Client: Brandon Young
Occupation: Fitness trainer Salary: $26,000
Age: 24
Brandon Young has been working at a gym as a fitness trainer since receiving his certifica- tion the year after he graduated high school. His monthly bills include rent, utilities, car payment, and auto insurance. He currently has no savings. After paying his bills, he tends to spend the remaining $350 per month on eating out or going out with friends and on purchases such as clothing, electronics, and entertainment.
Mr. Young already has a 32-inch television. However, he wants to purchase a 50-inch flat- screen high-definition television in time for a big Super Bowl party he is hosting in three weeks. A nearby electronics store has the model he wants on sale for $2,000. However, Mr. Young does not have $2,000 in his bank account.
Mr. Young is considering four options for paying for this purchase.
Option A: Use in-store financing. Apply for financing offered through the store. There will be no interest if there are no late payments and the balance is paid within the first year. If the balance is not paid off by the end of the year, or if any payments are late, there will be a retroactive 18% interest charge on the full purchase amount.
Option B: Use an existing credit card. Use a credit card he already has, which has an interest rate of 20%. He could then make small monthly payments until the balance is paid off. This option won’t require him to make many changes to his lifestyle.
Option C: Save. Wait until he has saved $2,000 and then purchase the television. He esti- mates it would take about a year, and some significant changes in his spending habits, to save the money.
Option D: Use a combination of the options above. For example, he might use some of this month’s cash and finance the remainder of the purchase through the store or with a credit card.
Which option would you recommend for this client? Why?
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