In the past couple of years, I have pretty much maintained the same financial commitments. I have lived in the same house. Taken public transportation work. Used the same phone plan, etc. Lately though I have been thinking to myself that I want to move closer to the city or at least buy a car. Then I sit down and do the financial maths. I think I can afford to do this. However, there are days when I get scared and I tell myself to thread carefully. What about all of the other savings goals that I have set for myself?
So I have decided that the best way to ascertain if I can actually afford to increase my financial commitment is to act as if I have those commitments already. A few years ago, I was watching a talk show and I think it was Suze Orman who advised a couple to determine if they could afford a bigger house and a bigger mortgage by pretending like they had made the leap. The trial phase helps to figure out how much of a strain making the increased financial commitment would be on a day-to-day basis. It is always easy to make a budget on paper. You cut a little bit of this and a little bit of that. However in real life, your daily happiness quota might just hang on being able to afford that extra manicure every month. Or knowing that you can see a movie on a whim without breaking the bank.
Financial planning, I am learning everyday, should not be about living a miserable life now to reach some happy place later. Financial planning has to balance current needs and WANTS with future needs and WANTS! This is why I think practicing increasing my financial load will help me determine if I am ready or not. Practicing would mean figuring how much extra moving into a new house or buying a new car would cost me monthly. The extra is then deposited into my savings account. In about 3-6 months, I will be able to determine if the extra commitment is livable. At the end of the trail period, I am rewarded with more money in my savings account that I can use to cover short term expenses of either buying a car or moving house.
Do you have any goals that you need to practice for? Tell me in the comment section.