with an expensive one), and credit cards usually have higher interest rates than the typical mortgage.

max said...

It's saying that if I owe myself the money instead, as it were, I won't be charged interest; I will instead slowly regain it, with interest increasing right along - a lovely win-win situation.

If you have a 1000$ in savings and 1000$ in credit card debt, the amount it costs you not to pay it off in the first month is the difference between the interest rates time the amount of debt.

That is, you have a 1000$ of savings collecting 5% interest, and a credit card debt of 1000$ costing you 18.9% per month. So 18.9% minus 5% == 13.9% times 1000 is 139$ for the first month for cost of credit.

The best way to think of it is that the banking system is borrowing 1000$ from you and paying you 5% interest and then loaning 1000$ back to you @ 18.9%. They make money; you spend it. There various weird circumstances in which the reverse is true, like you get a really good deal on some furniture for 5% interest, and you have the equivalent amount of money in the stock market and the market is going up. So you're pulling a 20% return for the year; then you really are better off holding the debt and keeping the money in stocks. But that's really rare. The banking system people always try to stay out of money-loser situations such as that.

Always pay cash! 'Poor people borrow money and rich people lend it.'

I was discussing financial attitudes with friends in e-mail

Is that STILL going?

max
['Wow.']

Keera Ann Fox said...

Always pay cash! 'Poor people borrow money and rich people lend it.'

Max, I paid off the whole thing with no interest. That's like paying cash.

Re e-mail discussion: I don't know what "still going" means. Nor do I know how you got into my e-mail. ;-)

max said...

Max, I paid off the whole thing with no interest. That's like paying cash.

Exactly! Just like Amex!

Re e-mail discussion: I don't know what "still going" means.

I was referring to Ye Olde list from the olden days, but guessing it was different, which is why I asked.

max
['I forgot to set mail on this one.']

Keera Ann Fox said...

Ah, yes, that old list is still going strong. :-)