here to discuss this is Harry Abrahamson Financial
Advisor and Ceo of Abrahamson Financial group.
Thank you so much for joining us.
So can we start by you giving us some overview of how this Buy Now pay
letter model works and what are the pros
and cons for those consumers getting into it?
Well, you know,
you have to be careful with the buy now pay later because you know what you are,
you're able do you really,
are you able to afford what you're paying for right now right?
Um if you can get you know credit that's relatively cheap,
but you have to be careful in the long term,
make sure that you can afford what you're actually
buying and don't necessarily go into debt to,
you know for luxury items or anything that's uh you know, you know,
you know something that's way above what you can afford to pay for,
but you say you have to make sure you can afford it.
Well that's the reason that people are using it because they can't afford it.
So they're like I'm just gonna pay a little bit now a little bit later,
a little bit later and say try to spread it out
so for consumers are thinking this is a good thing,
I'm spreading it out, being responsible,
not trying to put it all on one credit card right now.
Yeah,
I mean they can they can do that but they can also maybe free up some cash flow in
different areas to not just looking at the debt
but maybe um adjusting their four oh one K.
Contribution short term right to make sure that
you can bring in some additional cash flow.
Um
Maybe adjust your your W. four exemptions which can also free up monthly cash flow.
So you want to look at different areas outside of just looking at
the debt or going into debt to pay for things short term.
Okay.
So can you break down maybe how the regulation of
this industry differs from the traditional credit card usage?
Yeah.
Well I mean if you want to you know credit cards are one thing and
if you're using any kind of capital or whether it's a borrowing money from your
401k.
Where you're borrowing money out of there or maybe you're accessing capital from
an insurance policy which probably would be the best thing
in today's day and age believe it or not.
Um You want to be able to look at different areas of where you're
accessing cash or cash flow to help supplement whatever is going on financially.
And some of these cards that some of
these programs or models that actually have cards
to I know some of the big buy now pay later players include zip Affirm uh Clark
so have each of these released their physical cards that linked to
one's bank account all with the option to pay the interest free
installments over time because that makes a big difference if it's interest
free and what are some of the potential risks for the consumers.
Yeah.
Well you have to be careful to make sure primarily that what
you're dealing with is an institution that's backed by the F.
D. I. C.
Um You also want to admit then way up if you're getting any kind of points
or benefits from these cards,
um you just want to make sure that you're also protecting um you know,
your your money, your assets and where they are.
So um these cards that offer different benefits,
you also wanna make sure they're also backed up or that you have enough money
um you know, saved up in case something does happen with one of these institutions.
Well it looks like a big institution is trying to get into the game.
Apple is now offering a buy now pay later service called Apple Pay later.
Now this is the concern that Apple's devices or I should say,
do you have concern that Apple devices,
the dominance that they have now coupled with the
payment model could worsen matters for some people?
Or does this price point for Apple's products protect them from? Uh mass defaults?
If you will.
Well,
I think what you what you all have to really understand
with like Apple or these institutions that are out there,
they're obviously looking at their bottom line.
Right?
So if they're offering something to a consumer,
you have to really take a step back and ask yourself the question is this really
in the best interests of yourself Or is it in the best interest of the institution?
Right?
And you have to properly analyze what you are
doing to make sure it's gonna benefit you.
Not the institution, sometimes a short term fix is easy. Um,
you know, you do it, you think it's the right thing long term,
but you do have to take a step back and say, hey,
is this really what's good for me in terms of the benefits I'm receiving?
Or is it really gonna be benefiting?
Maybe Apple or a company that's a large institution that's out there.
So it's important to really decipher what's
going on from the message that they're sending
out there and the consumers in terms of
what they're doing with their personal finances,
it's critical
right now.
It's almost like that rent to own option that a lot of people started getting into,
the advisors said, maybe not do that,
especially because it could in the end cost a lot more.
So help us out here.
What are some ways that people can better manage their debt and take
advantage of the buy now pay later model at the same time?
Well, you want to you,
so what you want to really do with this situation is you wanna want to,
you want to manage your liquidity
and your debt super important day to day,
um when you're out there and you have debt and you're trying to manage that debt.
You want to make sure that all of your cash flow isn't
going just towards that debt because there may be an emergency,
something might come up.
So you want to make sure that you have liquidity that's there too.
Just because you have debt doesn't mean that you don't need to put
money away and have some liquidity or money in the bank account.
I think the hardest part for most people that's out there right now is that they put
money away into a savings account and they feel I'm not getting a rate of return.
Why am I doing this?
But the truth of the matter is is that you need to have proper liquidity
Built up even if you have debt so you want to manage your debt.
You also want to make sure that you do have proper liquidity and
you don't want to be putting money all into maybe a 401K.
Where you can't touch it. If an emergency pops up you want to be able to have it.
You want to strike a balance.
Yeah, always you know three or six months of liquidity just in case.
So before we go real real quick we gotta ask you, where do you see the buy now Pay later?
Industry maybe in two years.
Good question.
Well I think with interest rates um increasing
and rising right now I think in the next
two years it's gonna really um play out in terms of what people are doing today.
I think it's gonna amplify what what we are doing today.
I think people need to be really cautious of what's happening right
now because I think with rising interest rates in the near future,
which is happening right now
and two years from today, if you take this buy now and pay later approach,
it really might come back and be something that's
going to be detrimental to your overall financial picture.
Very good point. So be careful out there, everybody. Alright.
Harry Abrahamson, Financial Advisor and Ceo of Abrahamson Financial Group.
Thank you so much for joining us.