What a wonderful invention! You want cable TV? Only $60. How about a brand new car? Only $299! Why would you ever buy used, when you can get brand new for so cheap? And it’s not only limited to a few items, literally everything can be purchased using monthly payments. It’s simple, easy and most of all, affordable.

Wait, go back to the part about monthly payments being affordable.

Sure thing! Typically the amount is very small, compared to your overall income. Hence, it’s affordable. There’s really nothing wrong with the concept. The problem however, lies in the way our minds operate. The human brain naturally filters out the bad, leaving only good. For this reason, we see only what we want to see.

So what’s really going on here? What should I be doing?

When considering a monthly payment, take a few steps back. Look at it from a different view; a long term view. Remember what I said about how our brains filter out the bad? Here is an example of that in action. We only look at the monthly number because it’s a small number, compared to the big picture. It feels better. We don’t like large numbers when they refer to money we owe, so we ignore them.

Should I not buy anything by making monthly payments?

Not necessarily. By only paying a little bit per month, you can keep the bulk of your money in your account. It can then be used to generate even more money through investing. The important thing to remember is this: always convert your payments from monthly to yearly. What I mean is, if your internet bill is $60/month, it really isn’t. It’s $720 per year. Better yet, extend it out to five years. So your internet cost is now $3,600. Quite a big difference. If I handed you $60 cash, you would say “hey thanks”. But if I handed over $3,600 in crisp hundreds, you’d be ecstatic.

So, how many “never ending” monthly payments are you making right now?