Greetings, and welcome to the twenty-seventh edition of Wallet Wellness in 2024 - your weekly source of practical personal finance tips to elevate your money management skills! 

We hope you had a chance to check out the last edition where we explored the 80/20 rule of managing money. In today’s edition, we will discuss the cons of the Buy Now Pay Later mode of purchasing.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week. 

Let’s dive in!

MONEY254 TIP OF THE WEEK

Buy Now Pay Later: 5 Cons to Know ⚠️

Buy Now Pay Later (BNPL) which is often identified with terms such as, "Lipa pole pole," "Lipa baadaye," or "Lipa mdogo mdogo," is a common financial tool that allows you to make purchases immediately and spread out the payments over time.

Instead of paying the full amount upfront, you can manage your budget more effectively by dividing the cost into manageable installments.

While this option may help you get the phone, laptop, fridge, or TV that you've been eyeing without breaking the bank or denting your pockets, it's important to know what to watch out for.

Today, let’s take a closer look at the potential pitfalls of the Buy Now, Pay Later method. Our goal is to help you make informed decisions without hurting your finances.

1. Risk of Impulse Buying 🛍

Buy Now Pay Later (BNPL) services can make it tempting to grab that new gadget you’ve been eyeing without a second thought. The ease of spreading out payments might encourage spur-of-the-moment purchases.

• Why it Matters: When you don’t feel the immediate pinch of paying upfront, it’s easier to make decisions you might regret later. This can lead to accumulating items you don’t need or overextending your budget. Read More.

• What to Do: Before buying, ask yourself if you really need the item. Take some time to think it over, and consider waiting a few days to see if you still want it. Read More.

• Budgeting for purchases in advance can also help you save up and buy in cash without resorting to BNPL. Read More.

2. You Could Overstretch Your Budget 😰

BNPL plans break down the cost of an item into smaller, more manageable payments. However, it’s easy to focus on just the installment amounts and overlook the total cost.

• Why it Matters: By focusing only on the smaller payments, you might underestimate how much you're actually spending. This can lead to financial strain.

• What to Do: Always check the total cost of the item, including any interest or fees. Make a budget that accounts for all your regular expenses and ensure you can comfortably fit in the payments of installments without stretching your finances. Learn More.

3. Penalties and Fines 🚨

Missing or delaying the payments can result in extra fees and penalties - depending on the provider. This can make your purchase more expensive than initially planned and might even affect your credit score.

• Why it Matters: These additional costs can add up quickly, turning a seemingly affordable purchase into a financial burden. A damaged credit score can also impact your future borrowing costs. Read More.

• What to Do: Set reminders for payment due dates or automate payments to avoid missing them.

• If you anticipate trouble making a payment, contact the provider to discuss options before penalties kick in.

4. Limited Consumer Protection 🚫

If something goes wrong with your purchase say, the item arrives damaged or malfunctions too soon, depending on the BNPL service provider, you may not get much help in resolving issues compared to traditional payment methods.

• Why It Matters: Lack of protection can leave you stuck with a faulty item and with ongoing payments that you might still need to make while you sort out the problem. Read More.

• What to Do:

1. Check the BNPL provider’s policies and see what consumer protections they offer. You may find one that offers embedded device insurance, for example. 

2. When making a purchase, choose reputable sellers with good return policies. 

3. If issues arise, contact the seller directly and keep records of all communications. 

5. Risk of Obsolescence 🥵

Typical items available on BNPL plans such as electronics can quickly become outdated due to rapid technological advancements. If you’re paying for a product over an extended period, you might end up with less functional technology that you paid more for by the time you’ve finished making payments.

• Why it Matters: This can lead to regret as you’re stuck with an older model that may not meet your needs or be compatible with newer technologies.

• What to Do: Consider purchasing devices with longer-lasting features or explore options that offer more flexible upgrade paths. It pays to consider your longer-term needs before making a BNPL purchase. Read More. 

While Buy Now Pay Later (BNPL) can make purchases more accessible and manageable, it's important to use it with caution. Being aware of the potential pitfalls and planning accordingly can help you avoid unnecessary financial strain.

Remember to make thoughtful decisions and ensure that the payment plan you choose fits comfortably within your budget. 

CONCEPT CORNER

The 30-Day Rule 

The 30-day rule is a personal finance strategy to help you avoid impulsive spending and make more thoughtful purchasing decisions. It involves waiting for 30 days before making a purchase, particularly for non-essential or high-cost items. This means you give yourself a full month to consider whether you really need the item and if it's worth the expense. Read More.

Money and Me

“I Quit a 50K Job Because I Didn’t Want to Live in Ushago”

"…I felt like an underachiever working in the same place I had lived for the first 20 years of my life. It did not help matters that some of the people I looked up to - uncles and elder cousins, kept making fun of my dwellings.

“You went to university just to come back here and live with us in this hot village? I am sure even when it comes to marriage, you will be competing with us for the girl to take home from this small town,” they would tease me… Read On

MONEY254 #MONEYTOK

Waiting a Little…Could Save You More!

In today’s tough economic times, every coin we can save counts. This week's MoneyTok discusses how to increase the money you save without necessarily increasing your income. Watch The Video and read more in this article.

@money254hq

What is the 30-Day Rule? #Money254 #moneymanagement #30dayrule #Moneytok #Fyp #Personalfinance #Financetiktok

That's it for the twenty-seventh Wallet Wellness edition of 2024! We hope these financial tips have added some energy to your hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week and watch out for Money Weekly on your inbox this Friday.

Also, don’t forget to download the Money254 App on the Google Play Store, and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Cheers to your wallet's well-being!

Money254 editorial team.