• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Ask Neal a Question
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

How To Know If You Can Afford Something Or Not

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

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?

Tweet
Pin
Share4

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Comments

  1. Chris Garrett says

    July 24, 2009 at 11:41 AM

    I am trying to teach my daughter the reality of money without putting the scarcity ideas in her head that my wife and I grew up with … it is tricky.

    Reply
  2. Neal says

    July 23, 2009 at 1:30 PM

    Sounds like we have two peas in a pod!

    Reply
  3. McLaughlin says

    July 23, 2009 at 8:30 AM

    maybe your daughter should shop with my step-daughter. I her to the mall today to buy a few things to wear on vacation and she only looked at things that were on sale. We landed on something she really liked that was not too expensive, but she refused to look because it was not on sale.

    I was happy about that, her mom taught her well.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2021 All Rights Reserved