Imagine this: You’re eyeing a new laptop. The price tag is steep, but then you spot a tempting offer – ‘Buy Now, Pay Later’, or BNPL. No immediate payment, no interest fees. It sounds like a dream, doesn’t it?
As a seasoned money coach, I’ve seen this scenario play out countless times. BNPL is the financial world’s latest trend, even as The Guardian reports that one in four adults is doing exactly this for Christmas.
While no such statistics exist as yet in Malta, it’s a fact that BNPL is seductive, but complex. Let’s dive into its world, balancing the thrill of instant gratification with the art of savvy financial planning.
A real-world dilemma
Meet Sarah, a client of mine. Sarah stumbled upon a designer bag she’d been coveting, available via BNPL. She thought: “Why not? I’ll pay it off in instalments.” Fast forward a few months, Sarah had accumulated several BNPL commitments, each for different items. The small payments seemed inconsequential at first, but soon, they added up, causing stress and budget strain.
BNPL: A double-edged sword
BNPL schemes offer flexibility and immediate satisfaction, a boon for managing cash flow. You buy what you need (or want) now, and you spread the cost over time, often interest-free. It’s an excellent way to keep cash in hand for investments or emergencies. However, this convenience can be deceptive. It’s easy to lose track of spending, and before you know it, you’re juggling multiple payment plans.
Navigating BNPL wisely
Let’s circle back to Sarah. We worked together to create a strategy for her BNPL usage. The key? Budgeting and tracking. Set a clear budget for BNPL purchases and consider them in your overall spending plan. Use financial apps to keep tabs on what you owe and when. And always, always read the fine print. BNPL can be a friend or foe – the difference lies in how you use it.
Integrating BNPL into your financial ecosystem
BNPL isn’t a one-size-fits-all solution. It should complement, not complicate, your financial health. It’s vital to align BNPL with your financial goals, whether that’s saving for a trip, investing in stocks, or building an emergency fund. Smart BNPL usage can free up cash for these goals, but unchecked, it can derail them.
BNPL is like a trendy new gadget. It’s exciting, useful, but needs to be handled with care. As consumers, it’s our responsibility to use it wisely, and as a money coach, it’s my role to guide you through its intricacies. Let BNPL be a part of your financial toolkit – not the entire toolbox.
Follow Luca Caruana’s weekly column here, and his LinkedIn account or his Instagram for more budgeting hacks. For other money-related columns, check out Luca’s thoughts about the girl math trend and his advice to help change the narrative about women and money.