Everyday Cheapskate: Your Money Temperament and Why It Matters
Whether you're aware of it or not, you have a money temperament. Everyone does. It's the way you naturally think about money, behave with money or react to money. To loosely assess your money temperament, and to have a little fun with it, consider the following scenario and choose the response that's closest to what you would do.
Your rich uncle learns that you are in desperate need of transportation. In a surprise move, he comes to your rescue with a gift of $15,000 and the instruction to buy a car. What do you do?
A) Make a $15,000 down payment on your dream car.
B) Pay cash for a $15,000 car.
C) Exercise extreme patience, flexibility, consumer savvy and negotiating skills to find a dandy used, late-model, low-mileage, well-maintained car for $7,500 and then stash $7,500 into a savings account.
Putting aside your humble columnist's obvious bias, let's analyze the options.
Twice the Price
If you responded A, you are prone to living your life for twice the price. You don't mind paying interest and taking on monthly payments, because that's the way to get what you want. You're just doing the best you can to maximize your income so you can drive a reliable car.
You depend on consumer credit to bridge the gap between your income and your expenses. It's easy and convenient. Because you pay double-digit interest rates on your revolving debt, you end up paying twice the amount, or more, for the goods and services you charge. You don't think about paying double. You live for today, assuming that tomorrow will take care of itself.