Some years back, Steve Martin did a skit on SNL (as a guest host) that set the PF blogosphere all a twitter (even though twitter didn't exist back then). Chris Parnell's character was pitching his new personal finance self-help book called, "Don't Buy Stuff You Cannot Afford". The fictitious book had one page that contained the phrase:

"Don't Buy Stuff You Cannot Afford."

Now Steve was on his game, and played the dumb, overspending consumer perfectly. The skit was poignant and funny. What isn't funny is the way that phrase has been leaned on as if people really don't see how it's bad to buy things they can't afford.

I'm callin' BS.


Usually, it's the smart allic, know-it-all commenter that invokes this crutch. "Gee, hmmmm. Maybe you people shouldn't be buying all that crap that you can't afford." As if uttering this one statement will just snap folks out of it and cure all their ills. Again, it's not an untrue statement.

The one caveat is this: It only works if you know what you can afford!

If you're average in America, "wandering through life, like Gomer Pyle on Vallium", then it's very likely that you don't know what you can truely afford. So, let's dig a little deeper and do the leg work here.

How do you know what you can afford?

1. Unless you have a monthly budget that you actually live by, this is a total guess. There is no way you can make an informed decision without one. Even if you make gobs and gobs of money, these purchases may not break you, but you still do not truly know.
2. Ok, so you have a budget. Good! Now, so long as I can swing the payment each month and still pay my bills, I'm good, right? Wrong. "How much per month?" is the wrong question. You should be asking, "How much". If you aren't ready to pay cash for the whole bill, then you aren't ready to buy it. If you have the amount for the total purchase price in your disposable income, then you're good to go.
   
3. Cash!?! We're not talking about a pair of shoes, or a newspaper! I wanna buy 'X', and it costs a lot of money. I can't do that! Sure you can. Maybe the item costs $1000, and you're only left with $100 each month. You're going to have to be an adult and WAIT. You're going to do what we like to call in the personal finance world: save up and pay for it. In 10 months you'll have your 'X' and maybe a little more character.
4. Ok, so maybe you've got some cash saved up. A budget and savings, now that's weird. If it's not your emergency fund (and the purchase isn't an emergency!) and it's not earmarked for something else, then you may have made a love connection.
   

I know I grew up a little bit when I first heard Dave Ramsey say, "Adults devise a plan and follow it, children do what feels good". I don't know who he's quoting, but think about that and the last major purchase you made....

Did you devise a plan and follow it? Or did you do what feels good and buy some stuff you couldn't afford?

Consumerist has the video, if you haven't seen it.