Why buy an economy car when you can get a loan for twice as much and ride around in style?Over-buying (read: greed) is a trap into which consumers can easily stumble.
A dollar is not always a dollar in our minds, says Ronald Wilcox, professor of business administration at the University of Virginia and author of the upcoming book, "Whatever Happened to Thrift? Why Americans Don't Save and What to Do about It." Some days a dollar will be more valuable to you than others.
Often when making big purchases, the price seems so overwhelmingly high that smaller add-ons or upgrades start looking like great deals in comparison.
"What you're doing is pairing the smaller purchase with the bigger number and all of a sudden it looks reasonable in comparison when on any other day you would recognize this as a really bad deal," says Wilcox.
"Marketers are aware of that, so they will add on lots of small items -- like warranties for instance -- things that have huge margins that they can make a lot of money on," he says.
Rationalizations could include, "Well I'm already borrowing $10,000, so what's another $3,000?"
"Learn not to buy on impulse and plan every purchase carefully. If you don't have the money now -- save until you do," says Terry Rigg, editor of Budget Stretcher, a Web site and newsletter.