Can I afford it? How to decide before you buy

You are looking at a pair of sneakers, a discounted flight or a new phone. You open your banking app and see a positive balance. It looks like you can. Two weeks later, the credit card statement arrives, the rent is due and the comfortable balance is gone. It feels like the money slipped away, but the problem was the question: "do I have money in my account?" is not the same as "can I afford this?".

Deciding on a purchase safely does not require a complex spreadsheet. It requires looking at the whole month, not just today's balance, and a few simple criteria to separate a passing urge from a sensible purchase.

In this guide you will learn to calculate your free money for the month, evaluate installments, use quick tests like cost in hours of work, and recognize when the answer is "not now".

Why your account balance is misleading

Your balance shows the money sitting in your account right now. It does not show what has already been spoken for. If your salary arrived on the 5th and rent is due on the 10th, a big part of that balance already belongs to your landlord. The credit card statement that closes on the 20th is also committed, even though it has not been charged yet.

There are three common traps:

• Spending that has not shown up yet: credit card purchases only hit your balance when you pay the statement. Until then, your balance looks bigger than it is.
• Forgotten installments: in Brazil, stores routinely split purchases into monthly installments, often interest-free (parcelado sem juros). The fridge in 10 payments, the course in 12 and the flight in 6 add up to a fixed amount that repeats every month, but we tend to remember them one at a time, not together.
• Annual and seasonal bills: IPVA (the yearly vehicle tax), IPTU (property tax), school supplies, car insurance and year-end gifts come every year, yet they still catch many people off guard.

So the useful question is not "how much do I have?" but "how much of what I have is still free?".

How to calculate your free money for the month

Free money is what is left after setting aside everything that already has a destination. The calculation is simple:

1. Start with your take-home pay for the month (what actually lands in your account).
2. Subtract fixed bills: housing, household bills, transportation, health plan, school.
3. Subtract planned essential variable spending: groceries, pharmacy, fuel.
4. Subtract the installments already running on your card or store payment plans.
5. Subtract what you decided to save: emergency fund, goals and investments.
6. Subtract what you have already spent on leisure and shopping this month.

The result is the ceiling for your next unplanned purchase. If you do not yet know how much you spend in each category, start with a month of tracking, as explained in our guide on how to track expenses. And if you want a reference for how much to set aside for wants, the 50/30/20 budget rule suggests 30% of take-home pay as a starting point.

Example with numbers

Juliana takes home R$ 5,200 a month. This is her month at a glance:

She wants a pair of R$ 600 headphones. Paying upfront, it does not fit: she would be R$ 180 short, which would come out of her emergency fund or her grocery budget. Split into 6 interest-free installments of R$ 100, the payment fits this month. But there is a hidden cost: for the next six months, her installments go from R$ 380 to R$ 480, and her monthly room for discretionary spending drops from R$ 720 to R$ 620. Instead of one decision, she is making six.

An honest way out: wait until next month, set aside R$ 300 in each of two consecutive months and pay upfront, or ask for a discount for paying in full. None of these options touches her emergency fund.

Installments: the payment fits, but can next month handle it?

Interest-free installments are useful when the item is necessary and expensive. The risk is in the pile-up. Each new installment is small, but together they become an "invisible rent" that eats into income from months you have not even lived yet.

Before splitting a purchase, ask three questions:

• How much do I already pay in installments each month? Add them all up. If that total already takes a meaningful slice of your free money, new installments will lock up your budget.
• When does the last installment end? Short-lived items, like seasonal clothes, should not be paid for over a longer period than you will use them.
• If my income dropped, could I keep up with these payments? Installments are debt, even without interest.

If the installment only fits because you are counting on your credit limit rather than your income, that is a red flag. A credit limit is not income; it is credit that must be repaid.

It is also worth remembering: if your statement is larger than you can pay and you pay only the minimum, the rest goes to revolving credit (rotativo), which in Brazil usually carries the highest interest rates of any consumer credit. Since 2024, interest and charges on revolving credit cannot exceed 100% of the original debt, but even within that cap, "sorting it out later" gets expensive quickly.

Five quick questions before you buy

In the store or with a full online cart, this checklist settles most doubts.

1. Does it fit in this month's free money without touching my emergency fund? If not, the purchase needs to wait or be planned.
2. Did I want this before I saw the ad or the sale? Desires created by an offer tend to fade fast.
3. How many hours of work does it cost? See the calculation in the next section.
4. Will I use it often? Cost per use says more than the price tag.
5. What will I give up if I buy it? Every purchase takes money away from something else, whether a goal, a trip or peace of mind at the end of the month.

Cost in hours of work and cost per use

Cost in hours

Divide your monthly take-home pay by the hours you work in a month. For Juliana, R$ 5,200 divided by 176 hours (8 hours a day, 22 days) is about R$ 29.55 an hour. The R$ 600 headphones cost roughly 20 hours of work, or two and a half full workdays. The question changes from "is R$ 600 expensive?" to "would I work 20 hours for these headphones?". Sometimes the answer is yes, and that is fine.

Cost per use

Divide the price by the number of times you will use the item. A R$ 400 pair of sneakers worn three times a week for a year (156 uses) costs about R$ 2.56 per use. A R$ 400 party outfit worn twice costs R$ 200 per use. Same price, very different value. This calculation helps justify quality items you use every day and question purchases you will rarely use.

When the answer is "not now"

Saying no is not failure; it is choosing something that matters more. Some signs:

• You do not have an emergency fund. Until you do, every surprise turns into debt. Knowing how much to keep in an emergency fund gives that goal a number.
• You have expensive debt outstanding. If you carry a balance on revolving credit, overdraft (cheque especial) or a high-interest loan, every real spent on something new is a real that keeps accruing interest against you.
• The purchase solves an emotion, not a need. Boredom, tiredness, frustration and celebration are common triggers. Noticing that already weakens the impulse.
• The month has only just started. Spending your free money in the first few days leaves you with no margin for smaller surprises.

"Not now" can also become a plan: set a monthly amount to save, create a specific goal and buy when the money is set aside. Buying with saved money is usually more satisfying and often earns you a discount for paying upfront.

Adapting the decision to your situation

The reasoning is the same, but the numbers change depending on your situation.

• Fixed salary: your free-money calculation is more predictable. Do it once a month, right after payday, and update it when a new expense comes up.
• Freelancers and variable income: use the average of your weakest months as income, not your best month. A purchase that fits in a good month can squeeze the next three.
• Couples: large purchases that affect the shared budget deserve a conversation first. Agreeing on an amount above which each person checks with the other prevents friction and statement surprises. See how couples split bills for ways to organize shared money.
• Getting out of debt: most of your free money should go to paying off the highest-interest debt. Non-essential purchases wait until the plan is moving.

Keeping your fun money in a separate account also helps: when that pot is empty, you have your answer.

How Otto helps

In Otto Finanças, the "Can I spend?" feature was designed for exactly this moment. You ask before buying, and Otto looks at the accounts you connected through Open Finance Brasil, your open card statements, budgets and goals for the month to give you an honest answer. If it does not fit, Otto tells you, explains why and suggests a way forward, such as waiting a few days or adjusting another category. Access to your banks is read-only, and the final decision is always yours.

Official sources and further reading

• Banco Central do Brasil, financial citizenship and education (in Portuguese)
• Serasa, content on budgeting and debt (in Portuguese)
• National Confederation of Commerce (CNC), household debt surveys (in Portuguese)