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How to Decide if You Can Afford a Purchase

Posted: 27 May 2024

3 mins to read

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Here are five questions to help you decide if you can afford a purchase.

Whether you face a financial emergency or simply come across something you really want to buy, your next purchase may or may not fit into your spending plan. Setting your emotions aside and evaluating things with a clear head can help you figure out your next move.

Here are five questions to help you decide if you can afford a purchase. Your answers could help keep your budget intact.

Is the Purchase a Need or a Want?

The first thing to consider is if this is an essential purchase. If it is, you'll probably need to find a way to make the numbers work. That's not to say that your wants aren't important—if there's room in your budget and your basic needs are met, the purchase might be worth it to you.

Do You Have Enough Money for the Purchase?

If you aren't sure if you can afford a purchase, look at your finances and consider if:

  • You have money set aside for your upcoming bills.
  • You've allotted money in your budget for miscellaneous purchases that may pop up.
  • You have cash savings you can draw on to cover the cost.
  • You won't overdraw your bank account if you make this purchase.
  • You don't expect this purchase to cause financial stress.

A strong budget is one that has room for essential bills, flexible spending, and financial goals. Your income and regular monthly expenses play a key role. Tracking your spending and choosing the right budgeting plan can help ensure that you have enough money for what matters most to you.

Will the Purchase Affect Your Financial Goals?

This relates more to nonessential spending. Just because you have room in your budget to make a purchase, that doesn't always mean it's the right move. Your long-term financial goals should also be a factor. These can include:

  • Building your emergency fund
  • Paying down debt
  • Saving a down payment for a home
  • Setting money aside for your kids' college education
  • Saving for retirement

Consider Store Credit Cards

You might be able to lock in discounts, special financing options, free shipping, and other benefits if you use a store credit card. That could be a good option if you're purchasing furniture or essential home items.

Deciding if you can afford a purchase isn't always easy. Consider your budget, cash savings, financial goals, and whether it's an essential purchase. If you do decide to move forward, think about how it fits into your overall financial health—especially if you'll be assuming new debt. Saying yes to a large purchase today could impact your ability to work toward those goals—especially if you have to take on a new monthly debt payment to finance it. It comes down to prioritizing what's most important to you since achieving big financial goals usually doesn't happen overnight.

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