8 Things You Should Never Finance, Ever
Written by
Joel Lim
Edited by
Amen Oyiboke
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You’ve likely heard by now about good debt versus bad debt. Good debt is the kind that isn’t a loss, meaning you finance something that tends to appreciate over time, like a mortgage or even the right car, and the interest you pay over time is worth it.
Bad debt is the kind you enter into for items that are either fleeting or depreciate quickly. So the item is gone, but you’re still paying for it.
A lot of this bad debt is from financing things you really shouldn’t have financed. So, here’s our top eight things you should never finance ever, and the reasons why.
Furniture
No matter how much or how little you pay for your furniture, it almost always depreciates immediately, by a lot. If you finance your furniture, you’ll be sitting there on that fancy sofa a year from now, already over it, with that credit card balance still sitting there with you.
What to do instead: Buy used. You can find great furniture on Facebook Marketplace, at consignment stores, and on Craigslist for amazing deals. Many people are trading up, and they want to get rid of furniture that’s in great shape.
Or you might find an estate sale with a house that needs to be emptied. You can furnish your whole house with “like-new” items for a fraction of what you’ll pay for that fancy sofa. The trick is to be patient and shop around.
Vacations
You’ll be back from that $10,000 trip to Hawaii, with just memories of the trip, and thousands in debt. It’s not worth it. While you may really, really want to go, you’ll really, really hate the balance on your card in two years.
What to do instead: Take a staycation. Chances are, you live just miles from some amazing sights, sounds, and adventures. Flip your perspective to start vacationing closer to home, just a few cities away, within your state, and then in neighboring states. You can camp for cheap, find local hostels, or house swap with others in your same situation. Then, you can save up for Jamaica and pay cash a few years from now.
Clothes and Accessories
Clothes and accessories are perhaps the hardest thing to do without when everyone else on your social media looks so great. Plus, they’re selling you that gear right there on their accounts. Fast fashion pulls you in hard, and it’s up to you to resist. It’s a fast track to financial ruin if you’re financing it.
What to do instead: Spend your money wisely when it comes to clothes. Buy a few solid, quality pieces that will last the test of time, and then you can start building around those pieces. You’ll save yourself from debt, and you’ll save the earth from fast fashion.
Pets
Everyone loves a furry companion, but the price of some of these pure breeds has skyrocketed. Bulldogs are currently going for almost $5,000, according to SprucePets, and a Terrier is around $3,500. You may love the newest trendy dog, but you should not finance it.
What to do instead: Visit a shelter. Hang out with your friends’ animals. Even visit a breeder. Your hunger for a furry companion can be fed by a local shelter dog in need that costs little to nothing to adopt, or you can wait and save the money for the luxury dog.
Weddings
You’ve likely heard that the bigger the wedding, the harder they fall. There’s something to be said for going over the top with a wedding when you cannot afford to pay for it outright. And it’s nothing good. The only purpose of getting splashy with your wedding if you can’t afford it, a single-day party, is to show off to your friends. And that’s not what a wedding is about, right?
What to do instead: If you’re determined to have a huge, expensive wedding, then wait. Get the promotion, save more money, and make your plans one at a time. It will give you an opportunity to continue to grow closer as a couple before the big day. Alternatively, get married in a park. It can be lovely!
Electronics and Gadgets
Like furniture, electronics depreciate the second you open the box, and a new version of that item will come out the next day. Of course, you’ll want that one, too. It’s not worth going into debt just to have technology when you can have the same technology for a fraction of the price. You’ll just regret the purchase sooner rather than later and still have to pay off that credit card.
What to do instead: Buy an open box item that someone else returned. You’ll get a huge discount, and it will still be brand new. Or, buy a refurbished device at a fraction of the price and upgrade again when the next version comes out with a refurb model. You can play the game and save your cash.
Luxury Items
The definition of luxury is an item you don’t need, but you can afford, so you treat yourself.
If you don’t need it and you can’t afford it, don’t finance it. Like with weddings, you’re trying to prove something to yourself or someone else, only to have to live with the huge debt that comes with it.
What to do instead: Live within your means. If you want to buy luxury items, work hard, invest in yourself, and grow your wealth. Chances are, when you can afford luxury items, you may not even want them anymore. You’ll likely prefer to continue growing your wealth.
Consumables
You may justify buying dinner in a restaurant or buying drinks for friends at a bar with your credit card as a way to fit in or show off. The reality is that the food or alcohol will be gone in minutes, and you’ll be saddled with debt you can’t pay off quickly. If you could, you would have paid cash. Don’t finance anything that won’t be around still when that credit card bill comes in.
What to do instead: Invite your friends, family, or coworkers over to your house, or offer to cook a meal for them at theirs. It’s a great way to bond. Plus, you’ll spend less to cook a whole meal, with a great bottle of wine for four, than you would just to pay for yourself to eat and drink at a fancy spot.
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