This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Saturday, October 8, 2011

Article: Why Only Thinking About Affordability Makes You Poor

Posted By Paul

I saw this article on a blog that I discovered today.

I really liked the article because I use the term 'affordability' a lot when I talk about money. When people ask me if I think it's okay for them to splurge on something I often ask the question: "Can you afford it?"

This article emphasizes that many people when answering that question are simply asking themselves: "Do I have the money now to cover the payment?"

It talks about how using that definition can lead you into some poor choices.

The article lists a set of other questions you should ask in addition to just basic affordability when making a financial choice:
  1. Is it necessary or is it nice to have?
  2. Is there a more economical version?
  3. Would most people in your situation want to buy it?
  4. Would you still buy it if you had time to think about it? In other words, is it an impulse decision?
  5. How is that going to affect your short and long term goals?
I especially liked item 5....considering the choice in relation to your financial goals.

I think that now when discussing financial choices with people I'll have to ask the question: "Can you afford while meeting your other goals?" as a starting point for discussion.

Check it out:

Why Only Thinking About Affordability Makes You Poor

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