Lay-a-Way or Laying off
The idea of layaway is great and can offer a way for individuals to make purchases that they might otherwise be unable to make without it. I have used layaway many times in my life for a variety of items from Christmas gifts and clothing to my favorite pair of Waterford Crystal pineapple lamps.
Layaway is a great method to fight off immediate gratification and can offer great satisfaction in knowing that your items are paid in full and that you will not be carrying credit card debt potentially far into the future. As a financial advisor I would much rather see purchases paid in full versus instant gratification but before you jump back on the layaway bandwagon there are some things that you may want to consider first.
Every store has a different policy for their layaway program. Before you plunk down your items on the layaway counter be sure to get all of the facts and ask yourself a few questions;
1 Do I really understand all of the fine print?
2 How much is the layaway fee?
3 How much is the down payment required?
4 How long will I have before I must pay off the item? Some stores only offer thirty days some offer three to six months depending on the value of the items on layaway.
5 Will I have the money by then? If I cannot afford it today, can I really afford it in 4 short weeks?
6 How much will I lose if I do not pay on time or if I have to cancel? Will I get to keep my deposit?
7 Will I still want the item by the time it is paid off? If not, what is the return policy if I decide to cancel? Some items may not be accepted at full price by some stores (i.e. swimsuits out of season). Generally stores that have longer time periods will have stricter return policies and deposit terms as they may no longer be able to resell the items if they are left with them.
8 Is it worth it? Is the item so scarce or so highly discounted that you cannot live without it until you save up the money to be worth the fee?
Recently I looked into the layaway process of one of my favorite stores. I found they were charging $5.00 for the layaway fee and they only allowed four weeks to pay off the layaway. They required that you pay money each week and have the balance paid at the end of thirty days. Clearly that did not work for me.
First of all there was the simple matter of math – say you had around $100 in goodies that you could not live without so you raced up to the layaway counter and said sign me up; no matter how spectacular the deals were that you found – you just added 5% to your total bill because of the layaway fee! Perhaps that is not such a great deal any more.
Second, I personally –like many people - do not have time to rush down and jump in line to pay a fee every week.
Finally, I wondered if I would still want those items after the initial euphoria of the purchase had worn off and was I really willing to give up my $5.00 fee and initial deposit if I either changed my mind or if the more likely scenario occurred where I forgot about the items or did not have time to race down there and pay them off. Most likely I would move on as there will always be more victorious shopping to be done another time. For me, the pros and cons did not add up this time. Another store on another day might make sense.
In my opinion the best plans have longer time periods and low fees. Paying $5 or more for a short time period seems a little too steep to me and definitely not worth it. Before you make your next purchase ask yourself all of the questions above and decide if using layaway is worth it or if laying off the shopping might be better. It’s just possible that you would feel better if you set that money aside and saved up enough for the next time you ran into something that you could not live without.