How to tell if you can actually afford a major purchase: ‘Most people genuinely have no idea,' says self-made millionaire
Like many people, Callie and Travis think about their budget on a monthly basis, rather than an annual one. In doing so, they wound up with purchases — like the trip and the awning — that may have seemed affordable in a month when they had a little extra income. However, it might not have been the best use of that money long-term.
"In order to design your rich life, you have to know your numbers," he said. And for people like Callie and Travis who want to pursue entrepreneurship, that's even more important. "Until now, they would go on trips, charge up a bunch of stuff, and then get surprised at how much it all cost," Sethi said.
"I would rather you add more money to the budget and come back with a little bit of extra that you didn't spend rather than get surprised with an extra $1,800 you didn't plan for."