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Home › Blog › The Cost per Use Principle

The Cost per Use Principle

Do you want to spend less money than you earn, so you can save more, invest more, and ultimately achieve financial freedom?

Then I suggest you pay attention to the Cost per Use Principle:

For each material possession (especially the most expensive ones), calculate and minimize your cost per use.

Crave a swimming pool? Then interview someone who owns a pool and calculate his cost per use. It could be twenty dollars per swim.

Want to go on vacation with an RV? Then calculate the cost per night and compare it with a regular rental car in combination with hotels/motels/bungalows. The RV rental alone can easily be 100-150 EUR per day. Gas, campsite fees, parking, and additional public transportation not included. A regular rental car costs 20-25 EUR per day, with much less gas expenses. That leaves 75-130 EUR per night for the accommodation and parking. I love renting RVs myself, but you just have to be aware that more often than not, it’s the more expensive option.

Want to buy a Tesla with the largest battery pack and performance package? Compare the cost per kilometer with a smaller battery and regular performance. And then compare it with a pre-owned one. I talked to people who ended up paying more than $2 per kilometer ($3.22 per mile). So if I ever would buy a Tesla (I almost did), I’d do a careful calculation and try to bring my cost per kilometer down as much as possible.

Do your parents own a vacation home? You’d be surprised how much they pay per night if they don’t use it often. For the same money, they could often stay at 4 or 5 star hotels, and not always go to the same place.

I am aware that this is a purely financial perspective. You might want to consider convenience, quality of life, potential appreciation of assets, potential rental income, and other factors that are important to you.

Even more important than that is to make sure to consider the total and true cost of ownership of anything you own. Including maintenance, insurance, storage, opportunity cost of invested capital, your own time, people you need to hire, hassles/headaches, and all other directly and indirectly related expenses.

Of course, the most efficient cost per use is zero. This is achieved by either getting your things for free, or not buying them at all. Here are some hacks:

Hack #1: Instead of buying something, put it on your wishlist and wait for 48 hours. Often, your purchase impulse fades away. Example: Last year, I considered buying an electric moped. I ended up not buying it, and am using my bicycle (in combination with mobility-as-a-service options) ever since.

Hack #2: Force yourself to sell or give away one item before you are allowed to purchase another. Advanced: Give away two or more for each new one.

Hack #3: Make it a habit to buy things used. Example: I recently needed more teaspoons, so I went to a thrift store and bought some for a fraction of the price at IKEA.

Last year, I increased my iPhone cycle from 2 to 3 years, bringing my cost per day down by 33%. If I increase it to 3.5 years, 6 months after the introduction of a new model, I’d be able to buy it second-hand, decreasing my cost per use even further.

This is a powerful principle, and I hope that it will serve you as well as it did me.

[Hat tip to Mr. Money Mustache]

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Tags: Essentialism, Financial Freedom, iPhone, Life Hacks, Money, Mr. Money Mustache, Simplify, Tesla
Category: Wealth



April 2, 2019October 6, 2019 by Remo Uherek

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