Many of us spend the last few days before a paycheck pondering how we will be able to make it to the next payday without overdrawing our bank accounts … the sick feeling that you know this entire paycheck is going to pay off all the stuff (that new pair of shoes, ipod and dinner out with friends) you just had to have last week … the thought that once this paycheck comes, you will still be broke. What a crappy feeling! BUT the truth is that most people live like this. Most people see the amount of money that is directly deposited into their coveted bank account and think about all the ways to spend that money or cover the expenses they have already incurred. Whether is $500 or $1500, your mind still spins on what you could buy/how are you ever going to pay your bills …

What if you wanted something really big/expensive/you cannot go another day without? Would you be able to buy it or would your first thought be to put it on a credit card? Credit cards aren’t bad – they are really helpful to cover expenses, assuming that you can pay them off quickly! Let’s decide what we want this really big/expensive/you cannot go another day without item to be? I recently bought a big screen television for my bedroom – you are probably thinking who really needs a big screen television in their bedroom, I know, but our bed is so far from the mantel that we could barely see the screen on our old television. So let’s deem our really big/expensive/you cannot go another day without item to be a big screen television.

I have two suggestions on how to purchase this big screen television:

1. The easiest way to save for our coveted big screen television may be to physically separate your savings from your checking account in order to put money aside for the purchase. If you don’t have a separate savings account right now, then let’s start by opening up another checking account. (Refer to blog post on new bank accounts) Then let’s determine how much you think you could safely live without each paycheck? $10, $20, $50?

Think small to begin with – the idea is not to overwhelm you right now but to come up with some amount that won't affect the budgeted amount that you need to feasibly live on (rent, food, phone, etc.). Simply adjust your direct deposit at work (generally you can fund up to 3 different accounts on payday) to automatically put that set amount into a new bank account, then you are on your way to saving for your new big screen television!  You are able to adjust your direct deposit information at any time and if you should need that money in an emergency, you can easily withdraw the money if you have to. Try not to carry the bank card for this account in your wallet to resist the urge to spend that money - if you don't have it on you; you are less inclined to impulse buy. :)

2. The other way to save for our coveted big screen television is the dreaded credit card – find a store that sells your big screen television but you are able to put it on a credit card that is provided by the store (ie. Best Buy, Sears, etc.) and ONLY if the purchase qualifies for a 0% interest for over a year. If you make your purchase this way, it is in essence the same as opening up a new bank account and funding it every month by paying the balance little by little every month. Let’s back up for a second though and discuss the actual cost that you HAVE to pay each month to pay the television off without paying any additional costs. If the big screen television cost you $600 total and your credit card has 0% interest for one year, your monthly payment has to be at least $50. If you cannot afford to pay the minimum monthly payment to pay it off in time, then I would suggest going with my first suggestion and saving for the money up front before making the purchase!

Let’s take a second to step back and see if either of these methods is feasible in your own eyes to pay for that really big/expensive/you cannot go another day without item? Which method do you think would work best for you and why?