Last month I paid the final installment for our TV. For three years, I was paying about 70 euros every month to enjoy watching movies and series on a big, 65-inch screen. Was it worth it?
First of all, this was far from an impulse purchase. I had my eyes on this LG OLED television before the Black Friday in 2016. At the time, its original price was 4,500 euros, which went down to 3K until Cyber Monday. By the time I visited the stores on that Friday morning, both the biggest electronics retailers in the country had sold all their TV sets.
So, I quit the thought of buying this TV until five months later, in March 2017. Shops offered the TV on discount again, and this time it sold for 2,500 euros, coupled with a 5-year warranty as the replacement model had just been announced. I pulled out my credit card and asked for the maximum installments without interest rate. Eventually, I went into debt for 36 months but went home with a new TV.
Cash vs Debt
What if I wanted to buy that TV with cash instead of accumulating debt? First, I needed to have saved that money over the past years. Saving money to buy a television doesn’t appeal to me. If I did save that money, I would much rather invest it. 2,500 on a 7% annual growth rate brings home 560 euros after three years. So those 2,500 would be worth 3K today.
By buying the TV on credit even if I did have that cash, I can make better use of my money. Given the zero percent interest rate, I incur no penalty, as long as I pay the installments on time every month. Which I always do. My cash flow will decrease by 70 euros per month, which is totally manageable, while I am adding 560 euros to my net worth by investing the same amount. Finally, banks often offer cashback when you use their credit cards, which in my case, run at about 3%, so that’s 75 euros saved compared to buying the TV with cash.
For the same reason, I’m always buying consumer goods with debt. As long as the cash flow permits the purchase and I’m disciplined enough to pay on time, I see no point in paying with cash and money saved. Do you?