Is paying in installments good or bad?

My clients regularly ask me this question.  Installments are such a tempting option when you have problems in finishing the month, however, are installments such a good solution?

As you know, I am fascinated by the psychological aspects of spending money. Let us take a look what it means to pay in installments and why we are offered such an option. The retailer offers installments as an incentive to convince you to purchase.

If we need to purchase an item that costs 500 NIS, but we are offered 10 installments of 50 NIS, it is the amount of NIS 50 that we remember and not the NIS 500.  Not only that, you might be tempted to buy a more expensive item if it is on installments.  Also if you do not work with a budget you will forget by the 3rd month that you have this payment.

TashlumimSo what are the rules for paying in installments?

  1. a) For items that we purchase on a weekly and monthly basis, such as food, clothing, arnona, electricity and telephone bills. Do not pay on installments, because the next month we have to pay them again.
  2. b) If you have a major asset purchase, e.g. a refrigerator or computer, it is recommended to plan for them, so that you can take advantage of sales. They normally occur before and during Pesach and Succot.  However, the best sale is just before the end of the year, like now, where shop keepers want to get rid of their stock.  TIP: if you pay in cash you can usually receive an additional discount.
  3. c) However, if you have to pay in installments, especially if you buy on credit, make sure that the installments are as few as possible. TIP: credit is when you want to pay in more than the usual 3 installments – CHECK THE INTEREST RATE you are offered on credit purchases. Sometimes it might be worthwhile to take out a loan.
  4. d) Remember the key to financial stability is to track and plan. Remember if you have installments to put them in your budget for the coming months so that your cashflow reflects this extra expense, And, you are not tempted to buy again on instalments.

Wise handling of your payments will ensure that you achieve financial stability.  If you want guidance contact me via email or telephone me 054-4217207 for a free consultation.  For more financial tips check out my facebook page

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About the Author
Suzy Kahati was born in London, UK and made Aliyah in 1983. She is divorced with three wonderful daughters and lives in the center of Israel.