“If you can’t pay for it in cash, you can’t afford it.” “If you can’t buy it twice, you can’t afford it.” You’ve probably heard one of those aphorisms. The point is that even if you’re paying with a credit card (for the convenience or the cash back or travel rewards), if you can’t cover the cost of something with available cash, you can’t afford it and shouldn’t buy it.
While that is generally true, it’s not always practical advice when you, or someone you love, really needs something that neither your paycheck nor savings can cover. It’s also not realistic, since most Americans spend money on things they don’t need.
But you didn’t click on this article for a debate on whether Americans spend too much.
Nope. You want to know HOW to pay for something you can’t afford to pay for in cash now.
I’ll cover five options: old-fashioned layaway; newfangled point-of-sale financing; credit cards; saving for what you want to buy; and selling stuff you already own, but don’t want as much as what you plan to buy.
1. Old-fashioned Layaway
Growing up, I only heard about layaway during the holiday season when major department stores advertised their Christmas layaway programs. Now, the fintech community has transformed this option, as I’ll discuss next.
But first, it turns out the traditional Christmas layaway is alive and well at Walmart, the world’s largest retailer by sales. And now is the time to get started. Layaway works like this at Walmart: You go to a store, collect your intended gifts, go to a special Layaway counter, put down a deposit of at least $20 or 20% (whichever is more), and make additional payments whenever you’re in the store.
Walmart requires all items be paid off and picked up by December 10, 15 days before Christmas. There’s no interest charged. If you decide you don’t want a purchase after all, you can get a refund, usually minus a cancelation fee. That fee can be steep: 20% of the purchase price or $20, whichever is greater. (But Maryland, Ohio, Rhode Island and Washington, D.C., don’t allow a cancellation fee, while Alabama caps it at $25 and North Carolina at $50.)
If you’re shopping for a major appliance, Sears offers a layaway program year-round online and in its stores. The plan includes a $10 or $20 service fee and a set payment term of 8 to 12 weeks. If you want to cancel a Sears layaway contract, you have to go to the store to do it.
2. Newfangled Point-of-Sale Financing
The basic principle of old-fashioned layaway is that you don’t get the item until you have finished paying for it. If your refrigerator or washing machine is broken beyond repair, you don’t want to wait 8 or 12 weeks for a new one.
With newfangled point-of-sale financing (it’s primarily available online, but sometimes in stores, too), you get the item now and pay over time. Essentially, you’re taking out an instant personal short-term loan that is tied to the purchase of a specific item or service.
QuadPay, Klarna and Sezzle allow you to pay for an item in four interest-free payments. Forbes Fintech 50 member Affirm offers interest-free financing from a small number of retailers that subsidize financing (among them Peloton, Warby Parker and Casper), but generally charges interest rates ranging from 10% to 30% (based on your credit score) for other purchases. Affirm’s longest loan term is 48 months.
Often, these fintech financing offers only become apparent when you go to check out a purchase online. But you can also plan ahead. For example, Affirm offers a list of merchants who offer its service in each category. Plus, it allows you to find out in advance how large a purchase it will finance for you. Affirm gives you this number, it says, without making a “hard inquiry” on your credit record, meaning it won’t affect your credit score, the way applying for a new credit card likely would.
When you buy something financed by Affirm, however, both your loan and your payments are reported to the credit bureaus, meaning timely payments can help your credit score and late payments will hurt it.
Separately, while Amazon’s credit cards may be better known, the behemoth of online selling also offers its own point-of-sale installment payment plans on certain (usually higher-dollar) purchases.
Read more: Fintech’s Version of Layaway Explodes Online
3. Credit Cards
Like point-of-sale apps, credit cards allow you to get an item upfront while you pay the costs over time. “When you swipe a credit card, you are taking out a loan,” warns Tiffany “The Budgetnista” Aliche, a budgeting expert and financial wellness advocate. But unlike point-of-sale financing, it’s not a one-time loan with a set payoff date. The lure and danger of credit cards is that they provide so-called “revolving” lines of credit that you can use as long as you keep the account open and in good standing.
The credit card company doesn’t care what you’re buying with the credit line. (By contrast, companies like Affirm use algorithms that actually take the item you’re purchasing into account when deciding whether to green-light a loan.)
Before reviewing ways to use your credit card, here’s a bit of basic, yet very important, information on credit cards. Most credit cards are unsecured, meaning that if you don’t pay the lender back for the purchases you made, then they can’t take possession of those things. Lenders will likely send you notices requesting payment. If that doesn’t work, they will send your account to collections and report your delinquent account to the credit bureaus, hurting your credit score and ability to do things like get a mortgage or rent an apartment.
Some banks and credit card issuers offer secured credit cards, which are credit cards that require a deposit in order to use them. These are great for building credit and improving your credit. But they do not work if you do not have enough cash to cover the deposit amount.
So back to unsecured credit cards. Your credit line comes at a price known as the annual percentage rate (also called the purchase rate) and it’s based on your credit history. Individuals with good or excellent credit can borrow at lower APRs than individuals with bad credit.
Read more: The Forbes Guide To Credit Cards
But sometimes–often when you take out a new credit card and sometimes when you receive a special offer from an existing one–there’s a promotional period that allows you to buy something and take months to repay, without owing any interest.
If you’re in a rush to buy that new washing machine, you might be able to buy it with a credit card you already have and then apply for a new card with an attractive balance transfer offer. Typically, there may be a fee for this transfer. But not always.
For example, the Chase Slate credit card is currently offering new customers a 15-month 0% interest rate for new purchases and balance transfers. Plus, there’s no fee for balance transfers during the first 60 days after you open the card. Be careful: If you don’t pay off your balance within those 15 months, you’ll be stuck paying an interest rate of between 16.99% and 25.74%.
Credit cards are an option for buying something you can’t afford to pay for with cash—but an option that should be approached with extreme care. It’s easy to let a credit card balance sneak up on you (just ask this Millennial who accumulated more than $30,000 in credit card debt) particularly if you carry the card around and begin to use if for everyday expenses, as opposed to the one-time purchase of an expensive item (e.g. the washing machine) you need now.
Read more: The Best Way To Pay Off A Credit Card Debt
4. Save Your Coins
In the wise words of rapper Wiz Khalifa, “Surround yourself with people who help you save money, not spend it.” It’s not clear in what ways Khalifa and his friends save a few hundred dollars, but there are plenty of ways you can save money toward a goal.
The most basic and traditional way is to open a savings account. You can even incorporate your friends in this process: ask them if they’d like to refer you to their bank for any referral bonuses for the both of you. For example, if a TD Bank customer refers a friend who opens an account, each gets a $50 bonus.
Of course a $50 bonus shouldn’t lead you to open a savings account with a noncompetitive rate. With the growth of high-yield online savings accounts, it’s easier than ever to find an account with a good interest rate.
You’ve found a high rate. Now, get a plan to save for that big purchase you can’t finance from current cash flow. Let’s say you have a friend’s out-of-town wedding next year. Calculate the costs of travel, the outfit you’ll need, the wedding gift and anything else that factors into it. Then divide the total expense by the number of months or weeks you have until the date you need to be ready to purchase those things.
Once you’ve figured out how much to set aside into that savings account every month or every week, consider setting up automatic transfers from a checking account to a savings account so you don’t have to think about it. (And if your bank doesn’t offer that kind of service, consider finding a new one.)
More reading: Three Good Reasons To Switch Banks And How To Do It
Another behavioral suggestion to reinforce your savings comes from Aliche, who observes that “inconvenient money gets saved.” She suggests making your savings account difficult to withdraw money from. In other words, it’s harder to save money when it’s easy to transfer money back into your checking account for happy hour or an impromptu shopping spree.
“I had to make my money inconvenient so I opened up an online-only bank account. I just put my savings there–not checking, no debit card, just savings. It is impossible for impulse buys,” Aliche says. Banks usually take a day or more to transfer your money to other banks. Within that 24- to 36-hour period the impulse to buy something might pass.
Another behavioral trick to boost your savings: roundup options. A roundup is a feature wherein you accumulate more savings by automatically transferring over loose change to your savings account. Some banks like Bank of America have this feature. If your bank doesn’t have this, then consider a roundup app like Acorns, Qapital, Digit or Chime. These apps work with third parties, meaning a partner bank that you provide personal identifying information to. (They do this so they can offer FDIC insurance on your savings, since they’re not banks themselves.)
5. Sell Stuff
Way back when, if you needed to raise cash from your stuff, you had to go to the pawnshop or stage a garage sale. Both might be seen as signs of financial distress. Now, however, there are more ways than ever to sell surplus items online and living with fewer material things can be seen as a savvy lifestyle choice.
More reading: The Joys Of the Minimalist Life In Retirement
Since the heyday of eBay, there’s been a surge of platforms for neighbors and strangers to sell stuff to one another. Some platforms allow you to sell for a set price, while others allow users to bid on your items. Sites like LetGo, Craigslist, Ruby Lane and Facebook Marketplace allow you to unload unwanted furniture and decorative knickknacks. When it comes to your wardrobe, top options include PoshMark, thredUP, The Real Real, Kidizen and Tradesy.
Once you’ve gathered intel on your salable items, decide how you’ll sell them. Would you prefer to sell them yourself on sites like Poshmark and Craigslist or sell through an online consignment shop like The Real Real?
Before snapping Instagram-worthy pics of your things, there are a few things you should do to prepare. First, edit what you’re going to sell. Things in good condition and better do well on these platforms. Anything less than good condition should be recycled or trashed.
Second, research the price range of your item. The item likely will not go for what it originally cost, especially after you’ve used it—unless it’s a limited edition collectible.
Aliche’s sister picked up a Hermès scarf for $2 at a thrift store. (The old-fashioned kind.) While she had been shopping for a scarf to tie around her head at night, she decided to take this scarf to an Hermès in Short Hills, New Jersey, and get it authenticated. It turned out to be a limited-edition design worth upwards of $1,000. She sold it on Poshmark.