Can I Afford This?

Ben and Ernie tackle the age-old question: can I afford it? Many people who are stressed about money face this question regularly, and without a solid plan for their money, there's not a good answer to the question. The answer usually comes down to this: how much money is in my bank account right now, how much do I owe right now (do some mental math), and is the remainder enough to buy this thing?
As we all know, the bank balance and mental math approach to this question is a slippery slope, and prone to a lot of errors. But with a solid plan, following YNAB's Four Rules, you don't have to worry anymore! There's either money in the category for the thing you want to buy, because you assigned dollars to it already, or there's not. If there's not enough money in the category, then you can move money from other categories to see if there's enough to cover the cost -- and if you are OK with the tradeoff. Maybe you're OK with zeroing out your coffee budget for a month to buy this thing, whereas taking money from the rent category would obviously be a non-starter!
Ben and Ernie go beyond the dollars and cents, however, and discuss the hidden costs of things. There are things with ongoing maintenance costs -- like Ernie and his lawn equipment -- then are things which have a potential non-monetary cost, like Ben's new One Wheel. When you ask the question "can I afford it," especially for big ticket items, it's important to consider all the angles!
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Timestamps:
0:00 Intro
1:28 The math of "Can I afford this?"
6:45 What's the tradeoff?
18:17 Do I want to spend the money?
26:00 Other considerations
46:26 YNAB Wins
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[@emilytruesdell5969]

Oooh this topic hits close to home. I’ve had about $15k sitting in my savings account for 2 years specifically earmarked for a kitchen renovation. I can afford it, but 2+ years into YNAB, and now I’m addicted to saving! I didn’t want to see that net worth dip, even though I’m in good financial shape, saved for this goal, truly need a new kitchen, and can afford it. It’s weird.

[@jc-fy1wl]

Will the kitchen renovation increase your property value? Is your property in YNAB as a Tracked Asset? If so, you can maybe increase the value of the property, reducing the loss of net worth.

[@emilytruesdell5969]

@@jc-fy1wl I mean, of course it will, but no- I don't track my home value or investments or 401k value in YNAB, I don't feel the need. Deep down of course I know it'll increase the value of my condo but it's just hard to get over the mental hump of actually *letting go of the money*. I will, but it has been a harder emotional lift than I thought it would be.

[@TamsMarie]

@Ernie, when you were talking about ‘good enough’, it reminded me of that saying, “Don’t let the perfect be the enemy of the good.”

[@YNABofficial]

I don't know who I picked this up from (probably another YNABer!), but it has always stuck with me. And as someone who is inclined to strive for perfection, it keeps me moving forward. ~Ernie

[@TamsMarie]

When I was young and broke, I fought the urge to spend impulsively by asking myself, “How many net hours did I have work to earn this?” That nearly always did the trick.

[@TumblinWeeds]

That’s having the reverse effect on me. I like to make small impulsive purchases. I see the price and think, omg it’s only an hour or 2 of work, and I get so much out of it! But in reality 6 out of 8 hours of my work is going towards tuition and necessities, and I just threw away the rest.

[@Tesla-Cannon]

My stepmom had a rule that the couch was too new to sit on. We would have to sit on the floor of the living room all the time lol. So, you definitely have a consider how a purchase is going to affect everyone, and whether or not an item will eventually own you.

[@PeshaPhiladelphia]

Just no. Why buy a new couch if you can't sit on it! I have my mom's good china. She never put it in the dishwasher & therefore hardly used them. I put them in the dishwasher and yes the gold will wear off quicker but it gives me great joy and makes me think of my mom when I use them.

[@conureron3792]

My wish farm /wish list is ever evolving. But I still haven’t gotten anything off of it, probably because I do recognize how much it has changed.

[@Shrew_Gaming]

"Consider what it's going to do to you psychologically" - This and your whole chat about new vehicles perfectly captured what I've been feeling when I think about eventually replacing my aging jalopy. Thank you for helping me put it into words!

[@andrewmitchell571]

The conversation @10:00 is why frameworks like the 50-30-20 budget are so important (aspiring to

[@bilistooka_go_boom]

I work in fraud prevention for a bank, a lot of times the big retailers (Amazon, Walmart, and Apple are the worst) will try to come up with any reason that it's not fraud and that the person should pay. So a lot of the time it's the bank and the retailer going back and forth.

[@marianakishida8843]

$5 coffee daily coffee = $1825 per year $1825 retirement contribution per year from age 20 to 65, invested with a 7% return = $557,000 at age 65 If you start early, small contributions move the needle by a lot.

[@YNABofficial]

You are right, so I think I need to clarify my position here a bit more. In this scenario, I don't think the hypothetical person is making the decision not to buy coffee TODAY. Instead, they're making the decision to become the kind of person who does not need to buy coffee every day. That involves a larger lifestyle shift. And the larger lifestyle shift is what move the needle, as your math shows. But if you have made the decision to get a coffee regularly-and you've weighed that against your other priorities-I don't want you to feel guilty every time you follow through and get the coffee. I see it all the time, even after meeting their goals, some folks STILL feel guilty about every little purchase because they could have done just a little bit more. That can be a shame cycle, which leads to less motivation, not more. Make the decision when you budget-when you've considered everything at once-set up your life to make that possible, and then don't sweat it when you decide to treat yourself within your plan. ~BenB

[@elizabeth1234..]

I make a spreadsheet for any purchases. And if my husband or I want something we always just put it in our personal budget. My win is that with tax season upon us my mom wanted me to throw any return to debt. Well I said it didn't make sense, with my budgeting spreadsheet and YNAB it won't accomplish a significantly faster debt payoff. It would be better for savings and long term expenses. She was adamant that wasn't true and my dad pipes up and says 'honey, maybe we should let her handle it. She probably knows better than us how to use a budget'. I danced quietly because he understood that I am pretty darn responsible and just want my husband to be debt free. I only wish ynab has a forecast spreadsheet ability for multiple lines of debt. And not just loans

[@lynnmallory2096]

Didn't mean to give a thumbs down at all! I'd have danced too if my dad ever said anything like that.

[@elizabeth1234..]

@@lynnmallory2096 it's such a win because I only had debt from an unexpected wedding expense but quickly paid it off. My dad asked me in passing once, pre ynab, what I did. I showed him the major spreadsheet I had going on that was basically YNAB. He was very impressed and said that he should probably budget better. Once my husband and I combined expenses I needed something more automatic. So that's when I turned to ynab

[@just_zoshin]

Totally agree on the forecast ability! So, to get around it, I created a new budget called "CC forecasting" (because I wanted to see it used against my CCs) so rather than entering them as cards, I entered them as loans. Essentially, if you're not using the card AT ALL, it works the same as a loan.

[@elizabeth1234..]

@@just_zoshin I get that. For me it was easier to enter it into a program I built for my job and just tweak it a bit rather than building a whole new budget

[@elizabethgadsby9641]

That was a great discussion on the considerations for making purchases. I thought it was well thought out and insightful. 🤩

[@katiemoss6802]

Great conversation as always. So many layers to how this question can be answered! Regarding risk mitigation for the one wheel... might I suggest working on your balance, or doing specific balance training Ben? To help you minimise the need to use the padding...

[@mckennagarcia9094]

I have a separate ynab budget for my personal money. It really helps! For basically the same reasons ynab helps our family budget 😅. Keeps my spending under control and I’m finally saving up for things!

[@Eliz__p]

I did have to worry about my checking account balance to make sure I had funds to cover a large one time debit. But YNAB still saved the day, as I knew I had the funds allocated (but in my HYSA), so I scheduled the transaction a few days ahead of when it was actually due to remind me to transfer funds into the checking account in time.

[@GrabberBlue71]

This is great

[@jonathansaindon788]

As Ramit Sethi famously say : Stop asking 10$ questions, ask 10 000$ questions!

[@RonaldMorrissetteJr]

Where will I keep it? Do I have space for this. Do I need to get rid of other items in order to have space for this? Where will I keep it in the winter?

[@dewmara]

Can you post the link to Hannah's video referenced at ~27:50?

[@YNABofficial]

Sorry about that Mary! Here it is kzbin.info/www/bejne/q6Wrgp5ppsSBors ~Ernie

[@ChristianOlivier]

not on the playlist ? ;-)

[@YNABofficial]

!! Thank you, Christian! Added it! - Ashley