All about the challenges of Midlife Finance

Can You Afford It?

 “We need a new television,” Husband announced this morning. I knew this speech was coming — we’d practically crouched over the screen to see the latest Broncos game. Our current modestly-sized TV is the subject of much teasing from friends with larger sets. But I remember the tiny b&w model we had for years, back in college. This television seems huge in comparison.

     So why the change now? Because we’ve been watching Broncos football on a laptop screen, not the television. (No cable for more than a year — one of the small ways we cut back to save for more important things.) And our current set not only isn’t HD, but it won’t connect to the laptop.

     Husband’s done his research–an important step.  He found a 40-inch model with a reputation for quality and few repairs. (Thank you, Consumer Reports.)  The price isn’t even that bad.

Now, the million-dollar question: Can we afford it? 

Actually, we can, thanks to going without cable and squirreling away money regularly for the past two years for just such a purchase. But this question is one that anyone should be asking, not only for big-ticket purchases, but for vacations and other trips, or any item (like a gym membership, or the monthly rates on an iPhone) that’s going to make a sustained hit on your expenses. Even a monthly payment adds up to a big annual expense.

It’s easier to decide on your answer, once you consider the following.

First, do the math. How much is this really going to cost?  Buying a car, new or old, also means a title and license — and the ensuing sales tax. Not to mention insurance, or nasty little surprises like tuneups and tires. Don’t forget credit card interest or upgrades, either. (Buy a new computer, and you’ll invariably have upgrade software, as well. Fancy phones mean higher monthly fees.) The purchase price is only the beginning of your calculations.

Next, check your current spending — and what’s in savings. Do you have enough left over each month to cover the extra needed? Or is there enough put aside in savings to cover the full price now?

Third, is there an easier way to cover whatever money you can’t pay outright? Technology stores are eager to get you started on monthly payments — 6 or 12 months at no interest, provided you make the monthly payments on time. Some credit cards have similar plans. Miss a payment, or make one late, and you’re in a world of hurt.  Keep to the schedule, though, and you’ll have little or no interest to pay. Good for last-minute purchases, especially with items that suddenly break down. (Washers, cars, crabby partners who need a break, etc.)

     One of the simplest ways to use this approach is via ‘Bill Me Later,’ a division of Paypal that lets you pay 1000-plus stores, including Walmart and Ebay, in payments up to six months without additional fees or interest. (We plan to use it for the television, by the way.) If you’ve got an active Paypal account, you’ve got access to this plan, too.

Fourth, get the best quality at the best price. Take advantage of a sale. Ask for a discount. Haggle. Get something else included. Whatever you can finagle means less money paid in the long run.

Finally, will it help pay for itself? A vehicle with better mileage than your old clunker will immediately start using less gas. Well-constructed windows not only cut back on drafts, but keep the meter spinning much slower. (After replacing nearly all the windows in our house, we discovered a 13-20% drop in heating costs last winter.)  Less paid means more’s left in your pocket.

     The savings can be indirect, as well. Can you bring back a bagful of oranges from the Florida condo, or ten pounds of pecans from your Georgia jaunt? Buying at the source is much cheaper than the supermarket. Be sure to check – some states, like California, frown on fruit passing over state lines. International guidelines are even more stringent. (Although I once lugged home, from a Caribbean cruise, a 5-pound wheel of imported Gouda bought in St. Maarten, a Dutch colony. The cheese, bought for a fraction of its Stateside price, lasted for months in the freezer and was delicious.)

Eventually you’ll come to one of the following conclusions:

YES. We’re just fine.  By all means, go for it! But bear in mind — if you can find it for less, that’s more that goes back into savings for the next “Can we afford it?” decision.

NOPE. No way.  That answer may be just for now. Keep saving, and that ‘no’ could very well turn to a ‘yes’ in no time.

     Or something surprising could happen. Eventually, you realize you didn’t want that new sound system nearly as much as you thought! Some advice experts advocate waiting for at least a week or two before making large purchases, for just this reason. Check your motivations — are you still just as interested, or has the fever died down?

YES — If.  Can you sell something, work extra hours or pick up another source of income? Quit going out to eator at least cut back on your food budget? Or try more inexpensive sources of entertainment.   

     Having fun is important, especially if it’s been a long day/week/month, and you desperately need a break. Just make sure that relaxation fits into the money you can afford to spend right then. If you’re willing to make short-term sacrifices, it may free up enough cash to do what you want for the long term. The operative word here, though, is IF. 

TOO BAD – We’re Doing It Anyway. Maybe you should splurge on the expensive restaurant meal, anyways, or (in our case) the Las Vegas gunhandling classes Husband badly wanted to take. (We found cheap plane tickets and a condo, bought most of our food at the grocery store, and didn’t gamble.) Sometimes the choice is more serious: a dearly-loved relative is dying hundreds of miles away. If you want to see them, you must go — now.

     A once-in-a-while decision like this isn’t bad when  you do it, well, once in a while. If it’s really important, go ahead. You’ll figure out a way to pay for it when you get back.

     Why go to all this hassle? Because there’s a world of difference between enjoying every minute of your vacation or other large purchases, versus worrying the whole time how you’re going to pay for it.  Do yourself a favor. Stop to figure out whether you can afford it first.

     Then relaxand enjoy.

4 Responses to Can You Afford It?

  1. Nice post. I wrote about this about a year ago but took a different approach. I heard a commercial on the radio for some service that was expensive and the announcer made the claim that with the monthly payments, you can afford it. I say that if you need to take on monthly payments, you can’t afford it. I think too many people just look at the monthly payments of things and base that on whether they can afford something or not.

  2. I’d agree with you, Jon — if those monthly payments mean paying a lot of interest and fees. But if you’ve got it planned out — especially if you already have the money set aside — and the payments are small enough that you can confidently cover them…
    I see no problem with taking advantage of plans like “Bill-Me-Later.” In fact, you’ll get 1% extra on Ebay Bucks (another way to pick up extra benefits) if you put it on BML, and just schedule a payment.
    Thanks so much for writing, both of you.

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