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A Step-By-Step Guide To Tell If You Can Truly Afford Something

Maybe you’re finding this post because you’re curious about adding a new expense to your budget. Or because you’ve been planning a purchase for a long time, but are getting cold feet. Or maybe you told someone about a thing (or an experience!) you bought, and they looked at you like you had three heads. (Not just two heads, mind you. Two heads is for normal people who would never dare spend money on something like that.)

What that thing or experience is doesn’t really matter right now, because chances are, it’s highly personal. In fact, beyond the absolute basics, I’m a big advocate that most of your spending should be highly personal. But that doesn’t mean that the answer to the question — can I actually afford it? — is different.

Sorry pals, but whether your idea of luxury is a dog, a house cleaner, or an epic vacation, there are still some ground rules that can give you a very clear answer about whether or not you can afford it. And yes, it’s a heckin’ bummer when the answer turns out to be no. But it might also be yes! So let’s get to it.

Are you saving 10% for retirement?

This is a basic non-negotiable before you move on to luxury wants, whatever those luxury wants are for you. If you’re not yet saving 10% of your pre-tax salary for retirement, that’s the financial goal you need to work towards — as slowly as you need to, because it’s not an easy one to hit.

Once you can answer “yes” to this one, you’re on to the next question.

Are you saving an emergency fund, or do you already have one?

Your emergency fund is the first line of defense against all sorts of financial turmoil. The most frequently cited reason to have one is so that you can avoid high-interest debt in case of an emergency (duh), but there are equally important and positive reasons to have one, too. Your emergency fund can also do things like help you be prepared for opportunities, or even just give you peace of mind in the worst case scenario.

If you’re building up an emergency fund, or sitting on one that you consider fully funded, you’re on to the next question.

Do you have high-interest debt?

This is any debt that’s on a credit card — and with interest rates rising, soon it’ll be any debt, period. If you have any debt that’s charging double-digit interest rates, you need to focus on getting rid of that debt ASAP, because honestly, your current “luxury” spending is the amount of interest you’re paying.

Once you can answer no to this question, you’re good to go.

Okay, so you passed — now what?

I know this all sounds like a major bummer, but there’s a good reason I wanted to walk through those questions — and it’s ultimately uplifting, I swear! Those questions can be hard to nail on a low salary, and I want to be super clear that I’m not expecting everyone to be able to answer them in a way that opens the door to this next part of the post. If you’re not there yet, those are amazing goals that will help you take so much care of yourself now, a little bit in the future, and a lot a bit in the future.

Also: your tiny little pick-me-up at Sephora or Starbucks or the $20 you spend on happy hour every few weeks to see your friends is not luxury spending. Please see the fun budget for a full breakdown, but even if you’re not hitting all of these goals right away, you are still allowed fun. These rules apply to like, the $5,000 vacation and the housecleaner. Not your latte.

Never your latte.

But if you are hitting all of these goals, and you do want to move on to figuring out if you can afford That Fancy Thing? Let’s rap.

You can afford to do that one luxury thing you want to do.

Sure, you can’t do all of them, but That One Thing? The one you were thinking about that led you to find this post and read it? The one you’re worried seems like a little too much? You can afford it.

As long as you’re buying it in cash (aka not putting it on your credit card unless you pay that sucker off in full right after) and it doesn’t compromise your ability to handle your regular bills and your other commitments, go for gold. I wrote this for you as much as I did for me, because I’m no stranger to adding a few luxuries into my budget, and it’s easy to feel hella guilty about it from time to time — especially when you tell someone, and they look back at you with abject horror that you would dare to spend money on that thing.

Yup, that has happened to me in real life, so I assume it’s happened to at least one other person, once upon a time. If it does, or if the abject horror is just a tiny voice inside your head, this is what you need to remember.

If you’re…

  • Saving 10% (or more) of your income for retirement
  • Saving up (or in possession of) an emergency fund
  • Not taking on or carrying high-interest debt

…and you want to prioritize spending on something? You don’t need to feel guilty about it. You can afford it.

But obviously, you can’t afford everything

When this conversation happened to me, my initial, instinctive reaction was to list out all of the things I don’t spend money on, because to be honest, I felt like I had to justify myself. (Remember: looks of abject horror.) So let’s take a look.

Sure, I spend money on having a dog and getting our house cleaned. (I’m a monster, I know.) But here’s a short list of things I don’t do: Eat at fancy restaurants. Travel internationally. Buy fancy clothes. Get my hair cut by anyone other than me and my drugstore scissors (yeah, I cut my own hair). So when you’re thinking about the luxuries you do want to include in your budget, the other thing to consider is which ones you’re going to skip. Because an all-luxury, all-the-time budget is probably a recipe for disaster, unless you make way too much money to be reading this blog in the first place, you know?

But once you’ve decided on the ones that matter to you, and you’re in a place to be able to handle the basics and your luxury purchase?

You go, Glenn Coco.

Desirae blogs about money at Half Banked, and spends altogether too much time on Twitter. She takes “money nerd,” “no chill” and “crazy dog lady” as compliments. 

Image via Unsplash