By Diana Palmieri
With the holidays quickly approaching, this method from days past might not be such a bad idea. With consumer debt skyrocketing, instead of reaching for your credit cards, why not try something different while doing something good for your financial health?
Layaway is not a new idea; in fact, it was introduced to society around the 19th century as a popular way for retailers to sell products to customers who did not have the cash on hand to purchase it outright. With a small downpayment, followed by a series of payments, the customer could get the product over a period of time. Layaway peaked in popularity during the Great Depression, when unemployment rates were high and disposable income was severely low (hmmm … sound familiar?).
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The customer does not receive the item until it is paid in full. There will most likely be a fee, since the seller must “lay” the item “away” in storage until the payments are completed. When all payments have been made, the consumer is entitled to take the product home and enjoy. In the event you cannot continue to make payments and you need to cancel, stores will charge a cancellation fee and return the item to the shelf. What’s even better than that is that when January comes around, perhaps a much lower credit card bill is in store for you. Perhaps this will result in a smaller financial January hangover?
I remember when I was a kid and went shopping with my mother. She constantly put things on layaway. If she did not have enough money for a particular item on layaway, we did not get it. My father was a stickler for budgeting, and there was no negotiation. Unfair? Perhaps. Believe me, I thought so, but my parents did not have any credit card debt.
Very popular stores such as Kmart, Walmart, and Sears have all recently been advertising their layaway plans. There are also jewelers who offer it as well.
Our society has become one of instant gratification. No more saving for it, if you want it, just put it on the charge card. Total revolving debt in the United States as of August 2011 was $790.1 billion dollars (source: FRB Consumer Credit Release 10/2011), and 98 percent of revolving debt is credit cards. Believe it or not, there are some who don’t even know how much their rate is on the credit card they use the most. Do you? I hope some of you have started or will start to use layaway for some of your holiday shopping. This is a great way to keep within a budget, and you will feel much better when those January bills start arriving in your mailbox.
The information contained in this article is not intended to constitute legal, accounting, tax, investment, consulting or other professional advice or services. For specific information that applies to your circumstances you should consult a qualified tax advisor or independent professional advisory.
Diana Palmieri is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.
