Whenever I hear people say, “We can afford it.” I feel a little nauseous. I break out in cold sweats. Everyone has a few pet peeves. This is mine. Perhaps this seems counterintuitive but let me explain.

1. If you can’t pay cash, you can’t really afford it

Affording the payments isn’t the same thing as affording the item. Affording an item starts with having so much cash in your bank account that you can pay for it outright. Just because there is $200 in your budget a month if your employer keeps paying you every 2 weeks, doesn’t mean you can afford it. What if they decide to stop paying you? Can you still afford it? If not, you can’t afford it.

Now somethings are hard to afford. Houses come to mind. But if we only focus on “affording the payment” we will never actually afford the item. A lot of people in their 60’s are still “affording” their house payment.

2. Buying things you can “afford” steals your options

There is an opportunity cost to every purchase. When we buy the things we can afford, we are giving that opportunity away. Not that we never purchase an item. But is that item worth giving up your future choices for?

You aren’t just spending your cash, your spending your options.

Ok, you have $600 in your checking account for that new cell phone. If you spend it, you don’t get to spend it again. Simple right? If you spend it, you can’t invest it. The choice is over. You might end up spending all your choices on things because you can “afford” them.

We have had some amazing opportunities to buy cash flowing property. Very simply, because we didn’t spend all those choices a few years early on things we could have afforded.

3. If you buy everything you can afford,

you will never create financially freedom

If we buy everything you can afford, we will never get ahead. Have you ever heard people talk about all the things they can “afford.” “We can afford a bigger house now. This new car fits into our budget. It’s great to be able to afford a nice vacation. We can afford to treat ourselves to a nice meal once a week.”

Often, it seems the people who insist they can “afford” something are the same ones living paycheck to paycheck, with no savings or investments. Maybe it fits in your budget. Maybe you have the cash. But if we buy everything we can “afford” we won’t ever create financial freedom.

Financial freedom only can happen when we DON’T buy everything we can “afford.”

We opted not to buy a LOT of things we could have “afforded.” Then the housing crash came. We had a lot of cash, from all those things that we could have afforded, but opted not to give away our choices on(point #2). So we had the choice available to us to buy some great rental properties. Everyone told us how “lucky” we were. Sure, we can call it luck. But honestly it boils down to not selling all our options away, so we had some options when we really wanted them. Like if the option to create some amazing passive income from rentals shows up, would you have that option? Can you be so “lucky?” If you save some of your options, you might be able to create enough financial freedom so that working jobs you hate become optional.

It took me a long time to recalibrate the way I looked at the things I could “afford.” If I was ever going to break the cycle of poverty and create some financial freedom, I would have to stop buying everything I could “afford.”

It’s a pet peeve out of love. I want the best for this person. I want them to have freedom. Choices. To be able to be Work Optional. I want their monthly nut to be low, so they have tons of flexibility. I want them to be able to jump on amazing opportunities. It just makes me sad to see them trade all that away. For what? Fill in the blank.

What should we trade that away for? Well, that is where “personal” comes into personal finance. I might trade away my freedom and choices away for something different than you would. That’s OK. As long as we realize what is essentially happening when we buy that thing we can “afford.”

For Conversation:

1. Have you ever justified a purchase because you could “afford” it, but later regretted it? (Me: jumping up and down and waving my hand wildly!)

2. Have you ever connected the dots on real life opportunity cost? I know exactly which rental we couldn’t afford to buy at a super discounted price because we decided to travel through 27 countries instead.

3. Have you noticed the more people try to convince you they can “afford” something, often the less likely that is true?