One of the greatest aspects of working with a bunch of financial analysts is that I’m surrounded by people who, well, analyze their finances! There are constant conversations around investing, saving, and determining the risk-to-reward of a variety of money matters.
Just recently, Steve, who sits across from me in the office, shared a way of thinking that he uses to determine the value of any purchase. And I love it!
The Minimalist Lifestyle
Steve and I began this conversation by discussing the books and blogs of Patrick Shulte. Patrick and his wife have maintained a minimalist lifestyle – selling off everything to travel the world via sailboat and travel van.
For someone like me, when you hear about these minimalist who are slaves to nothing, free to roam, and environmentally friendly, it’s tempting to immediately sell everything and shout “Freedom!”.
And then realize that I’m in trouble…
Why? Because my wife would get mad at me for selling our pots and pans, and I’d have to buy new ones. I’d be much less productive without my computer, and I’d have to buy a new one. And it would take me about a day to commute to work on foot, so I would have to pick up a new vehicle.
Therefore, while I may go extreme minimalist at some point, I probably shouldn’t right now.
However, just because we aren’t interested in starting life over with nothing, this doesn’t mean that we can’t begin to minimize our current lifestyle.
Minimalism for the Rest of Us
As Steve and I chatted about this minimalism, he shared with me a concept that he uses to determine whether or not he should buy, or keep, something.
Steve doesn’t just look at the cost of something, he looks at the cost per use. In other words, if he buys a $500 guitar and only plays it once, that guitar has cost him $500 for one use. However, if he plays it every week-day for two years, than the guitar only costs $1 per use.
By calculating the cost per use of a purchase, you can determine its true value.
This is a great way to look at every purchase, as it can keep you from ending up with a bunch of junk that you never use.
Sometimes, It’s Better to Rent
In America, the general consensus has been that owning is better than renting. If you rent something, you are paying for someone else to own it. If you buy, it, then you are “paying yourself” (kind of).
While this is generally true of homes and vehicles, there are other purchases where this may not be the case.
During the summer there are three weekends where you see hundreds of motorhomes and trailers on the roads – Memorial Day, 4th of July, and Labor Day. The rest of the year, the highways are very sparsely sprinkled with these portable homes. Where are they the rest of the year? In storage.
I bet, if the casual motorhomer did a cost-per-use analysis of their RV, they would determine that it would actually save them money to rent instead of buy. Once you account for depreciation, taxes, insurance, storage and maintenance, the several hundred dollars a day to rent may actually put you financially ahead.
Not only that, but knowing that someone else is responsible for taking care of the RV could make many family vacations much less stressful.
This same philosophy could be applied to boats, large equipment, and some household items. If you only use it sparingly, it may be better to rent or borrow (not steal), then to buy.
What Happens When You Do Your Own Cost-Per-Use Analysis?
If you take a moment to look back at some of your larger purchases, less used purchases, or on-a-whim purchases, what are you paying per use for those items?
Although selling the item may not be the right decision (unless you are paying to have it stored – then get rid of it fast!), this process can certainly help you and I make better purchasing decisions in the future.
What are your thoughts? Do you think it’s always better to buy than rent? Have you made purchases in the past that you semi-regret now? I’d love to hear your thoughts in the comments below!
Photo credit: here.