If you had $18,000 to spend on a used car, your options would include a 2017 Honda EX and a 2014 BMW 535i. Tell me honestly, which would you prefer?
Ah, but you know it’s a trick question. Sure, the BMW seems like it would be a lot more fun to drive. However, over time, it would end up costing a lot more as well. According to the Edmunds True Cost to Own calculator, after five years of ownership, the Honda would end up costing you $32,678 vs. $52,935 for the BMW. The main differences are in the cost of maintenance ($5,538 for the Honda vs. $11,185 for the BMW), repairs ($1,470 for the Honda vs. $8,757 for the BMW), and insurance ($4,789 for the Honda vs. $7,030 for the BMW).
Clearly, it isn’t just the purchase price that matters. It’s the ongoing costs as well. And that’s true for a lot of things we all buy, both big and small.
When buying a house, a larger house will be more expensive to heat, cool, insure, furnish, and maintain than a smaller house. And, less obviously, there’s The Pull of the Neighborhood to consider because our surroundings impact us more than we may realize. The types of cars our neighbors drive, the types of vacations they take, and so much more, influence our own decisions. Just because we can afford to live in a certain neighborhood does’t mean it would be wise to do so.
When buying clothing, if we buy something that’s “dry-clean only,” that’ll be more expensive to own than something that can be machine washed. If one of our kids wants to go to college far from home, not only is the out-of-state tuition likely to be higher, but the ongoing costs of transportation will be higher as well.
There was a good article on a related topic the other day on My Money Blog, in which the author showed a powerful “Enough Curve” graphic from the book, Your Money or Your Life. It points to the importance of knowing when enough is enough, because once you cross a line, the ongoing costs in time, money, and hassle, can mark a transition from owning stuff to your stuff owning you.
What are you planning to buy right now? Have you considered the ongoing costs?
Read more: The Ripple Effect of Our Financial Choices
Take it to heart: “Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.” – Luke 16:10
Know someone who has gotten engaged or married recently? The book, Money & Marriage, will help them get their relationship off to a great financial start.