We all have little habits that tend to drain our finances. Perhaps it’s soda pop, online games, cigarettes, beer, magazine subscriptions, gambling, wine, or movies. No matter what your poison, if it costs you time or money, it’s worthy of a close examination.
Health and moral concerns aside, the wise consumer will examine his or her habits to determine if the benefits outweigh the costs, or if cutbacks are necessary to restore a healthy balance in one’s budget.
One of the first steps in this process is to determine what you get out of your habits, and try to place a monetary value on those benefits.
For example, if you like to get a weekly massage, you could list several potential benefits:
- Health: Many medical professionals recommend massage to reduce stress, increase circulation, and improve lymph drainage. If your health is compromised, or if you experience a lot of stress in your personal or work life, the monetary health benefits can be extraordinary. Let’s say four massages a week replaces a prescription muscle relaxer. In this case, we could say your monthly massages are worth $80 a month in health benefits.
- Productivity: In our example, we could imagine weekly massages increase your work performance by reducing stress, allowing you to complete two extra projects a month. The productivity benefits could total $400 a month.
- Happiness: If your massages brings you immense joy, you’re less likely to spend money on other pursuits of happiness. You could also place a monetary value on how your habit makes you feel. What’s you habit worth to you? How much would you pay to continue it? For our massage example, we could say our happiness value for this habit is about as pleasant as mowing the lawn is unpleasant. If we pay a lawn service $30 an hour, our massages would be worth $30 an hour in happiness, or $120 a month.
- That’s a total estimated monetary benefit of $600/month.
The next step is to calculate what your habit costs you.
Not only will you have to determine your out-of-pocket expense (in this case, the cost we pay for the massages), but also such things as the cost of managing negative health impacts, transportation and maintenance costs, and the effect your habit has on your relationships.
- Out-of-Pocket Expenses: For our massage example, let’s say the cost of a weekly massage is $65 plus tip, equaling $308 a month.
- Transportation: If we travel 20 miles round-trip to the spa, we’ll estimate it costs you $0.74 per mile to maintain and operate your vehicle, equaling $59.20 per month in travel costs to support our massage habit.
- Time: The time you invest in your habit is also considered a deduction. Our massage habit takes up four hours a week, plus two hours of travel time each month. If your time is worth $40 an hour, you’re losing $240 worth of time every month.
- For our massage habit example, our total cost is $607.20/month.
Our conclusion is a weekly massage habit costs us $7.20 a month. Is it worth it? That’s where you need to decide if cutbacks are necessary.
If you don’t want to drop your habit, try finding ways to reduce the impact of the overall cost to make your habit a wise choice.
David’s Note: This sounds great, but you can obviously see that the assumptions of benefits will need to be estimated fairly accurately for this method to work. Do you ever take the time to see how much you’re paying for your habits? How much is your habit costing you?
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Excellent post with great points. The other day I took my fiance to the doctor. We had to pay $129 out of pocket because his flu turned to bronchitis.
He’s a smoker. Average the cost of approximately 5 packs per week; consider the smoking is what caused his flu to turn to bronchitis; and consider the cost of the doctor visit plus meds.
Granted, any of us could get sick on any given day, but his *bad* habits almost guaranteed his illness would get worse. I can think of a few ways we could have saved on this one!
I absolutely think like this. The thing for me is the soda habit, which can add up to some pretty good savings over the course of time. Keys to success, I think, are being aware of such savings as well as having the discipline to act on your knowledge.
I agree with you all, i think its healthy to at least give ourselves a treat and get a taste of spending from the money we all worked for so hard.
My habit is potato chips and the daily paper. That makes my life comfortable; I am frugal by nature, but I believe that a little money poured down the drain is what makes life worth living.
Life is good the best of all, living simple in the luxury place is a humble but totally healthy.