Have you considered the true costs of all the little things you buy in life?
Do $.99 paper clips really only cost $.99? The answer is no.
For any given item, whether it be a book, a toaster, a new piece of jewelry, or a new riding mower for the lawn, there is a cost that goes well beyond the physical item and that cost will be paid for in time - your time.
Let's look at something trivial, a new toaster. Purchasing a toaster isn't generally considered a complex task but there are choices. Perhaps you want to read a review of various toasters online so you spend an hour searching for toasters, evaluating features (will it handle bagels?), checking a few prices ($229 for a home toaster, really?), and reading reviews.
Okay, you've selected two toasters around $50. You know you could decide to buy it online but you also know that if you don't like it, then it's a hassle to get it to the post office and ship it back. Besides, you'd like to see both models first, so you choose to buy it locally. Add at least an hour for a trip to the store to buy the toaster and come home.
What Are You Worth
So what did this simple and useful appliance actually cost? That depends on how you value your time.
I've always had the idea that my personal time should be valued at least at the same rate as what I can earn working for someone else. The time is interchangeable, to some degree. If you worked overtime, a second job, or picked up some freelance work, you'd get paid. You could choose to do these things but you choose to forego that extra income to have a personal life.
Even if you are currently unemployed or a stay-at-home mom or dad, think about what your rate would be if you were working.
When viewed this way you can see that your personal time has a specific monetary value. Take a moment and calculate your hourly rate.
Have you got your hourly rate? Great. To keep things simple, I'm going to assume the use of dollars in my examples.
Do you value personal time more highly than work time? The fact that you invest in your personal life implies that you do. If you didn't you'd just go find more work. What you want to know is how much extra money would someone have to pay you to get you to give up doing something in your personal life. What's the true cost of going out with friends or doing something with your children instead of going to the office for a project? Even if you're unemployed, you probably have a price you would put on your personal time. Set your price and, to make my examples real to your personal experience, enter your personal hourly rate here (this information will not leave your PC and is not saved anywhere):
Technical Terms: Acquisition Cost
Let's do some math. The true cost of the toaster is $50 (toaster itself) + 2 hours X $40 per hour = $130. That's pretty expensive, when you start to look at it this way.
The costs to buy things aren't just the costs of the things themselves but the acquisition cost, too. The less expensive the item, the higher the relative acquisition cost.
Think about buying a box of paper clips. It costs $.99 for 100 large paper clips, less than a penny a clip. Even a quick trip to the office supply store can take an hour out of your day between traffic, waiting in line, and searching the store for the items you want. Those $.99 clips really cost you $40.99.
Technical Terms: Opportunity Cost - Personal Style
Now you might be saying, "Yes, but I needed a new toaster and paper clips." That's fine. What you just did was ask and answer the essential question:
Is it worth the true cost?
The true cost isn't purely financial. It's about life and lost opportunities. What else would you have done with your time instead of going to get a toaster and paper clips? Could you have spent time with your loved ones? Gotten some much-needed exercise? How about working on the Great American Novel you put up on the shelf? It might not seem like much but you probably spend many hours each week on small tasks that have a big price. Putting a monetary value on your time allows you to see that time clearly and make rational decisions about the true value of things.
It may well be that the value of a nicely toasted bagel is high enough for you to spend your valuable time researching and selecting a good wide-slot toaster and that paper clips are essential to your organizational mental health so I'm not suggesting that buying these items is in itself a bad thing.
What is important is asking yourself the question, "Is it worth the true cost?"
While some may consider going shopping for toasters and paper clips fun, I'm guessing that's not at the top of your bucket list. So what are you supposed to do?
First, look at whether or not you need something. Is it really necessary? Do you need another or a new (insert item here)? What is the true cost of that thing? What else could you do with the time that would be better?
Let's take another example, this time something more complex: booking a flight. How many hours are you going to spend searching for the best deal? If you spend another hour working on it that will cost you $40 more. Is it worth it? How many hours did you invest so far? Would it have been cheaper to have bought the slightly more expensive deal you found in the first 10 minutes? Ask the questions and get your life back.
Strategies To Regain Your Time
Here are a couple of strategies you can use once you have determined that the item is needed and worth the true cost:
- Narrow your research as quickly as possible by focusing on requirements, not cool features you won't use. Do you know anyone who actually uses all those fancy microwave features? Give me 'Add Minute' and 'Clear' and I'm happy.
- Pay attention. Research costs you money. Spend it wisely by focusing on getting the maximum value by adding the cost of your time to find the best deals.
- Select two, or at most, three competing options within your price range and forget about the others.
- Go with your gut. Once you're down to two or three choices, just pick one and don't agonize about it.
- Make a shopping list. And stick to it. Plan what to get and where to get it.
- Plan trips. Take your shopping list and figure out the best route to get all the items on it.
- Shop in batches. Wait until you have several items to get before going out to get them.
In our consumer-oriented world where you are bombarded by savvy marketers convincing you that buying is the only thing you should be doing with your life, stopping long enough to do the math can make all the difference between having a life - your life - and simply having things. It's not that the things are bad, only that they have a hidden cost, one that is much higher than you might have previously thought.