Unless you are advertising for pure brand awareness, or to generate traffic that cannot be accurately measured in any way, your advertising spend should ultimately be measured against its returned, often referred to as the Return on Advertising Spend (ROAS) or, more often in AdWords as the Return on Investment (ROI). In very simple terms this means that if your advertising is working as well as it can - and this includes your website - then what you spend should be governed by this ROI, not simply by what you can "afford". I've tried to show this concept in the following diagram...
The only time the term "afford" should come into play is where a campaign is new and has no reliable data upon which to make decisions (shown above as the period of 2 weeks data collection). Here you may have to consider any spend as "lost" since you cannot be sure of a profitable return but even here it is still important that the test is fair. Throwing £100 at a Campaign for a fortnight (less than £10 a day) then announcing it a failure may miss the opportunity for a £200 a day Campaign to be a roaring success. Success with AdWords is as much about exposure as it is clicks and it's important that any test captures a respectable proportion of the available coverage.
Imagine a campaign of putting flyers under car windscreen wipers in a large car park. If you put flyers under only 20 cars in a 1000 car lot, and only do it once, your chances of sales are dramatically reduced from putting flyers under 800 car wipers and doing so 10 times a day.
Think about why your daily budget is what it is, what your measurable income is from AdWords, then consider if you shouldn't be making some changes.
AdWords Management Consultant, a Google Partner, based in Dorset, UK, but working worldwide... I'm very proud of having been a Top Contributor for AdWords since 2006 and enjoy being able to help others improve and develop their AdWords usage. I now work primarily as an AdWords Manager & Consultant. You can read my eBook "AdWords Preschool", just search on Amazon.