When we got serious about saving money the first thing I did was search my house for a calculator. I am always amazed at how many times people make financial decisions based on what they “believe” to be the best financial option, but they never actually run the numbers.
Just last week my husband realized that he cannot bike to work, as he had been doing in the past. ( He needs knee surgery, but I am getting off topic) We both immediately started talking about selling our Suburban and getting a car or just getting a motorcycle for him to ride to work. Before we got totally carried away with the discussion and my husband ran out and bought some steel-toed boots I did a quick caculation to see how much money we would save if we bought a motorcycle.
Amount of gas money currently used every week driving to work: $12 (using $2.5o a gallon price)
Total yearly gas cost: $624
Upfront cost for a cheap motorcycle/ scooter plus gear: $1700 (I think this number is low, but I used it anyway)
Yearly gas estimate for a motorcycle/ scooter: $104
The gas savings for a motorcycle is not that high because we live very close to my husband’s work. If he had to travel 50 miles a day the savings would be much greater.
The first year we would save $520 in gas riding a motorcycle, but we spent $1700 purchasing one, so that savings isn’t realized.
The second year we would save another $520, but that would also go towards the purchase price.
Same thing for the third year…
It isn’t until the fourth year that we are saving money by purchasing a motorcycle.
Since we only have three year orders to this base, we would never re-coup our money if we purchased a motorcycle.
Now this calculation doesn’t take into consideration gas prices fluctuating, repairs, or the “fun factor” of owning a motorcycle, but I think you get the idea.
Another example is cloth diapers. I thought I could save money using cloth diapers, but it wasn’t until my friend from church showed me a spread sheet her husband made that I knew I would save money using cloth.
Before you make a big purchase or even a small purchase do the math. It is even a good idea to take a calculator to the grocery store to help you get the best deal.
One online resource I found a few years ago is Dinkytown, the name might be silly but this site is loaded with calculators. When we were trying to decide if we should purchase a house I went to the site and ran the numbers using one of their calculators. They also have calculators for savings , investments, loans (bad, bad bad) auto, debt reduction and more.
Dave Ramsey says that personal finance is 80% emotional. He is probably right, but I believe one of the best ways to save money is to be intellectual about your money. Do the math, and make your decision after you have all the data.
This post is linking to Frugal Friday.
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{ 13 comments… read them below or add one }
Still would like those steel toed boots and an old school moped – er – Ducati. Ah well, those calculators don’t lie…
Love ya!
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Well, my dh would have bought the motorcycle anyway. He would have said he’d keep it for ten years and ride it to work no matter where he was.
He plans to buy one someday. For him it is 100% “emotional”.
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My husband, being an accountant, is the spreadsheet king! For any major purchase, he whips open Excel and analyzes the situation from every financial aspect. Like you, he always ends ups with the “years to benefit from savings” figure. He is currently analyzing a new water heater and the cost savings between a regular water heater and a tankless heater…tankless costs twice as much but will save us money within two years since there is a energy saving rebate from the government. I love my man and his spreadsheets!
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I love being a number analyzer! We did just about the same thing when we were looking into getting a more efficient vehicle. It would take quite some time to re-coup our initial investment. It wasn’t worth it in the end. Glad we analyzed it all first before jumping in!
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The best way to be smart with money is to be intellectual instead of emotional. The hard part is actually doing it. It is hard to tell yourself no and put your emotions aside!
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Yes, great advice!! We always compare the price of Costco with the “regular grocery store”, sometimes they win, sometimes they lose. Doing the math is the only way to know for sure. We can’t assume we’re getting a deal or doing what’s best.
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I hope your husband’s knee heels quickly!
The site with the calculators looks awesome. I bookmarked it. Thanks!
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Riding a motorcycle is fun
it can also be financial suicide. Few of us have enough money in the bank to survive what happens when some car doesn’t see you and wipes you out or worse…
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Hi….We were looking into the scooters/vestpa’s for our 19 year old who goes to school and works just a few miles away. You can buy them well under $1,000. I don’t know if a scooter type would work for you, but if it did, it might change those numbers. Have a great weekend.
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I don’t run the numbers as often as I should. Thanks for the reminder.
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I agree it’s makes much more sense to do the math when making purchases or future purchases. You will be amazed at what things may or may not save you if you only run the numbers.
God Bless,
Tammy
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Dh has considered us having one vehicle but hasn’t been feasible as he drives a lot back and forth with his job to different meetings and such. Thanks for the great link. I added it to my favorites.
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This is an excellent post! A little number-crunching can point the way to big savings. Once I tried to convince myself that I was wasting gas driving to the commissary, but that big spreadsheet I’d made detailing our weekly savings on milk, diapers and meat goaded me into making the weekly drive. Even with time and kid-watching stress taken into account, we still saved money!
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