Can We Really Afford It?
Have you ever wondered what you would do with your first paycheck? Ever said something like: “I’ll buy that when my pay comes in!”? or “I just need to trim food expenses for a month, so I could have that extra money to buy the latest mobile phone!” This, my friends, is a classic example of how we can relate the matter of wanting to afford something in relation to being more independent in life.
What do we mean by affordability? If you put more thought into it, being able to afford something is mostly subjective. We afford things we want to afford, and most of the time, they are not things we should afford. Imagine you just got your first real job, and you have also been eyeing that latest phone model that has been taking the world by storm, it would be so great to get your hands on them!
Currently, you have an older model of the same phone, still in usable and good working condition. But somehow, you still want to buy that new phone you do not really need. Why? For reasons both you and I know; it’s new, and the prestige and status that comes with owning it. Not to mention it’d be impressive to be able to buy something I want, the liberation and satisfaction being able to spend the money I’ve earned.
The latest phone may cost an arm and a leg, but you’d still blow three-quarters of your bank on it, and spend the rest of the month skimping and saving on meals. You might feel hungry doing so, but the purchase will still be justified! What if you had the option to put that same amount into a savings account that could give you a 0.5% interest in a year’s time? Sounds boring and unaffordable, something probably for the future? My point exactly. We afford what we want to afford.
Throwback to the time when you really wanted that new luxury bag, or expensive watch (that you purchased in the first years of your first job). From receiving a $500 monthly allowance from your parents, to a $2,500 monthly income.
Totally feeling ready to be part of the real world, able to afford whatever you wished for. You start to upgrade parts of your life that never used to bother you. And at some point, you might realize that you have little to no savings to fall back on, and everything that you earned, you spent on living in the moment. Regret sets in about forgetting to save for the rainy days, living from hand to mouth till the next paycheck comes in, promising not to overspend again. You probably succeed a few times, and fail a couple of times more, but the cycle continues.
Most people eventually mature out of the vicious cycle, or are even wise to stay out of it from the start. However, for those stuck in the rat race of “spending money that they do not have, to buy things they do not need, to impress people that they do not like.” They may get hooked on the mindset nearing a behaviour that triggers addiction. This may have lasting negative ripple effects.
Picture this, you hate taking the bus to work, possibly a train delay, squeezing with everyone else on your commute to and fro work. How lovely it would be if i had my own car, I’ll always get a seat, comfort and convenience galore! You start seeking and an opportunity presented itself, you bought yourself a nice new car, because you justified that you needed it, drove away with no down payment. That wonderful idea of bringing your friends for supper, driving around to places you always wanted to go to, and not to mention getting to work would be enjoyable! Few months in, the novelty wears off, you realize you can no longer sustain driving to work, paying multiple tolls and the hefty parking charges, fuel costs, car insurance, and the staggering loan repayments. The costs start bogging you down badly, that you make excuses not to meet up with friends and stay home most of the time to try easing those very tight pockets of yours. Suddenly, the car does not seem so attractive any more, you wish you never bought it.
It is not wrong to want to afford stuff, but when it mindlessly creates a financial mess of your life, that’s where you need to sit down with someone who knows their stuff to work your sums out. The happiness and satisfaction of acquiring new things, will always be there, but when that euphoria wears off, there is a whole bunch of commitments you need to stick to, in order to keep that acquisition.
Many years back, I read an article that resonated with me, let me elaborate. Our monthly salary is a jar with limited capacity, you have many big odd shaped stones (these represent the mandatory basic needs, food, rent, utilities, saving for rainy days, insurance, etc.), and two big handfuls of sand (these represent your leisure spending, entertainment expenses, wants). The challenge is to fit everything into the jar, how would you do it? Would you place your big stones in first, before filling it with sand, or the other way around? As Warren Buffet would put it; “Do not save what is left after spending, but spend what is left after saving.”
Always be on the look out to acquire assets and not liabilities, speak to a professional, like a Financial Consultant, who is equipped to do an assessment of your financial health and give you a detailed analysis and advise on the status of your financial health, and what you need to be doing in order to improve and maintain it. It is akin to you doing your Annual Health Checkup, except, this is for the longevity of your finances.
Planning what you will be doing when you are retired, will largely depend on how much effort you put into saving for it now. I am sure we work very hard for our money, the ultimate goal is to have our money working hard for us as well, take action for your future, now.