Affordology to the Rescue

Buy and Buy 

Students desperately need to know more than they know about money, but what exactly?

While a person will need more than a few financial skills over the course of a lifetime, we can cut to the chase when it comes to the college process by focusing on one particular type of money decision: purchases. The other things you can do with your money–giving, saving and investing–don’t have the same urgency. Students may not do any of these other things, but we do know young adults who go off to college must purchase a host of items, often for the first time. These include housing, groceries, clothing, transportation and yes, education. How then should a person approach this most urgent financial area?

Affordology? Never Heard of It 

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af·ford
/əˈfɔrd, əˈfoʊrd/[uh–fawrd, uh–fohrd]
verb (used with object)

1. to be able to do, manage, or bear without serious consequence or adverse effect.
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Enter affordology, the science of making bearable purchases. I first began putting metrics to the affordability of purchases some time ago in my role as financial advisor, financial ministry coordinator and All Around Good Guy when I realized misspending accounted for most of the need, waste and regret I ran into. Everywhere I looked, purchases had swallowed buyers, or as financial guru Dave Ramsey puts it, “they didn’t get stuff, their stuff got them.” I’ve been there myself: in a boat where I had good things to show for my efforts, but almost unbearably so.

How to address this? At the time, no purchase seems like a bad one, or we wouldn’t make it in the first place. But avoiding spending to play it safe leads to a dire, or at least boring, situation fairly quickly. Given that we have to spend, but that spending is dangerous, how then could we evaluate purchases ahead of time to know if they were going to stymie a person? With this question in mind, I began to examine a whole host of the buying decisions and behaviors of many people. After quite a bit of observation and calculation, basic patterns emerged. As it turns out, the positivity or negativity of a purchase can be predicted most of the time, and for three basic reasons.

I’ll spare you all the gory details, but I began to see that bad purchases

• interfered with greater objectives, and/or
• required more assets than the person had available and/or
• required an unanticipated level of ongoing expense.

Affordable purchases, on the other hand, didn’t do any of the above.

So What? 

None of this knowledge does us any good in hindsight except as a means of explanation. Like any science, affordology only matters if we can apply it to make our lives better. Fortunately, we can use the discipline to both prevent mistakes and to plan to make good choices. If we can narrow down our options according to a filtration method, we can then go into the experience or decision knowing ahead of time what the outcome will likely be.

In these ways I think you’ll find affordology quite handy for purposes of making college-related financial decisions.