“Can I afford it?” is a natural question to ask before making a large purchase, but I try to take it a step further.
For example, if I’m going to be taking a trip, I take a look at things beyond the cost of plane tickets and hotel rooms. There’s also spending money, meals, and the little unexpected expenses that always seem to crop up. Sometimes there’s also the cost of missed work or lost income to take into consideration.
If I’m going to be buying a physical item, I try to take all of the costs associated with owning the item into account. Sometimes it’s not the item itself that’s expensive, but the fees that go along with this.
A good example of that is the “free” cell phone you can usually get by signing up for a two-year contract. How much will that free phone really cost you? Is the service still worth it to you when you look at the cost as a whole? Are there any other associated expenses to take into consideration? (Insurance, accessories, etc.)
Finally, there’s opportunity cost. What else could you be spending the money on instead? What will you be giving up by making this purchase?
“Is it really worth it to me in the long run?” is a great question to add to “Can I afford it?”.