[noirbot]

That seems like an unhelpful way of thinking about it. I always think about it as "I make X per Month. This thing costs Y per month. Is Y/X a reasonable amount of money to spend on a thing?"

By your logic, I earn "just $N per month" so I'll earn infinite money unless I'm fired. That's obviously not a useful way to budget, but neither is thinking about $5/month as "costs infinite money".

If, after taxes and mandatory expenses I have $500/month left over, then the proposition "Should I spend 1% of my discretionary money on this?" is a much more reasonable way to think about things until your financial situation changes. If I lose my job, or take a pay cut, then it's obviously time to consider cutting back unnecessary expenses, but otherwise, it's as "infinite" as my income.

[devney]

It is interesting to me that you have income and outflow so tightly coupled that you think in terms of "N% of income".

I did that for several decades. These days I take pains to decouple income and outflow. That is: I judge the expenditure on its own merits, whether I need or want it by itself, without regard to what % of income it might be.

Think of it like a leaky bucket: my paycheck goes in the top, and I control how much leaks out the bottom. Of course, I am lucky enough to have that luxury. Many people (most Americans) don't have enough income to decouple outflow from it, and are forced to think in percentages of income.

[noirbot]

Sure - there's benefits to both ways of thinking about it. It's less that I tightly couple them and more that I find, for a sufficiently low percentage of my income, it's not worth stressing that much about the expense.

My mental model is quite close to yours for larger purchases ($100 or more, generally), but for something whose monthly cost is less than my hourly wage, thinking too long about if it's really worthwhile is probably not a great use of my time.

[sifar]

>> Is Y/X a reasonable amount of money to spend on a thing?

The proper question to ask is sum(Yi)/X a reasonable amount of money to spend. If not, which Yi is not providing the desired marginal utility.