How do we define the term, “afford”? Is it being able to pay cash up front? Is it being able to make the monthly payments? Is it having to choose between something unaffordable and an impossible alternative? According to www.answers.com:
“afford” means to be able to spare or give up
So by definition, we can afford something when we are willing to give up something else. However, both sides of the equation are not always equal. What if we give up financial security in exchange for a mansion? What if we exchange a comfortable retirement later for a fun vacation now? This is why there can never be a single financial definition of affordability – because every person would assign a different value to the variables in the equation.
Part of the reason we are successful at beating down debt is that we have discussed our values. So when we are trying to decide if we can afford a nice wedding, we are able to weigh the exchange correctly. We would be exchanging our ability to quickly pay off existing debt and minimize our taxes for beautiful wedding photos and memories. Because all these things are equally important to us, we can see that the equation is roughly equal. So we’re going to try to do it all: Have a nice wedding while still paying down debt and saving for the future. Doing this analysis should help us set spending limits without feeling guilty or deprived.