5 Better Questions for Making Smart Purchases than "Can I Afford It?"

When I was growing up, the question asked about many purchases was "Can we afford this?"  That's really the only criterion I remember being considered.  And if there was enough money in the piggy bank or checking account, or enough room on the credit card, the answer was "yes."

And so the purchase was made.

How we justify our whims

Now, I'm not suggesting that this question should never be asked.  Of course it's important to use funds wisely and stay within a budget.  But this question only came up when the purchase being contemplated was something extra.  We didn't ask it about groceries, gas, or laundry detergent.

No, those aren't the kinds of purchases we need to justify, and so they aren't the purchases we question.  "Can we afford it?" is a question for that thing we just saw and decided we want.  It's the question we ask about a piece of clothing we don't absolutely need, or a tchotchke for the house, or a leisure activity.

And while it's a good idea to determine if you have the funds for this impulsive purchase, that's not the most important question to ask.

It might not matter if we can "afford" those cute shoes, that extra knickknack, that new device, or even that bigger car with more features if we have no reason for buying other than desire.

I've thought this way myself, and maybe you have too.  "I can afford that pretty new dinnerware or that holiday trip, so of course I should treat myself.  I work hard, and I deserve it.  It's my money, and I can afford it."

Here's the problem.

"Can I afford it?" is an inadequate filter if it's the only filter we use to make decisions about how to spend our money.  It's not wrong, but it's incomplete.

Unfortunately, it's the only thing many of us consider.  "If the money's in the bank – or I'm not maxed out on credit – I can buy whatever I want.  Why shouldn't I?  I can afford it."

Obviously, if we really can't afford something, we shouldn't buy it.  That's a no-brainer.  But there are several reasons why this isn't the smartest way to decide.

1.  Financial situations change.

In 2007, my husband Jon and I bought a house we could barely afford, figuring that his salary would soon go up and my new part-time job would make the difference.  You probably remember the huge economic downturn that affected people all over the world!  No salary increase for Jon, but a pay cut instead.  My job was phased out and I couldn't find a new one.  We needed a more reliable car for our college-age children still living at home.  A couple of years later, we paid for our daughter's wedding.

We eventually sold our house at a loss.  (It was a relief.)

Over the ensuing years, I hope we've all learned that financial situations can change overnight.  If we're maxing out what we can afford, we may wind up in trouble.

2.  Financial advice is inconsistent.

• Never buy a house without at least a 10% down payment.
• Buy a house as soon as you can and don't worry about the down payment.
• Don't spend more than 28% of your income on housing.
• With today's housing costs, the 28% rule is outdated.

Those contradictory and subjective pieces of advice are all available – you can simply pick your favorite.  Advice about buying a car or saving for the future is just as varied.  How do you know what you can really afford?  Even your personal opinion may vary over time.

3.  We rarely count the full cost.

The amount on a price tag is never the full cost of a purchase.  Whatever we own has to be cleaned, organized, insured, and maintained.  Some items can require a lot of our time, energy, and even worry as we care for them.

Then there's the Diderot Effect.  Have you heard of this idea from the 18th century French philosopher Denis Diderot?

Acquiring a new possession leads to a spiral of consumption that results in our buying even more.

Don't believe it?

• We buy a new outfit and immediately start to look for new shoes or accessories to go with it.
• We buy a new sofa and decide that our old end tables look shabby and need to be replaced.
• We refinish the backyard deck and decide that we need new patio furniture and a fire pit too.

"Can I afford it?" rarely accounts for the full cost of owning something over its lifetime.

4.  We forget that every financial decision impacts all the rest.

This is something I need to remember more often than I do:  If I spend $10 on X, I don't have $10 for Y.  I especially need to remember this when I pass a Starbucks, but it's also true for larger purchases.  If I buy that house I can barely afford, I may have to delete all the kids' lessons, a replacement for my 10-year-old vehicle, and family vacations.  If I insist that my child attend the prestigious private university instead of the state university, I may have to delay my retirement while I help pay off large student loans (as my brother-in-law is doing).

Once I spend my money one way, it will be too late to realize that there are other ways I could have spent it that might have brought longer-lasting happiness, security, opportunity, or fulfillment.

Related article: Why Every Financial Decision Matters

So what should we ask?

Here are five questions that will bring more wisdom and insight when asked in addition to "Can I afford this?"

1.  What's my motivation?

Do I want to buy this thing because "everyone else" has it, or because I'm trying to impress someone?  Am I bored or titillated, and just feel like indulging in something new?  Or do I need this item and can I justify its purchase with several good reasons?

2.  What are my goals?

What am I aiming for in life; what are my dreams; what do I hope to achieve?  Does this purchase move me closer to those goals or take me further away from them?  

3.  What do trusted friends think about it?

Don't expect yourself to have all the answers, especially when it comes to a major purchase.  Is there a family member, friend, or mentor you trust and who seems to have some wisdom about finances?  Asking for help isn't a sign of weakness; it's a sign of strength.  It shows you have the courage to admit you don't know something, and the intelligence to learn something new.

4.  Is there something else I should or would like to spend my money on?

Is the luxury car really worth it, or would a more moderate car meet my needs and leave money for getting out of debt, investing, taking those classes I'm interested in, or maybe helping my son replace his old, unreliable vehicle?

5.  What happens if I just say no?

This question comes from minimalist author Joshua Becker.  He points out that we're usually focused on the benefits we believe we'll gain from a purchase.  But maybe there are benefits to refusing to buy, and we should honestly evaluate those as well.  Maybe you'll be doing yourself a favor by NOT buying.

Not only does this question help us discern between needs and wants, it also helps activate our creativity.  We can think about what we'll use instead of this new thing, and consider how to get the most out of what we already own.

Related article: How Limits Help You Become More Creative

To your (financial) health

None of this is meant to discourage you from ever spending money again.  But financial health can only be achieved with intelligent spending choices, and "Can we afford this?" is just one aspect of those decisions.  We can do better.

COMING IN FEBRUARY!  My newest book, Goodbye Clutter: Say Hello to the Freedom of Minimalism, is in the works now, and the e-book is available for pre-order at a special price.*

Decluttering is a form of self-care.  When our homes are cluttered, we feel stressed and guilty about all the chores that demand our attention.  We feel irritated when we're unable to find what we need amid the chaos.  It's hard to focus or relax when we have piles of things with nowhere to belong.

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