Economics Editor, The Age
Personally I do this for most purchases (on most occassions).But I am sure that a lot of people do not, particularly when it comes to buying very expensive things (houses, furniture, TV's) using CREDIT/DEBT.I think this is particularly because there seems to be a disconnect with the idea of credit (money I don't have) and its real value (interest and principle payments).I really think this flowchart should be provided in schools.
'explains how to use it'.a) learn how to read englishb) learn what arrows meanc) apply acquired skills to interpret. et voila!
I like this, but it could do with another box: "Can I borrow it from a friend, for long enough to get the job done?"
How sick is this from the SMH?''Sure I love the dollar at the moment. It has reaffirmed my faith in humanity.''http://www.smh.com.au/business/born-to-party-us-is-no-longer-the-boss-20091015-gz79.htmlGo Gen XYZ!
In my view 'can I afford it' is the wrong question to start with. It may have been designed by a scarcity-obsessed economist and a not very creative one at that. Costs are emphasised over value, potentially losing you a lot of benefits. I would start with the benefits. If the benefits end up outweighing the costs, it gets you more creatively thinking 'how can you afford it' rather than a defeatist 'can't afford it' mentality. Eg if something costs $20 000 but gives $100 000 benefits, then surely that's a better deal than blowing $2000 on something with no long-term benefits? My alternative decision tree is: Q1. 'Will I benefit from it/Do I need it (or is it merely a want)' 1a. If no benefit/need, don't buy. 1b. If there is a benefit/need, go to 2. Q2. Is this item the best value way to satisfy the need, or is there a better alternative? 2a. This is the best item. Go to 3.2b. There is an alternative. Return to 2. Q3. Can I afford the item? 3a. Yes. Go to 6. 3b. No. Go to 4. Q4. Can I make changes that will allow me to afford this item? Eg - Save up until you can buy it- Work more- Borrow money to buy it- Give up something else (of lesser benefit) so you can buy it4a. Can now afford item. Go to 5. 4b. Can't afford item. Q5. Is the item and its benefits worth the sacrifice? 5a. Go to 6. 5b. Don't buy. Can't afford it or it is poor value. Q6. Is full permanent ownership of the item best for you? 6a. Yes. Buy it. 6b. Maybe not. Consider alternatives like hiring, borrowing or buying/reselling.
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