Can I afford it?
Suzie Orman runs a popular program in the US of A which is simply titled “Can I afford it?” wherein people call in to ask “Can I afford a second hand Mercedes which costs me $ 45,000?”. Then Suzie sizes up the situation checking up whether the person has some money in her/his savings account, retirement account, existing debt, etc. and says “Yes you can afford it” or “No. you cannot afford it”.
There is one important question that is missed. Does this person NEED it? If I am going to travel 18 km a day for 5 days a week, do I need a Merc or a smaller car will do?
This is the essence of financial planning. The planner should be able to make the client do the following:
1. Set the goals
2. Make it into Needs, Wants and Luxuries
3. Priotrize the goals
4. Allocate the funds towards the goals.
Should I be buying something because I can afford it or should I be buying it because I need it. I think my usage of any asset should take into account my need and how abusive it is of the environment. If all of us think this way, maybe we will have lesser complicated lives. Both financially and physically.
Ravinder Makhaik
Such a systematic way of prioritising “Needs, Wants, & Luxuries’ will convince many of us of what is essential and what it superfluous.
It could save a lot of botheration to many and add peace of mind into turbulent lifestyles.
Roshan
do i need it is a very tough question..there are many human needs like emotional, self esteem etc and others other than financial which need to be satisfied. Say if i can afford a one month European holiday ..i will go on it for various reasons and for the pleasure of it..