True cost of stuff you buy per month

[dachs]

Dear Mustachians,

I just made a spreadsheet that lists the stuff I bought lately, how long I might use it (or have used it so far) and the price. Then I can calculate what that stuff costs me every month on average. For example: If my new trimmer (100$) last for 5 years that would make 1,67$ per month. Pretty good, huh? I find that useful because it helps to make a more reasonable decision between more expensive but higher quality stuff instead of cheaper lower quality things assuming that higher quality will last a lot longer. For me it is totally reasonable to use that trimmer for 5 years whereas it might not be the same with new sunglasses since they will be quite out of fashion after that time (maybe).

It also shows how much money you will have to "save" in total every month in order to just maintain the stuff you already own since you will have to replace it eventually.

What do you think? Do you also do that? Do you have any other suggestions about how to do that?

[forummm]

If you track your actual spending over time it will tell you how much you can expect to spend in the future. And that amount tells you how much you have to save in order to fund that expenditure in perpetuity (more or less).

I find that if I just don't buy stuff, I don't need to replace it :)

[ender]

If you track your actual spending over time it will tell you how much you can expect to spend in the future. And that amount tells you how much you have to save in order to fund that expenditure in perpetuity (more or less).

I find that if I just don't buy stuff, I don't need to replace it :)

Yup. One of the main reasons we are tracking expenses is so we can get a better guesstimate of what we actually spend over a year on average. It doesn't help if you save 50% one month if the next one is -50%, etc.

[dachs]

That's true, I track my spending like that as well. But in case of the hair trimmer I'd have to wait for 5 years in order to get the real monthly costs. Right now it would cost me almost 17$ per month on average until now or 8,33$ this year. So my calculation is particularly useful for stuff that is quite expensive but lasts a lot longer than a year.

So I think (at least for me ;) ) it is a nice way of thinking about that kind of stuff and ask myself something like "Is this item worth a subscription of 8,33$ per Month for a year?" Or something like that. My expense tracking goes back until late 2013 and that was after I had bought my last trimmer :)

[sheepstache]

I think this is a good idea. It's too easy for me to look at a month of low expenses and be like, yippee for me I didn't spend anything. But then if I calculate my cost of living per day as accrued over my lifetime, I see what an expensive little beast I am. Dental care alone puts me over the COL you hear about in developing countries where people make like a dollar a day.

I think it also helps avoid grist for the internet police mill who, reasonably, point out that saving money is easier if you come from a place of affluence to start with.

[tonysemail]

I do this for large and infrequent purchases like a car.

[nereo]

That's true, I track my spending like that as well. But in case of the hair trimmer I'd have to wait for 5 years in order to get the real monthly costs. Right now it would cost me almost 17$ per month on average until now or 8,33$ this year. So my calculation is particularly useful for stuff that is quite expensive but lasts a lot longer than a year.

So I think (at least for me ;) ) it is a nice way of thinking about that kind of stuff and ask myself something like "Is this item worth a subscription of 8,33$ per Month for a year?" Or something like that. My expense tracking goes back until late 2013 and that was after I had bought my last trimmer :)

Sure - use whatever method works well for you.  It's a good method for including expensive items you only buy every few years like a car or a new roof.  The two difficulties I see with your method are 1) how long something like a hair trimmer will last is at best a wild guess - will this trimmer last me 6 years or will it break after 9 months? and 2) for many of the items i purchase for the 'long term' I have no idea if I will even both to replace them (will something better come along?  will I still need a hair trimmer when I am 40?) and what they might cost years from now.

That said, I do find it very useful to consider an objects cost over it's expected life-span and then judge if it's worth it.  Single-use items and subscription services suddenly seem incredibly expensive when I tally what they would cost me over several years.

[forummm]

That's true, I track my spending like that as well. But in case of the hair trimmer I'd have to wait for 5 years in order to get the real monthly costs. Right now it would cost me almost 17$ per month on average until now or 8,33$ this year. So my calculation is particularly useful for stuff that is quite expensive but lasts a lot longer than a year.

So I think (at least for me ;) ) it is a nice way of thinking about that kind of stuff and ask myself something like "Is this item worth a subscription of 8,33$ per Month for a year?" Or something like that. My expense tracking goes back until late 2013 and that was after I had bought my last trimmer :)

I'm not saying it's a bad idea. Do what works for you.

Just suggesting that if you track over 5 years you will get he trimmer in there as an average cost. You will also get the other random stuff you buy too. I find that most months there's something non-routine being purchased. So over time you can see how much that ends up being on average. And whether you want to continue buying those particular things or not.

[Jakejake]

I do this to win arguments about budgeting. Someone called me out for living on less than $1 per day for food per person, but having an "extravagant" lifestyle because they saw our riding mower/food dehydrator - the accusation was that I knew nothing about budgeting.

I did the math and given that we spent $1800 on the mower, kept it 18 years, and then sold it for several hundred dollars, it cost $89 a year ($3 per week in mowing season for the convenience). The amount we save on groceries over the typical american family of two is $5500 per year - enough to buy a brand new riding mower every year and still come out way ahead of most families. 

Figuring out this stuff helped confirm for me how much the nickel and dime stuff that other people wave away as insignificant really adds up!

[Rezdent]

I use this as a method of evaluating potential purchases but I prefer to use cost per use instead of cost over time.

The hair trimmer might last for five years, but if I only use it once then it's very pricey.
Cost per five years: 1.67/month
Cost per use if only used once: 100.00

I think of "true cost" as including the running costs and maintenance.  If the trimmer is electric, true costs will include electricity used and possibly oiling and blade replacement.  It also includes storage costs, which are usually hidden in what someone is paying to live in a place large enough to house things like hair trimmers.
On a lot of purchases the running and maintenance can make or break my decision.

Even if the Ford Escalade were the same purchase price as a Honda Fit, the running costs would favor the Fit.

[dachs]

Rezdent, thank you for that interesting idea. I hadn't thought of that like that yet, but it really does make sense to me now.

However, that would make a brand new iPhone look cheap. 700$ for two years, probably 30 uses per day (if not more...) makes 0,032$ per use. Hairtrimmer: 100$, 1 use per day, 5 years of use 0,054 $ per use.

[Arktinkerer]

Figure the cost per use as another mechanism--A hair trimmer for example, how many haircuts until you break even?  Is that wiser than going to a barber school for your haircut?

MMM looks at the investment value over some period of time. 

I often look at the cost of how many hours I have to work to pay someone else to do a task for me.  Even if the $/hour for a task is the same as your pay, you still have to pay taxes on those earnings so unless you can't do the task or its cheaper to do it yourself unless the cost is less than your hourly wage after taxes.  Honestly not a lot of tasks fit this requirement for someone of average intelligence who is willing to do the work.

Other items to include in the cost of things is the cost of operations and ownership.  Is that Chevy Volt really a better buy than an old VW bug?  Figure in insurance, taxes, resale value, maintenance costs, and how many miles you really drive.

[rocketpj]

I've been noodling around with a spreadsheet that looks at the true cost of things in an 'impact on FIRE date' way.

So input your assumptions - Rate of Return, Inflation, current savings rate, current total savings, projected expenses, SWR etc. 

Then, when faced with a purchase, enter the amount and see what impact it will have on your ultimate FIRE date. 

Who would buy a jet ski for their vacation if they knew it would mean working for an extra year or two?

[Roots&Wings]

It also shows how much money you will have to "save" in total every month in order to just maintain the stuff you already own since you will have to replace it eventually.

What do you think? Do you also do that?

I'm doing this now for car maintenance/repairs. Have some big ticket items coming up in the next few years (e.g. timing belt, tires) along with the regular ongoing maintenance items (oil filter, automatic transmission fluid, brake fluid, engine coolant, air filters, etc) and some replacement items like the lower control arm bushings. I'm likely grossly under-budgeted for car maintenance/repairs at the moment.

So thanks for posting this! I'm putting together a spreadsheet to try to estimate these costs better moving forward.