Scenario: Pay now or pay later?

Given Ryan’s situation, which decision do you think is best for him?

Ryan’s been working to save money for school next fall. While he’s at work, his motorcycle gets clipped by a pickup and crashes over. Result: a bent foot peg, a broken lever, a smashed signal, and scratched paint. It can all be fixed, but it isn’t in his budget, unless he pays some bills late. He needs his motorcycle to get to work and school. Given his circumstances and these three choices, how would you advise him to pay?

Use his debit card and pay his other bills late. He needs to get to work and not take on debt.

The consequences of your choice

See the consequences of this choice for Ryan and hear what your guide has to say.

“This advice just didn’t work out. I got my bike fixed, but ran myself short on cash. Because I paid a few bills late, I had to pay late fees and hurt my credit rating, too. I’m still scrambling to catch up, money-wise. I think I should have used my credit card and paid it back over time instead. That would have meant paying some interest, but the overall cost would have been less than I paid this way.”

Sorry, this advice hurt Ryan more than it helped. He lost cash on late fees. Having a lower credit score could penalize him in many other ways, too. He needed to take his whole spending plan into consideration. Paying by credit card could have helped him pay back this unexpected expense over time.

Use his credit card so he can get it fixed fast, keep working, and earn the money to pay it back.

The consequences of your choice

See the consequences of this choice for Ryan and hear what your guide has to say.

“I’m really careful about borrowing money, but I think this was a good time to do it. I figured out in advance how quickly I could pay off my credit card balance so that I could still pay my other bills on time and minimize the interest I paid. I also didn’t have to dip into my savings that I’ve been working so hard to build up. Plus I got my bike back right away and didn’t miss work.”

Good advice! This was an emergency situation for Ryan because his loss of transportation meant he wouldn’t be able to get to work and earn money. He was smart to get his motorcycle fixed right away then pay off the charge as soon as possible.

Use the money he’s saved so far. Savings are for unexpected emergencies like this.

The consequences of your choice

See the consequences of this choice for Ryan and hear what your guide has to say.

“This didn’t work out like I hoped. I thought it would be better to avoid borrowing money. I got my bike fixed, but then I had real emergency: I hurt my arm and couldn’t work for four weeks. I didn’t have time to build my savings back up before school started, so I started using my credit card for stuff like concerts. I think it would have been better to use my card just for the bike and pay it off as quickly as I could.”

This advice could have worked out if he'd had enough savings to cover both the repairs and the month off work. Ryan could have considered using some combination of cash, credit, and savings. But his biggest mistake came later: using his credit card for things he really couldn't afford.

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Consider your options when it's time to pay. You might want to use cash, credit, or savings – or some combination of these. How will your choice affect your overall spending plan?

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