Small Dollars Every Month Can Add Up
Continuing monthly expenses are the bills I hate the most to pay. I’d much rather pay $200 once than pay $10 a month. Part of this is my tendency to make things last, I tend to keep things well beyond their expected lifetime. Over the years this have saved me stacks of money, but if I was paying for those things with a monthly fee, well then I would not have saved much, would I? I think the classic example for me was my new Tivo, back in the summer of 2000, I bought a brand new Series one Tivo, and plunked down the $200 for the lifetime service. So far I have used that Tivo for 6 years, my lifetime service cost $200, if I’d paid monthly it would have been $10-$12 a month for 72 months or well over $700.
In essence paying monthly for something is like renting it, or financing it, and you all know how much a fan of those I am. It’s also much harder to figure the true cost of something when you pay for it in dribs and drabs over many months. Consider how much money you’d have to save to cover that monthly cost before you take it on. For example $10 a month is $120 a year, if you can get 8% return on your money ($5% after taxes) it’s going to take $2,400 in capital to throw off that $10 in earnings that you are about to spend every month.
The same goes for trimming expenses, every $10 in expenses you trim out of your monthly budget is like an additional $2,400 in savings. So watch the small dollars that occur every month, there’s gold there if you can save and ruin if you let those expenses get out of hand. So don’t sweat the small onetime things, but taking on any additional recurring expense is worth serious thought, even the $10 items can add up quickly.