“I can afford it” is a dangerous phrase that will destroy your finances every time you say it!

Most people will say these words every week. We are always at the store looking around at new shoes, clothes, bigger TV’s, new cars, furniture, etc. and we find something we really want and like. We often will think if we can buy it and how we can. We will look at our bank accounts and most people will look at financing options. While they are considering the financing option, most people will just look at the monthly payment and will say to themselves, “I can afford that”. But what does this word mean and how should we use it?
If you do a quick search of what the word afford means on Google, it will define it as “to have enough money to pay for”. However, our capitalist society and the want for newer nicer things has changed the meaning of this word.

Thirty years ago, to be able to afford something was when you had the cash in your wallet and you were able to pay for the item/service on the spot. Now, if it’s a large purchase we think about getting a loan, how much our payments will be, and if we can “afford” the payment.

Let’s further discuss what a capitalist society is and how we have gotten to use this phrase the way we do. Capitalism is defined as “an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state”. This means, the power is given to private companies for profits instead of the state government running the economy. When you’re driving down the road and you see a business on the left or right of you that is Capitalism.

Now that we know what Capitalism is, let’s discuss more of why this is bad for us as the consumers. Private businesses that offer goods and services now have the power to control the price. This is good and bad, because competition causes lower prices. However, with this competition comes marketing tools that businesses use to lure you into buying something that you would not normally buy right now (because you don’t have the money). What they also offer to make it more enticing for you is often times a loan with a low interest rate or 0% interest. Of course, 0% interest or a low interest rate is almost like free money. However, it isn’t. Because of the availability of the free money, you can buy the product or service when you really couldn’t “afford” it. This means, you are spending money you don’t have; therefore, they are making money on you even with 0% interest!

Credit cards are also another product that capitalism has created. Credit cards are a great way of getting rewards if you are responsible with them. However, credit card companies know that with temptation most people will buy. We are a society that wants instant satisfaction and we don’t want to wait, which means, credit card companies are luring you in with great promotions. They know statistically most people will carry a balance and make minimum payments on their credit cards. In a 2016 study by Nerdwallet, it was discovered that credit card debt has increased by 11% and the average household credit card balance was a little over $16,000.
Now, do you understand why the phrase “I can afford that” is dangerous to say?

Between marketing strategies, capitalism, and loans people are buying things that they shouldn’t really buy every day and having to pay for it for years after. Take the financially smart choice and redefine what “I can afford that” means to you. Low interest rates and 0% interest really is not free money, it is a marketing tactic used to lure you into spending money that you normally wouldn’t be spending.