Practical biblical stewardship advice, tools, tips, and techniques


Affordability Index


To access the Affordability Index Calculator immediately, click here.


Affordable is Subjective

Affordable means different things to different people. Affordable, according to Merriam Webster Dictionary, means being within the financial means of most people. However, the dictionary doesn't define financial means. I define affordable as spending funds without acquiring or committing to acquiring debt. With debt easily available nowadays, it's essential we keep this affordable definition in mind. Unless we have a firm grip on affordable, we cannot be effective as God's stewards.

Affordable Housing

Affordable housing should be viewed separately from affordability of other buys. Your house is likely to be your most expensive lifetime buy, and it's unlikely you could buy it without debt. Housing affordability became widespread in the 1980s in Europe and North America. Today, it is a major issue. Here is my simple checklist to decide affordable housing. Ensure each of these criteria exists before you conclude you can afford to buy a home. Don't let government enticements by lowering deposit requirements, cutting interest rates, and so on, sway your decision.
  1. You are debt free.
  2. Working with a monthly budget.
  3. Know your housing needs such as size of housing. For example, will the family size increase shortly?
  4. Have at least 20% down payment for a conventional mortgage and so avoid mortgage insurance (in Canada).
  5. Understand and accept sacrifices needed to pay the full yearly housing costs. What might you have to give up to pay these costs regularly?
  6. Understand current and projected state of the economy and housing market, and feel reasonably comfortable you will be able to fund your total housing expenses for six months, even if you were laid off. This article on speeding up mortgage payments might help you.
  7. Understand the best approach for mortgage life insurance.
  8. For a couple, husband and wife are on the same page.

Affordable housing, therefore, means the ability to buy the house so that the total estimated ongoing costs, including a mortgage, do not compromise current and projected household budgets, plans, and commitments. Essentially, affordable housing means carry a mortgage, but no other debt.

Affordable other than Affordable House

Affordable for all other items is the ability to pay for that item without debt, and not compromise current and projected household budgets, plans and commitments.

Who Decides Affordability

Governments try to define affordability for us. They don't care if you add to your debt; they want you to spend! They want households to use the same reckless Ponzi-style funding they use to waste taxpayers’ monies. Reject their approach. Each household member should decide if he or she can afford to spend. You decide affordability.

What Happens With An Unaffordable Home

To get a grip on this challenge, separate two decisions. First, can you afford your present home? Second, if no, how can you get affordable housing?

If you can’t afford your present home using my definition, move directly to question two. Don’t try to juggle the numbers by lowering or deferring a few months' mortgage. This does not deal with the root cause. Look at your lifestyle. Understand renting can be a virtue. Some ownership arrangements give home owners significant risks with no equity. That’s why so many mortgages are higher than home values. While mulling over these two questions, review this article about when you're better off renting than buying a house.

If you are in an unaffordable home consider lifestyle counseling. Talk with your pastor or relevant charity to help to prepare you to live in a rented home. This could be a long journey. But, if you reject the victim path and learned from your errors, it could be rewarding. Meanwhile, reflect on these seven housing myths.

Affordability and Debt Free Lifestyle

Today, people don't consider affordability before spending. Instead, they look at payment terms. They think the item is affordable if they can pay the first few months installments—even if they take on debt. Considering the affordability of items before buying is crucial to living a debt free and stress free lifestyle—I suggest the overarching goal for each household should be to live a debt free lifestyle. That's why I recommend that households consider the affordability of each item before committing to spend. This led me to develop the Affordability Index.

I repeat, excluding your home, you can't afford to buy an item if you must borrow to get it. To buy a vehicle, a fridge, stove, or other consumer item, pay cash, including using a credit card and paying the full monthly balance.

Affordability Index Calculator

The affordability index calculator will help you answer this questions: Can you afford your lifestyle? If you want to be a good steward of God's money and practice effective stewardship, you need to ensure you can afford to spend before you spend. The affordability index is a Christian financial management tool designed to help you stay away from debt. If you use it routinely, you will live debt free.

We developed the Affordability Index to help folks decide, based on preset conditions, if they can afford major outlays. We defined affordability earlier as the ability to buy consumer items without going into debt, and without compromising prior needed commitments. This procedure does not replace dependence on God. Instead, it's meant to help you clarify wants from needs so you might focus your prayers. Let Jesus be your final decision maker. The Affordability Index quantifies contemplated spending decisions based on our PLANE Spending Analysis that asks these five questions:

  1. Did I Plan this expenditure and include it in my budget?
  2. Will the expenditure increase my Loans?
  3. Are there realistic Alternatives to achieve my spending objective?
  4. Is the expenditure Necessary to achieve my spending objective?
  5. Is this the most Effective use of resources now, relative to my life goals and budget goals?

The Affordability Index has two preconditions. First, define precisely the spending objective. Why am I spending? This is the key, understanding why! For example, you might wish to change your car. However, that's not a good spending objective. The real issue is this: What are my current and medium term transport needs? This is a different question that could produce a different answer. Think about this carefully because poor spending objectives' definitions normally lead to excessive spending based chiefly on clever, seductive advertising.

The second precondition is to ensure the proposed spending conforms to the GAS Principle. If it does, answer the PLANE questions above based on a proper definition of your spending objective. After, fill in the Affordability Index Calculator below for the item you believe fits the objective. Decide to apply the Affordability Index to all spending on individual items greater than a predetermined amount. Husbands and wives should use it together. When you use the Affordability Index, always review Matthew 6:24-31. Recall Jesus' promise to supply our needs.

For more information on both the Affordability Index and the PLANE Spending Analysis refer to The New Managing God's Money-The Basics pages 225 to 237. There you will see suggestions to evaluate two exceptions; a car for work, and a special one-off item called a "vase". We would appreciate your comments.

What am I buying? What's my objective?

Why am I buying this?
(Don't assume you need an item being replaced. Re-justify it! Define the need generically: You don't need a car, you need transport, which the public system could supply!)

"PLANE" Questions Score Comments
Plan If you did not set aside funds for this, select "Not Budgeted".
Loans If you plan to pay by credit card, select "Unchanged" only
if you have reserved the cash to pay the balance in full.
Alternatives Is there an alternative to do the same objective? Not an alternative objective, but an alternative for this objective. This Index assumes you have identified the need to do the objective. It's merely helping to decide if you can afford to carry out this need.
Necessary Necessary for the stated objective.
Effective Is this the most effective use of God's resources now?
Seek to know God's will for you in this decision.
Even if you scored "0" for each item above consider this:
If you used these funds now, would it prevent you from doing a different objective?
Total Score  
Scoring System:

If the total of the five selected items is less than 6, you can afford this item.
If the total of the five selected items is "6" or greater, you cannot afford this. But, this is merely an initial guide, go to God and let Him guide you.

Print this Frame