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Why You Should Have a Buy Now, Pay Later Budget

Last updated Apr 10, 2024

The number of buy now, pay later (BNPL) options has multiplied over the past few years. In fact, there are dozens of BNPL platforms you can use to finance everything from jeans to airfare without paying for the entire purchase upfront. 

While this type of payment plan can be helpful, it can also bring some challenges. Luckily, a lot of those challenges can be avoided with a simple solution: creating a budget for your BNPL purchases. Let’s explore the risks associated with not having a set BNPL budget. Then, we’ll provide a step-by-step guide to help you create your own.

person writing down a budget with computer in background and a coffee in hand

How does buy now, pay later work?

Buy now, pay later is a type of short-term financing where you can make purchases and pay for them over time, typically in interest-free installments. BNPL companies will typically partner with retailers and online merchants to provide an alternative payment option to their customers. Some BNPL companies also have their own buy now pay later apps that you can make purchases through. If you’re approved for a BNPL plan, you’ll typically be required to make a small initial payment before paying off the remaining amount in a series of interest-free installments over several weeks or months. 

Risks of Using BNPL that Budgeting Can Address

While buy now, pay later platforms can give you a purchasing option that works better for your financial situation, they can also lead to financial difficulties if not used responsibly. 

One of the biggest risks of BNPL is overspending. Buy now, pay later can be ideal if you’re not able to pay for an entire purchase at once or just want to spread out the payments. Unfortunately, it can also be easy to forget about those installment payments or not have the money to pay them off when the time comes (if you don’t budget for them). Without a summary of all your BNPL purchases, it can be easy to lose track of your payments. BNPL paybacks can start overlapping if you’re not keeping track of them all, causing you to be surprised when the payment is due. 

Another risk to be aware of is the repayment terms and conditions you’re agreeing to. Be sure to understand each company’s requirements before committing to installment payments with them. Some companies will give you 3-6 months to pay off your purchase, while others may only give you a few weeks. Know what you’re getting yourself into before choosing to “buy now, pay later.”

Why should you have a buy now, pay later budget?

Budgeting can help you stay on track with monthly expenses and can improve your overall financial health. In the same way, a BNPL budget can help you stay within your means and only spend what you can afford. Here’s what else it can help with:

  • Better tracking of all your BNPL purchases. Buying from a variety of merchants that may use different BNPL platforms can make it difficult to keep track of all your required payments because you probably won’t have a summary of all your payments in one place. Setting a budget ahead of time will help you organize your purchases and can make it easier to keep track of all of your BNPL purchases.
  • Reducing impulse spending and unnecessary debt. You may be less likely to spend on a whim if you have a defined budget for BNPL purchases, which can help you avoid accumulating unnecessary debt. 
  • Avoiding late fees. Late fees can pile up and add a deceivingly large amount of money to your payments, not to mention late or missed payments can impact your credit score significantly. If you stay within your set budget, you should have enough money for each BNPL installment payment and can avoid late fees. 
  • Protecting your credit score. BNPL is a payment option, but it’s also a form of credit. Some BNPL companies report your payments to the three major credit bureaus, which is why late or missed payments could end up on your credit report and can impact your credit score. Setting a budget can help you protect your score from these types of negative credit events.
  • Getting in the habit of making on-time payments. A BNPL budget can get you in the good habit of making on-time payments (one of the biggest factors impacting your credit score).
  • Ensuring your emergency funds don’t get used for BNPL payments. Ideally, an emergency fund is something you only tap into if an emergency occurs. Setting aside a BNPL budget helps you avoid dipping into your emergency funds for BNPL payments so you can save them for an emergency.

5 Steps to Create a Buy Now, Pay Later Budget

Before you create your BNPL budget, take a moment to assess your current BNPL commitments and payments. Make sure to factor these into your budget so they are accounted for and don’t get lost in the shuffle. Then, follow these steps to create a BNPL budget:

  1. Determine your disposable income. Evaluate your monthly income and expenses. Write down your take-home for the month (your paycheck with taxes taken out). Then, tally up your monthly obligations, including rent/mortgage, car payments, loan installments, and any existing BNPL payments. Don’t forget things like utilities, food, and gas, too! (Tip: If these things fluctuate each month, average out a few prior months to give yourself an idea of what you might pay per month.) Subtract all of these expenses from your monthly income and you’ll get your disposable income—the money you have left over each month after any required expenses. 
  2. Allocate a specific amount of your disposable income to current and future BNPL purchases. Remember that your disposable income is also what you’ll spend on things like dining out, vacation, and other incidentals, so make sure you have enough to pay for any of these things that arise in a given month.
  3. Set your spending limits. Budgeting only truly works if you stay under the spending limits you set for yourself. Set your limits for BNPL spending and prioritize essential purchases over “nice-to-haves.”
  4. Use budgeting tools. If you need an extra push to stay on track, consider using a budgeting app to track your BNPL spending.
  5. Reassess your budget regularly. Expenses fluctuate, and what works for you one month may not work next month. Get in the habit of regularly reviewing both your BNPL budget and disposable income to make adjustments to accommodate unexpected expenses, income fluctuations, and more.


At the end of the day, purchases you make through a BNPL company are still purchases. Think of them as such and create a budget for them just like you would for any other type of purchase. Remember to factor in your existing BNPL payments when creating a budget and stay within your limits to keep your financial wellness on track.

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