Can You Afford It? There’s An App for That.

A new tool helps users decide whether they can buy a new car, vacation home, or outfit.

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If you have your eye on a new car or luxury vacation but you’re wondering whether you can really afford it, a new app can help you decide. “Can I Buy?” designed by the husband-and-wife team behind the Massachusetts-based developer Sqube, tells you whether or not you should purchase the item of your dreams after making calculations based on your savings, income, expenses, and debt.

The app is reminiscent of Suze Orman’s popular show segment, “Can I Afford It?” A viewer explains his financial situation and what he wants to buy, and Orman denies or approves the purchase. But unlike Orman’s segment, which is available to only a select few chosen to be on her show, anyone can download the “Can I Buy?” app for $1.99.

Beena Katekar, one of the app’s creators, along with her husband, Sudhansu Samal, says she got the idea for the app after going shopping with her five-year-old daughter. “Every time you take her to the shop, she wants to buy a toy. We kept saying, ‘no, no, no,’ and she asked, ‘Why not?’”

To answer their daughter’s question, Katekar and Samal made a simple program on their iPhones that compared how much money she had in her piggy bank to the cost of the toy she wanted. If it costs more than the amount she had saved, the program said, “No.” But if she had enough, it said, “Yes.” That soon made trips to the store easier, says Katekar, because “it’s not mama and papa saying no, it’s the app saying no!”

Katekar and Samal soon worked to develop a more complex app for grown-ups. The current version asks the user to enter total monthly income, monthly expenses, retirement savings, other savings, credit card debt, other debt, and any investments. Then, the user names his dream purchase and how much it costs, and the app offers an answer: approved or denied. A brief explanation tells the user that he simply doesn’t have enough liquid savings, or he has too much debt.

When I told the app that I wanted to buy a $1,500 diamond ring, that I earned $3,000 a month and pay $2,000 in expenses, and that I have no debt, no investments, and $25,000 in savings, it smiled on my purchase: “Approved,” it said, because my liquid savings exceeded nine months of expenses and my monthly income exceeded my expenses. (It did add, though, that I should ramp up my retirement savings, because at age 32, it said, I should have accumulated $67,294 already.)

Then, I tested it with a more indulgent question. Could I buy a $25,000 new car, with the same financial stats? It approved that purchase, too, for similar reasons. But when I tweaked my stats to say I was carrying $2,000 in credit card debt, it quickly reversed course: I could no longer afford the car, it explained, because I lack sufficient liquid savings (perhaps it subtracted my debt from my savings account).

The app suffers from a few quirks. When I had no credit card debt, it approved me to buy a $100,000 sports car, even though I said I was only earning $3,000 a month, because I had more than nine months' worth of savings in my bank account and my monthly income exceeded my expenses.

The app could also benefit from better explanations for its reasoning, a shortcoming the developers say they are working on. “The feedback is that some people are not clear on why [a purchase] is denied or approved, so we will add more clarity on that. We are refining it every day,” says Katekar.

Numbers and logic are one thing, but could the app ever incorporate higher-level sophistication, such as helping a user determine if a purchase is in line with his values and bigger goals? I might be able to afford a new diamond ring or even a sports car, but if my passion lies in travel, should I buy those more materialistic items? Katekar says she would like to eventually incorporate that kind of higher-level thinking into the app.

In the meantime, while the app feels as though it’s missing some complexity, it’s still useful as a handy check-up for anyone mulling over a big purchase. At the very least, Katekar points out, it forces users to collect their own financial data so they can enter it into the app, such as their total retirement savings and expenses. And when it comes to denying children’s shopping requests, it’s always easier to blame the app.

Twitter: @alphaconsumer