When somebody asks you a question like this, what can you really say?

I have seen Suzie Orman say “you have $ 59,000 in a Roth IRA, you have………blah blah….” so go ahead and you will be able to afford it!

I would like to take a slightly different route.

Let us say the person asking this question is 29 years of age and has a Gross salary of Rs. 700,000 and a take home salary of Rs. 45,000 after all deductions. He is a good planner and has decided to do some Investments etc. and this is how his money is spent:

Rs. 19,000 towards household expenses, Rs. 8700 SIP towards housing emi and Rs. 5500 towards car emi, Rs. 6000 towards retirement goals, and Rs. 4000 towards eating out, and other entertainment. This means he does not have a cash flow of Rs. 9000 to pay for the shoe. It also means that he KNOWS what he is spending on and what is he investing for. All this is good. In fact very good.

It also brings us to the question – can he afford it?.

Ha! he has decided that he will invest Rs. X for retirement, and his ENTERTAINMENT expense will NOT EXCEED Rs. X.

So his annual entertainment budget is Rs. 65,000 (retirement figure is Rs. 72,000) – and he will keep about Rs. 7000 for some emergency that might come up. His budget of Rs. 65,000 includes money for eating out, movies, hobbies, etc.

Now for his hobbies. He is an avid runner and takes part in 5 events in a year. Each of these events cost him about Rs. 2000. He eats out and spends about Rs. 3000 per month on that. That leaves him with about Rs. 19,000 for other entertainment. He attends weddings of friends, etc. and that takes away …some.

So on the whole Rs. 9k for a shoe looks fine – on a CTC of Rs. 700,000 – it really does not look too big. However, when he looks at it as 9k/ 65k it does look big and if he takes off his eating out, etc. it looks like 9k / 29k!! Now it is really tight is it not?

So ask yourself: Out of the Entertainment box, are you willing to spend Rs. 2000 on a running seminar, Rs. 1500 on the registration fees, on the Rs. 8000 air fare to go to a running venue………….

Can you afford an Asics, Reebook, Adidas, Nike, Puma,…..well, well..

the answer is obvious, is it not?

You need to decide!!


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  1. “It also means that he KNOWS what he is spending on and what is he investing for. All this is good. In fact very good.”

    For someone who is just 29 years old, this observation shows that he is on the right track – at least as far as financial planning goes !
    i.e. he doesn’t seem to be an impulsive buyer on the face of it.

    As for how to figure out whether he should spend 9k on a pair of shoes – well, since he is smart enough to have planned his overall finances well enough, it boils down to –
    (a) how badly he wants to buy this pair of shoes,
    (b) does he want to buy it so that he can improve his running times ? or is it to enjoy the attention that they might attract from other runners ? and
    (c) whether he is willing to cut down a little bit from other parts of the 65k discretionary expenses budget so that he can truly afford this expense.

  2. Finally an example which is more closer to an average 29 old, rather than six figure montly salary examples described here.

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