Posted on August 10, 2017
It’s only $20
I have a family member (who shall remain nameless) who I used to go shopping with at Costco. It was a social event combined with a grocery run and we had a monthly standing date to head out together. The problem with shopping with other people however is that they often influence your purchases. So while I may not pick up some widget when shopping on my own, when shopping with a friend I may be more likely to pick it up.
This person was particularly bad for my wallet because every time I picked something up she would say, “It’s only $20!” If I protested she would make a lengthier plea for her case, “You should treat yourself! You rarely buy anything for yourself!” So I would buy the widget and be down another $20.
Does anyone want to guess how many widgets I remember today? Yep: 0.
This is not an argument against treating yourself. While some people enjoy an incredibly lean existence by not spending except for in extreme circumstances, I am not that person. However, I want to be conscious about my spending and I want to make sure I get value out of the dollars I am shelling out. It’s about maximizing the pleasure you get from your purchases instead of just blindly buying something because you saw it and decided you needed it THAT SECOND. After all, you are an adult, not a kid at the impulse buy section at the checkout.
People who know me may laugh right now because if I have one motto, it is “throw money at the problem.” But throwing money at a problem requires you to actually HAVE money, and having money means not spending it on stupid crap because you are an impulse shopper with a monkey brain.
$20 is not $20
We often think of money as its face value but while we think we make, say, $50 000 a year, after taxes and calculating commute, overtime, wasted lunch hours & the clothes/makeup/work expenses we make way, way less. That larger discussion I will delve into another time but let’s calculate basic wages after taxes and deductions, assuming my current province of residence. It obviously doesn’t reflect all the possibilities in our progressive tax system but it will give you an idea of why $20 is not $20.
Assuming a regular 40-hour workweek, your gross hourly wage is $24.04 an hour but after deductions it’s only $18.80 an hour. You are essentially paying $5 an hour for deductions. So while you may mentally believe that you make “almost $25 an hour,” the reality is that you make less than $19. To spend $20 you have to work more than one hour to buy the widget. Tack on the sales tax and you are looking at $22.60 – a little less than 1 ¼ hours of work time.
The nickel and dime of it all
This post is really a think piece and not a discussion about what we value as individuals. I know some of you are saying to yourselves, “Cripes Tucker, just suck the joy out of everything why-don’t-you!?” but you aren’t seeing the bigger picture. The idea behind this exercise is to get you to really think when you are making purchasing choices.
Let’s face it as well: $20 is not just a one-time thing. In fact, chances are you are spending this a few times a week on impulse things that don’t really add anything to your life. If you do this three times a week in a year you are spending $3120 or $3526 after sales tax. That is 187.55 hours of after-tax work, or 4.68 weeks – more than A MONTH. You are spending a month of your life, per year, on crap you probably don’t remember at all.
Conversely, I bet some people reading this have little-or-no long term savings, either for emergencies or for retirement. Imagine if we put that $60 a week ($240 a month) away in long-term savings at a meager 4% interest rate:
Any guesses how much that will be over time? Let’s look:
You read that right: in 20 years you will have almost NINETY-THOUSAND dollars for the low, low, price of paying attention to what you really want.
I am not advocating you suck the joy out of life by never, ever spending money. If we are all honest with ourselves we can all think of a time where we made a purchase that we regretted or that was subpar in some way or another. By being conscious so that we enjoy our purchases can turn out to be big wins long-term. So the next time someone tries to get you to buy something you are indifferent about, “Go ahead! It’s only $20! Treat yourself!” you can smile and think to yourself, “Well actually, that may be $90000.”