Can We Afford This?

Mar 5, 2019 by

What does it mean to consider whether something is affordable? If we’ve got enough money in our bank account, or enough credit on our card, that means we can afford to buy the item, right? Well, no; I’ve come to realize the question is a bit more complex than that.

Context Matters

Before we had a budget, we struggled to decide whether we could afford to eat out ten times a month or buy a more expensive car or move to the super-premium cable service. Why? No context. We were trying to make choices in a vacuum. Without a budget with our goals built into it, we couldn’t decide whether we could afford to buy a particular service or item or take a Caribbean vacation or move to a pricier neighborhood. No budget means each spending decision is like a coin flip, except modern pressures to consume are such that the coin seems weighted to land “spend.”

A Budget Fills the Vacuum!

The only way that’s worked for us to help us decide what we can afford is making a thoughtful budget with monthly line items for income, living expenses, and cash set-asides for each of our near, medium, and long-term goals (vacations, costly purchases, retirement, etc.). If we’re thinking about adding an expense to our life—say buying a camping trailer—that would throw our budget out of balance and force us to cut back on another expense or goal that’s more important to us, then we recognize that we can’t afford the trailer, period. Or, if we decided the trailer is important, then we’d either give up a less important goal or figure a way to increase our income to pay for it. Otherwise, we accept our reality—we can’t afford a camping trailer right now—and move on, appreciating what we do have and what we will have if we meet our goals.

We’re Not Tyrants About Our Budget

It’s the 28th of the month and we’ve spent our restaurant budget for the month, but we’ve had a long, rough day and we’re exhausted. We don’t torture ourselves about an inexpensive meal out. The point is, with a budget we’re making decisions consciously: With knowledge of how the decision affects us. If we overspend, maybe we can cut back a bit somewhere else, or maybe we can make up for overspending next month, or maybe we don’t worry too much about it and just recognize we may not save quite as much as we’d planned that month. That we’re thinking through the choice, even just for a moment, and understand how we’ll be affected, I think is 80% of the battle.

With a budget, we manage our money with consciousness of how our spending fits in the big picture with all of our goals. Without a budget, we’re wandering aimlessly and have no idea whether we’re spending too much, saving too little, or whether we’ll meet any of our goals. In short, with a budget, we’re in control.

How do you decide whether you can afford something?

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