Afford something vs. Need something

Ever wondered if you could afford that new hybrid? or that latest flagship smartphone? Have you asked whether you really need it? Are there any alternatives?

There are many angles to look at this topic depending on the position of every individual. Let’s talk general here.

Scenario 1: You’re loaded

Unless you want to increase your load further, go for it and buy what you want regardless of whether you need or not 🙂

Scenario 2: You barely manage to match income with expenses

If this item is absolutely critical then you probably need it. You might have to reduce your expenses somewhere to save up or to finance it and even look for other sources of income. But first, think of the real need. Given that you live far from access to public transport, the need might be transport – not a car. Will a motorbike suit you instead? If not, then what kind of car? You do not need a car work north of Rs. 3 million but can settle for a used one for a few hundred thousands. There is a misconception that Hybrids are cheaper – yes, maybe to run. But the total cost of ownership might not be worth it for many.

I remember a good friend Sachith, who bought an old used Honda Civic for 400,000/- when he started Uni and used it for the entire 4+ years without much hassle. Now that’s a brave but intelligent thinking.

Scenario 3: You save a good amount monthly and can afford it

This probably is the most dangerous scenario – people buying stuff just because they can afford it. One of the reasons for the middle income trap. Buying something without the need for it is a very short sighted decision. Have you though about the consequences? The future requirements etc.,? The need for a someone who has worked 1-3 years is to find stability in life. There could be financial requirements in years to come that you need to be ready for. What goes into a car can easily be invested to generate greater returns. A car is a liability most of the time, not an asset. Gone are the days when you buy a Toyota and sell it for higher in few years. It’s not the case anymore.

When it comes to large cash outlays, if you have a need, then buy it. Don’t buy it just because you can afford it. Strike a balance between enjoying now and saving for the future.

Watch the below video which I found useful.


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