It's always hard to keep in mind the "real cost" of anything you purchase. By the "real cost," I don't mean the PRICE, but all the money that you need (a) to earn in order to be able to afford the purchase price, and (b) to be able to use, store, maintain, and ultimately get rid of the product.
It's often the price, however, that lures us to buy a product in the first place. For example: last Sunday's paper had an ad from Linens 'N Things advertising a sale on several Black & Decker appliances which one could get for $9.99 after rebate. One of the products listed was a toaster oven--something that has been on my "someday/maybe to buy" list for a while. Since I'm trying to cut down on my food expenses by eating out less and cooking more at home, and it's oppresive cooking in the summer heat (and I don't own an outdoor grill), I allowed myself to persuade myself to buy the grill.
Initial outlay $31.79 ($29.99 + 6% PA sales tax). However, I am in the 25% tax bracket, so in order to be able to lay out that initial expenditure of $31.79, I had to actually *earn* $42.39. I should also count the cost of getting to and from the mall--one simple way would be to estimate that the 16-mile round-trip on the highway would require half a gallon of gas, about $1.80 (or 2.40 if I again count the amount of money I had to earn in order to be able to spend $1.80). Another way would be to include not only gas but the presumed depreciation as well, and use the IRS mileage reimbursement rate, currently 44.5 cents per mile for 2006. Google maps indicates that it is 8.15 miles each way for me to drive to the mall, so by that calculation, it cost $7.25 for my trip to the mall (or $9.67 if I again apply the tax rate rule). Since this exercise is a demonstration of how much things cost beyond the price, I'll use the higher rate.
So: the amount of money that I needed to earn in order to afford my $9.99 toaster oven was actually 52.06 ($42.39 + $9.67). Presuming that I do in fact receive the rebate, the "real price" of the toaster was actually, $32.06!
This doesn't even count in the "opportunity cost" of what I could have earned if I'd been working rather than taking the afternoon off and shopping. I could technically include that in the analysis too--IF I would in fact have been working. But it's summer vacation and I wouldn't have been, so I won't extend the analysis that way.
However, I WILL extend it to look at the cost of OWNING and USING this new toaster oven. When I looked at it in the store, I realized that almost none of my existing cookware would fit inside it, other than my loaf pan. Linen's 'N Things doesn't sell special toaster oven bakeware, but Bed, Bath, & Beyond does. In order to be able to use my toaster oven, I ended up spending $17.99 at BBB for a casserole pan and a broiler pan, and another $10.59 at Michael's for a set of a dozen silicone muffin cups, since my oven is small enough that even the standard "toaster oven size" muffin tins wouldn't work. That's another $28.58 price/$38.11 after taking into account the money that I need to earn to afford the price.
Since I bought this on the same trip as the toasteroven, I won't add in any more gasoline price. Other things that I could add in but won't include the cost of having a place to have the toaster oven stand. Back when I moved, I bought a $35 (price) microwave cart at Target that fortunately has room for the toasteroven as well. Theoretically, I could add in any maintenance costs or getting rid of costs to the price as well, but I won't at this point.
So, in sum, my "$9.99" toaster oven REALLY requires me to earn $70.07 to pay for it.
Perhaps I wouldn't have been so quick to jump at the sale if I'd thought of that beforehand. But now I'll keep in mind that I need to save at least $70 by eating at home when I'd otherwise go out to eat in order to justify this expense!
The REAL cost of things
July 14th, 2006 at 04:08 pm
July 14th, 2006 at 07:23 pm 1152904992
July 15th, 2006 at 01:13 am 1152926027
You know - the "Hmmm, I had an idea so I haveta buy it syndrome. *lol*]
Well - I did use it for the first ... well, let's say 3 weeks but have only got it out once since then to use it.
I too should have stopped before hand and really thought about the purchase.
One of these days ...
July 15th, 2006 at 01:23 am 1152926596
Jennelle, check back with me & see if I'm still using it in 3 weeks! That's a test for sure. So far I've used it for every meal since I got it but that's still the novelty effect. We'll see if it lasts!
July 15th, 2006 at 02:45 am 1152931534
July 15th, 2006 at 04:26 am 1152937591
July 31st, 2006 at 10:53 pm 1154386425
I love articles like this one! It should help us get into the process of actually THINKING before we slap down our dollars! Good post!!