If you have the money, does that mean you can spend it? Not necessarily. Then how do you determine if you can afford something or not?
If you do not keep a budget, this is a very difficult question to answer. A budget is just a formalized priority list. If you don’t have a budget, you haven’t really formulated a priority list. That being the case, your priorities can easily shift depending on your mood and the situation. In the heat of the moment, some item might seem like an absolute necessity. And if at that very same time you do have the cash, you’ll likely spend it because there is nothing holding you back.
But if you budget your money, it’s quite a different kettle of fish. If you’ve set aside money for something in your budget, you can afford it. If you haven’t set aside the money, you can’t afford it. Simple. And by setting up a proper budget, you make decisions about spending without your emotions involved. That’s why people with budgets tend to spend less money than people without them.
At home, we use YNAB to set up budgets. Clearly, you don’t have to use the software we use – any tracking procedure will work so long as it’s complete. But once you start setting up budgets beforehand, you’ll never have to ask yourself the question ever again.
What If Your Priorities Shift?
Life happens and things change. There is nothing wrong with re-evaluating your budget from time to time and rearranging your priorities. But it’s very important to do this when you aren’t under pressure. If you suddenly decide that a trip to Paris (for example) is an absolute “must have”, just cool down for a bit. Go home. Look at your budget and see if you can move things around. Just by slowing down your process you’ll likely save a fortune.
How To Get Buy-In From The Family
It’s one thing to be clear on your budget and what you can afford or not. It’s another thing to get your family on board too. And by the way, this is a critical step. Without getting your entire family to agree to a compromised priority list, you invite struggles, hurt feelings and resentments. Who needs it?
First talk with your spouse. Determine your priorities and the cost of those items. Determine how much cash you have available after paying your living expenses and putting money aside for your retirement. Then brainstorm with everyone on the best uses for that money. Work together and compromise. Discuss how spending on one thing influences what you have left to spend in other areas.
This is a great lesson for everyone involved. It’s also a wonderful technique to guarantee more peace and quiet and fewer disagreements. On top of that, you have much higher odds of actually achieving your goals if you put them down in black and white and then budget for them.
This approach is good but it doesn’t always work. Sometimes emergencies come up or unexpected “opportunities” arise. I know that. But if you have a budget and stick to it, at least for the most part, you’ll be far ahead of the game because you’ll know if you can afford something or not. At least this has been my approach.
How do you decide if you can afford something or not?