206 replies to this topic

[CostcoLover]

Oy vey, that is abstract. Though by that definition, Americans are the money masters of the universe!

Perhaps afford simply means that whatever financial choice you make, represents the best use of your money towards some end, usually happiness. Although that's really getting pretty abstracted from the common, albeit ambiguous, use of the word.

"Best use" and "happiness" usually don't go hand in hand. Most people would be happier blowing all their money, though that's probably not the best use if they ever hope to retire, send their kids to college, pay their mortgage?

How about "my budget can afford this?"

Budget? What's a budget? Has your spouse ever asked if their purchase is within the family budget?

Last working budget I ever saw was when I was single.

[cw68]

Budget? What's a budget? Has your spouse ever asked if their purchase is within the family budget?

Last working budget I ever saw was when I was single.

Well, yes, he has. However our "working" budget is a joke. We pretty much just sock the goodies away and spend what's left. We keep trying to do the whole big budget thang, but....

[bishmasterb]

"Best use" and "happiness" usually don't go hand in hand. Most people would be happier blowing all their money, though that's probably not the best use if they ever hope to retire, send their kids to college, pay their mortgage?

Well, an intelligent plan for happiness defines it in both the long term and short term (I think I even said than in my following post ).

[Maitreya]

Lot's of good ideas on saving money... and working like both your parents did when you were a kid. You have to be able to live on what you earn. ...then if you really want to save think about:

Using other people's money

Be comfortable with more debt than you can possibly pay on your current salary

If you fail, get up and try again

Simplest thing to do...look at the return of your 401K's. Match it to your investment need. I like aggressive BRIC's (Mutual funds in Brazil, Russia, India, China) they are up more than 50% this year.

Gold is also going up as is inflation near term

You largest investment is your home. But it is the banks asset and your liability. If you have a few thousand, try debt equity getting a rental sometime after August 2008. Hire property management for 7%. If it's your first one stay close to home, otherwise consider out of state. Flip it once you gain 20%. (Do the math: 100K at 20k down goes to 120K net on the sale. You make 100% of your initial investment. It's a down market and will around.)


Peace,
M

[CostcoLover]

Well, an intelligent plan for happiness defines it in both the long term and short term (I think I even said than in my following post ).

Intelligent? Plan for happiness? It sounds so.... sterile.

To not further obfuscate the issue we should probably put "intelligence" aside. There are lots of "intelligent" folks with "intelligent" plans and broke. We could get into the whole emotional intelligence discussion, but then we're off on a serious tangent. That would be more of a philosophical description of afford rather than a financial one.

I'll put this one forward with the full knowledge that it's full of holes, but expands a bit on "ability to buy"

- Afford: The ability to buy ____ without becoming further indebted (this one would at least meet Chip's "pay cash" approach without financial shenanigans - that is, borrowing to have cash on hand)

or a much more stringent definition

- Afford: The ability to buy ___ without becoming further indebted or reducing your
a. existing savings
b. existing expenses
c. existing assets?
d. net worth?

That one probably won't fly for most people in any of the variations, and unless one has a very large cash flow, purchases such as a car or house aren't feasible with this variant.

I still like the priorities approach though if we studied our household purchases one can easily conclude that my wife and I have different priorities.

By the way, IMO "using other people's money" is more of a financial investment strategy than a "savings" approach.

I fully agree with cw68 that "saving" speaks to NOT spending rather than I saved $50 because it was 50% off type of "saving".

[mylo]

Cash can either be defined as savings, or an asset, and is obviously part of your net worth. So spending cash, even if you have a massive pile of it, will reduce a), b), and c) above.

Spending always comes from somewhere, and unless you're always buying more profitable assets, it's going to be negative. I'm still having a hard time justify what limit of negative is permitted and still called 'afford'.

I think "afford" is more along the lines of: You can spend it, and still live the life you want.

In my case, a cup of coffee won't dramatically affect my lifestyle, but then again the bum who finds $5 and buys coffee isn't really going to change his life, either. He'll still wake up on a bench. However, I think most of us don't see homelessness as a preferable option, the bum could have a better life, if he'd not had the coffee. But, if I buy a Wii (and enough games), that would affect my cashflow and limit my lifestyle. However, it would be a fun-filled action-packed life, which is potentially more preferable to my aging Atari 2600 life of today. How can I _not_ afford it?

[ChipShot]

I can afford more expensive, import beer, but choose to drink regular American beer, which has a positive effect on:

a. existing savings
b. existing expenses
c. existing assets
d. net worth

Ahhh, now I understand.........

[mylo]

Ahhh, now I understand.........

But at what cost? Is it really worth it?

[CostcoLover]

Cash can either be defined as savings, or an asset, and is obviously part of your net worth. So spending cash, even if you have a massive pile of it, will reduce a), b), and c) above.

Spending always comes from somewhere, and unless you're always buying more profitable assets, it's going to be negative. I'm still having a hard time justify what limit of negative is permitted and still called 'afford'.

I think "afford" is more along the lines of: You can spend it, and still live the life you want.

That's a matter of perspective. You're right of course, technically speaking, but how many people receive a paycheck and consider it part of their net worth immediately? They probably consider what they put aside (if anything) part of their net worth / asset.

When cash gets deposited into our checking, I don't consider that savings, and while I'll readily admit that technically it's part of your net worth and an asset, I don't think of it that way. It's more of a short-term holding repository from which bills, expenses, debts, investments are paid.

I never count it among our net worth until it's put to work in a longer term investment vehicle.

Does anyone really calculate their net worth when their receive their paycheck, and moments later when they pay their bills recalculate it?

As for the definition of afford, if I lived the life I wanted, I'd be broke! That's probably the reason most Americans ARE broke.

[CostcoLover]

I can afford more expensive, import beer, but choose to drink regular American beer, which has a positive effect on:

a. existing savings
b. existing expenses
c. existing assets
d. net worth

Ahhh, now I understand.........

And down the slope we go...

Like Chip, I too can afford more expesive import beer, but chose to drink American beer which had the positive effect that Chip described though I soon figured out that not drinking beer had an even greater positive effect.

So in the words of Jolene, "Beer is no longer a priority for me"

And no Bish, it hasn't affected my happiness.

So for Mylo Chip, is your beer purchase coming from savings, expenses (giving up cable to drink beer), assets (selling your stocks and bonds, collections) to drink beer?

[ChipShot]

But at what cost? Is it really worth it?

Yes. What kind of silly question is that ??

[mylo]

That's a matter of perspective. You're right of course, technically speaking, but how many people receive a paycheck and consider it part of their net worth immediately? They probably consider what they put aside (if anything) part of their net worth / asset.

When cash gets deposited into our checking, I don't consider that savings, and while I'll readily admit that technically it's part of your net worth and an asset, I don't think of it that way. It's more of a short-term holding repository from which bills, expenses, debts, investments are paid.

I never count it among our net worth until it's put to work in a longer term investment vehicle.

But you could take all that leftover cash in your checking, and buy gold immediately! Your net worth would skyrocket, along with your savings ratio. You should count it as an asset, immediately, and try and convert every penny to higher earning vehicles. Then, what's leftover (usually nothing) is "disposable income".

Does anyone really calculate their net worth when their receive their paycheck, and moments later when they pay their bills recalculate it?

I count every penny in my checking as an asset. I have an equity-line, and any dime I don't move from checking into there is a negative ~8%. After 401k deductions, paying bills, budgetted frivilous spending, every penny moves into a higher asset class than cash (USD). It's not a before/after payday, it's constant.

As for the definition of afford, if I lived the life I wanted, I'd be broke! That's probably the reason most Americans ARE broke.

Maybe they can afford it then? I would argue against that, because the debt catches up, and they're in the poor-house (not the life they want). That's why I don't pity or offer bailouts for people that lived the life the wanted "now" without thinking about the future. IF they can live like that today, and when rates adjust, more power to them, they can afford it!

[ChipShot]

And down the slope we go...

Like Chip, I too can afford more expesive import beer, but chose to drink American beer which had the positive effect that Chip described though I soon figured out that not drinking beer had an even greater positive effect.

Yes, technically you are right...But when you're on the golf course, or by the pool, or doing yardwork, or just enjoying the weekend or the game, then technically you're wrong. Sorry, my friend.

[mylo]

So for Mylo Chip, is your beer purchase coming from savings, expenses (giving up cable to drink beer), assets (selling your stocks and bonds, collections) to drink beer?

Good beer is a budgetted frivilous income deduction, reducing my potential net worth but improving my lifestyle

[ChipShot]

Good beer is a budgetted frivilous income deduction, reducing my potential net worth but improving my lifestyle

Much the same thing as eating Sushi every other day like the Sushi-heads here...