The other day I was talking to a coworker about her quest to downsize her house. She is nearing retirement and post kids. As such she feels she now requires less than her current 5000 square foot home. Mind you her kids have been out of the house for at least 10 years, so really it is just her and her husband in this giant house. As we talked about her latest trials of attempting to sell her home we ended with her jokingly suggesting I should buy her home. To this I responded with a statement along the lines that I can not afford it.
What do most people mean when they say I Can Not Afford It?
Thinking about this conversation later got me thinking. When someone states they cannot afford something they typically seem to be referring to literally not being able to come up with the money to pay for something. This is especially true in real estate where there is sometimes a school of thought to buy the most expensive home you can afford. The thing is, while her house is listed about double my own, there is no doubt in my mind I could get a loan to buy her home were that my goal? So why did I say I can not afford it? Clearly I did not mean I could not come up with the money.
Going into Debt
I do not just use those five words when I am referring to a McMansion either. Recently we were running a bit close on our monthly variable spending budget. When my wife asked me about putting a deposit on a summer camp for my son I asked her to delay that purchase until the next month as we currently could not afford it. Now mind you, summer camp costs all of 250 dollars for a week so this is not a lending question as pointed out before. Some people do take the afford question a bit further and define it as not purchasing something if it means getting into debt. This is still not what I mean though.
I’ve already noted our savings rate is about 1x our yearly expenses. There is no conceivable way one non budgeted 250 dollar expenditure would cause us to spend more than what we save in a given month, let alone go into debt. In fact other than replacing a roof and a septic system (both once every 20- 30 year events) I can not remember a time in the last decade where we spent more in a month then our monthly income. So the question of affording it is not about taking on debt for me either.
No, in my case afford it means not spending beyond our budget. Occasionally, I might move the budget forward a month or other actions to balance better deals. When I do this and we end up over our monthly amounts I tend to tighten the belt. On one such occasion we were in target when my wife discovered 30 dollar buy one get one free shoes. Yes, even to these I said we could not afford it since we had not gone to target to purchase shoes. Needless to say my wife got a little cross with me on that one.
In fact this is probably the only contention point between me and my wife on money. Not the shoes mind you, but occasionally when I use the words we can not afford it her mind goes somewhere dark and she starts worrying we will be the people in the soup kitchen. Mind you my wife is a fairly frugal person too. She once told me she was in her twenties before she realized putting money in the bank was anything other than a means to get a lollipop for a deposit. And yet in this case affording something means something different to me then her.
The I Can Not Afford It Mind Shift
So I was thinking about this in the context of this lady’s house. Somehow previously I did not even realize this is how I defined affording something. Somewhere along the way my mind shifted. I stopped thinking about my income as something to spend and started to think of only the portion of my income I had not preplanned to save as something to spend. Essentially I had automated my savings to the point that I barely considered the savings my money to spend. I am not alone here.
Many Personal Finance bloggers write about how much car you can afford to own or what house. When they write these things they usually mean similar things to what I do when I say I can not afford it. They mean if your being financially responsible, funding a budget, and buying what you value then buying this item will break one of those three things. You can not afford to break those things in those cases as it will delay your path to financial freedom without brining value.
The I Can Not Afford It Mind Set Shift is the Key to Frugality
I do not know when my mind shifted to the point where I no longer saw my savings as mine to spend in the now. However, I do suspect most of my savings rate I can attribute to this mindset. I write all the time of setting goals and budgets. I write about tricks to avoid spending on things you do not value. Initially those are the things that get you on the right path to financial success.
But you know what, in the long run I suspect it’s more that mindset shift. When savings goes from something you do by brute force to something you simply do not question. When it becomes a required payment, just like a bill, that you simply can not touch. That mindset is the key to taking those goals, and making them habit. After savings is a habit, it just sort of happens.
Has savings become a habit for you? Have you reached a point where you no longer view savings as yours to spend? Do you find yourself saying you can not afford something when you really mean your self-imposed spending limits and values mean you should not make a purchase?