‘I can’t afford it’ – a common and well understood phrase that clearly ties a rejection to reasons regarding finances.
Its counterpart, ‘I can afford it’ is a little more complicated. I offer my thoughts on what a number of hypothetical people mean when they say it.
1) The Hopeless
I am able to get someone to give me the item in exchange for nothing but a promise to make future payments with interest. I am borrowing the full value and, if I did the math, I would not see a clear path to me being able to actually make the full payments. If I did the math I would probably also see that I will end up paying much more than the listed cost of the item. Most likely they will be reclaiming the item shortly and I will have wasted any money I gave them up to that point.
2) The Naive Optimist
I am able to get someone to give me the item in exchange for a promise to make future payments with interest. I put a significant chunk down though and after doing the math am confident I will be able to just barely make the payments indefinitely if my earnings stay the same or grow. All of this is true unless an unforeseeable change to my limited & optimistic plans occurs before I am finished making the payments. This will happen to me a handful of times in my life based on the length of time and sheer volume of events that could cause such a change.
3) The Treadmill Runner
I have the money to purchase this item in full now. While this item will be paid off, I’ve developed a lifestyle where my expenses have grown to meet my income. Maybe I’ve saved a little bit, but not much. I will likely have to make many choices I dislike in order to maintain my lifestyle. If I ever decide not to or if I experience a life altering event, I will be forced to dramatically change my way of life on short notice. I don’t know what is going to happen when I want to retire some day, I sure hope the government has a plan for me.
4) The Diligent Ant
I have considered this item and it fits into my budget. I have savings goals which are set long term and won’t be altered during a single purchasing decision. Living this way has allowed me to accumulate a surplus. Because of that, I know I am able to withstand most bumps in the road like career changes, periods of unemployment or underemployment or a major illness. As long as I continue to work hard I will be able to retire some day on my savings.
5) The Financially Independent
I have calculated the statistically likely return on my savings and know what my yearly spending needs to stay under so that I can last without income indefinitely. This purchase fits within that budget or represents a change to that budget that I can continue to afford indefinitely. Because I make purchasing decisions this way, my life decisions can be fairly removed from financial implications – I can chose to work where I want, doing what I want, or not at all if that is what I want. Aside from my own decision process changing, it would take an historic financial catastrophe to derail my plans.