I am a firm believer in spending the right amount of money. I focus on price per use to determine the right amount of money to spend on something. My style on the journey to Financial Independence Retire Early is not to be frugal or minimalist. Instead my style is to identify what something is worth to me and pay that amount or walk away.
Buying things that you pay too much for is just wasting money. You will only make so many dollars in your life. Each dollar matters. Each dollar either needs to be put towards helping you survive, making you happy, or investing.
That’s where price per use comes into play. If you look at the price of something and then guess how many times you’ll use it then you’ll know it’s price per use.
I enjoy kayaking. I don’t go often. A kayak is $500-1000. It costs $10 to rent. So I need to use the kayak 50x before its worth it to me. That’s 5x a year for 10 years. I dont go 5x a year.
YMCA. Our neighbors are members of the YMCA. A family membership is roughly $800 per year. They had been members for years. My wife asked me if we could sign up too. We talked through how often we would go. I thought I’d go once or twice a month for treadmill in very bad weather. So maybe 6 times a year. She thought she would go a couple times a week for fitness classes. So we projected we’d go roughly 100x in a year. $800/100 = $8 per use. That felt about fair. We signed up. We didn’t go that often so we cancelled after a few months.
But my neighbors don’t think this way. They go to the YMCA maybe 10x a year. That is $80 per visit!! They could cancel that membership and invest the money. They are in their 30s. If they invested the $800 a year for 20 years at 5% they would have $26,000 in their 50s. Let’s take that one step further. If their monthly expenses are a $4,000 a month then they could retire 6 months earlier. This is real and easy.
I do this assessment with nearly every purchase besides food. How many times do I think I’ll use something, what does it cost, and then I am getting my money’s worth. Even my running shoes. $150 a pair (before I discovered jackrabbit.com) for 450 miles = $0.33 a mile. A 10 mile run is costing me $3.30. Seems high but I use them. I’m fine with it. The point of this example is I break things down into their cost per use then make the judgment call.
Don’t forget! Most things have residual value too when you’re finished. You can sell them. This also comes into play. What can you sell the things for when you are done?
Bonus tip: Some things you can sell for more than you paid even after using them. My wife buys things are Facebook Marketplace that our family uses, and then she sells them for more than she paid. Our kids clothes are a prime example. No one knows they are used. Most of the time they aren’t even used. She buys them, we use them, then we sell them.
Who cares about all this? Who cares about price per use? Well people that want to retire early should care. These are just a few trade-off decisions. It’s a real one too. So many of us have subscriptions and gym memberships we don’t use enough to be worth it. Make your dollars matter. Be smart about what you buy. Future you will thank you for it.
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