Can You Really Afford What You Can Buy?

In the modern world brimming with conveniences, we have simplified the definition of affordability.

Most of us think that if we have enough money to buy something, we can afford it.

Or that even if I don’t have the full money, I can comfortably pay the EMI.

However, in both cases, the calculation ends more or less at the point of purchase.

But if you think carefully the ownership of anything you buy doesn’t end there.

Think about a high-end mobile phone. Someone earning a decent income may have no problem spending a good chunk of money relative to your monthly earnings, to buy an expensive phone. They may even have enough means to buy it without needing any form of credit. There is nothing financially irresponsible about the purchase on the face of it.

Now imagine that the phone falls six months later and the screen is badly damaged. Or the battery develops a problem. Or the phone is- just lost or stolen. What happens then?

The interesting question is not whether the person has enough money somewhere to pay for the repair or buy another phone. The question is whether doing so would hurt.

Would a ₹30,000 repair bill be an irritating expense that they simply pay and move on from? Or would it make them anxious for the next few weeks? Would losing the phone be an inconvenience, or would they keep thinking about the money they had spent on it?

That difference tells us something about whether the phone was actually affordable.

The same thing becomes much more obvious with luxury cars. The used-car market is full of cars that look incredibly tempting because depreciation has made them accessible. A Mercedes, BMW or Audi that originally cost ₹60–80 lakh can sometimes be bought years later for ₹12–15 lakh. Someone who could never have considered buying the car new may suddenly be able to buy one.

And that is where the trap can begin.

The car’s market value may have fallen dramatically, but it hasn’t suddenly become an ordinary car. Its components are still expensive, its maintenance can still be demanding, and a major repair can cost an amount that completely changes the economics of the purchase. The person may have been able to arrange ₹1.5 million for the car, but can they comfortably handle a ₹ 0.2 million repair six months later? Can they replace four expensive tires without having to rethink their finances? Can they keep maintaining the car for the next five years without constantly worrying about what might go wrong?

This explains why there is a difference between buying something and being able to afford it. Consequently, the distinction matters.

Our ability to pay for an object tells us very little about whether we can comfortably own it. A credit card can easily increase our buying capacity. An EMI can increase it even further. But neither one increases our ability to absorb an unexpected expense. Neither of the two increases our actual affordability to own and maintain it.

The Solution

So should we just stop buying anything on credit? Of course not! That’s now what I would recommend. EMIs or any other form of credit are useful tools IF USED CAREFULLY. So, how to go about it?

Perhaps the simplest test is that before buying, imagine the worst reasonably foreseeable day of owning that item.

Additionally, the phone breaks. The laptop dies. The camera is stolen. The car needs a major repair. The expensive watch gets damaged. This could affect what you can afford. Can you deal with the situation without feeling that your finances have suddenly been thrown off balance?

If you can, then the purchase is probably within your means.

If you find yourself thinking, “I just hope nothing happens to it,” that is probably worth paying attention to.

This doesn’t mean we should never buy expensive things. Money is also meant to be spent on things we value, and there is nothing wrong with wanting a better phone, a nicer car or something simply because we enjoy it.

But perhaps before asking whether we can buy something, we should ask whether we can comfortably own it.

Because the real cost of an expensive purchase isn’t always the amount written on the price tag. Sometimes it is the anxiety that begins the moment something goes wrong.


If you like this article, you may also like this article: Can Money Buy Happiness? You’re Asking the Wrong Question.

Until next time…