This is my typical Chipotle order (extra protein, add guac). Most online food ordering services have higher base menu prices PLUS all the fees shown comes out to a whopping $41.16 for a burrito.
But don’t worry, DoorDash now let’s you pay for your meal in installments with a service called Klarna. Yes, this is also real. You can pay for your burrito in four easy payments. Charged to your credit card. On which you may also be making payments.
I spent some time today looking into Klarna. It’s got a compelling pitch. If you pay in 4 payments, you don’t pay any additional fees or interest. The total paid is the same you’d pay if you paid up front. Klarna makes their money in other ways (merchant fees, late fees, other payment plans that do charge interest, etc). I assume this 4 payment plan is a “loss leader” to get you in the door and hooked.
It’s tempting, so why not? I’LL TELL YOU WHY NOT. IT’S A GROSS VIOLATION OF RULE #1, LIVE BELOW YOUR MEANS. I mean, are we in bizarro world here?! You can go to the grocery store and easily make a healthy meal for well under $5 and we’re sitting here having a conversation about whether to make four payments on a $41 burrito?
Services like Klarna, and debt in general, put you in this bizarro world mindset. Instead of LIVING BELOW YOUR MEANS, saving up and simply buying things in cash (or with a credit card paid 100% in full every month), you start thinking in this perverse “payments” way of thinking. You set yourself up for failure by continually kicking the can down the road, leaving your future self to deal with the implications of all these delayed payments. And you end up draining ALL the cash from your accounts, leaving none for the second rule, invest early and often! That’s a recipe for staying broke.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
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