3449: What is the Real Cost of Buying Something by Mr. Finer on Financial Independence and Freedom

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[00:00:30] This is Optimal Living Daily. What is the Real Cost of Buying Something? By Mr. Finer of MrFinder.com. And I'm Justin Malik. This is the show where I usually read to you like an audiobook, sort of, but on Sundays I think it's nice to share an episode from a different podcast where we read articles to you. And today's comes from Diana with Optimal Finance Daily. So with that, let's get right to the bonus episode in Diana's commentary as we optimize your life.

[00:01:02] What's the Real Cost of Buying Something? By Mr. Finer of MrFinder.com.

[00:01:09] The real cost of an item is not just the number that appears on the price tag. The real cost.

[00:01:18] Before buying anything, it's important to know the cost of that item. Not the amount listed on the price tag, but the actual cost. The actual cost to you.

[00:01:28] The philosopher Thoreau said, quote, the cost of anything is the amount of life you exchange for it, end quote.

[00:01:37] This quote reframes the buying decision. You don't pay for an item with money. Instead, the real cost of an item is the amount of time, basically the amount of your life, you spend to make the money needed to buy that item.

[00:01:50] If an item costs $1,000, you're not paying $1,000 for it. You're paying the amount of time of your life that you'll need to earn $1,000.

[00:02:01] If it takes you a week to earn $1,000, you're exchanging a week of your life for that item.

[00:02:07] Nothing in this world can replace time. You only get one life, and that too with a limited amount of time.

[00:02:15] Every buying decision, therefore, is not about paying with money. Instead, every buying decision is about paying with a part of your life.

[00:02:24] A coffee a day. I used to buy a cup of coffee on my way to the office and another one in the afternoon.

[00:02:31] After hearing the previously mentioned quote, I started thinking, how much of my life am I exchanging for this coffee?

[00:02:38] And is it really worth it? A cup of coffee at Starbucks costs about $2.50.

[00:02:43] Assuming an average lifespan of 80 years, one would end up spending $109,500 on coffee.

[00:02:51] 60 years of adult life times 365 days times $2.50 times two cups.

[00:02:59] The average income in America is about $50,000.

[00:03:02] So in effect, one would end up exchanging two years and two months of their life for the coffee.

[00:03:08] Now, you may love your coffee, and in that case, it's perfectly fine working two more years to enjoy it.

[00:03:15] The key is to think of this concept before buying anything.

[00:03:19] If you're okay with exchanging part of your life for a given item, then by all means, buy it.

[00:03:25] The process of thinking in these terms is important, not the outcome.

[00:03:30] Going back to my coffee example, when I used this process, I didn't give up coffee completely.

[00:03:36] Instead, I reduced my coffee consumption from two cups to one cup a day.

[00:03:41] I was okay with about half of the cost.

[00:03:45] Upfront cost versus total cost.

[00:03:48] Coffee is a relatively inexpensive item, and it can still cost more than two years.

[00:03:54] People buy many more expensive items without even thinking about the extra years that will add to their working life.

[00:04:00] And that's why most people are not able to retire early.

[00:04:04] And it's not only the sticker price we pay while buying something.

[00:04:09] Several other costs follow.

[00:04:11] For example, consider purchasing a car.

[00:04:14] In addition to the cost of the vehicle, there are costs for servicing, insurance, gas, parking, running costs like a car wash, tire change, air, tolls, registration, etc.

[00:04:27] There are non-monetary considerations that we should also account for with every purchase.

[00:04:33] In the coffee example, it's not just the cost of the coffee itself.

[00:04:37] It's also the time and gas spent on getting the coffee, the sugar and dairy in the coffee, the lack of sleep it causes, etc.

[00:04:46] So the actual cost of something is usually much more than the upfront cost.

[00:04:51] We should factor in all of these costs when considering the amount of life we exchange for something.

[00:04:58] About earning money.

[00:05:00] The previously mentioned quote does not apply only to spending, but also to earning money.

[00:05:07] For example, when you take up a new project that pays $1,000 for a week,

[00:05:12] you have to make the decision, is it worth giving up a week of your life to earn that $1,000?

[00:05:18] If it is, then you should do the project.

[00:05:21] If not, then don't.

[00:05:23] Many people go through their entire life without asking this question.

[00:05:27] Living your life making money to spend money is like being on a hamster wheel.

[00:05:31] There's no progress and it always ends in the same place.

[00:05:35] Thoreau himself believes that one should only earn as much as needed to do the things one wants to do in life.

[00:05:42] For him, earning money just to be able to spend money did not make any sense.

[00:05:47] Quote, there's no bigger blunder than people who spend the greater part of their life getting their living.

[00:05:55] In conclusion, saving money is not easy.

[00:05:59] It's much easier and more fun to spend money.

[00:06:03] However, saving is the most important way to get to financial independence.

[00:06:08] Over time, I've worked on saving more and spending less.

[00:06:12] And this quote was key in reframing how I thought about spending.

[00:06:16] You just listened to the post titled,

[00:06:23] What is the real cost of buying something?

[00:06:25] By Mr. Finer of MrFiner.com.

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[00:07:36] Reminding ourselves that when we're spending money,

[00:07:39] we're really spending the amount of time it took to earn that money

[00:07:42] is a great way to spend more intentionally.

[00:07:45] And when you do spend money,

[00:07:47] it's worth it to make sure you're getting an appropriate amount of value from it.

[00:07:52] For example, a night out at a restaurant could easily cost me $120.

[00:07:58] And not that I never eat out,

[00:08:00] but I don't do it often because I rarely feel that I'm getting the appropriate value for this money.

[00:08:06] I usually ruin the experience by reminding myself that I could have made something better at home.

[00:08:12] And not to brag, but I'm a really good cook.

[00:08:15] And entertaining is one of my favorite things to do.

[00:08:18] I can save money and have a better experience by inviting my friends to my house for dinner.

[00:08:23] And that $120?

[00:08:25] I would much rather spend it on a massage.

[00:08:28] The value I get from massages is well worth the cost.

[00:08:32] I also think spending becomes more meaningful and intentional when we align it with our values.

[00:08:38] If you value quality time with your family,

[00:08:41] and yet you're allowing yourself to fall victim to the excessive consumerism

[00:08:46] that forces you to work more than you'd like,

[00:08:49] then your spending isn't aligned with your values.

[00:08:52] If your material needs were less,

[00:08:55] perhaps that would allow you to work less and spend more time with your family.

[00:09:00] And that's another episode of Optimal Finance Daily.

[00:09:03] Thank you for your support and for listening every day, of course.

[00:09:06] Have a great day, and I'll be back with another post for you tomorrow,

[00:09:10] where your optimal life awaits.