Convenience can be a component of most any purchase.
Think of all the things that you do that are convenient.
The challenge is to balance convenience with cost.
For example Amazon is very convenient
and it has the lowest cost in most cases.
In this course we will learn to apply convenience with value in a way that works for our own unique situation and the specific thing that we are buying.
To think about convenience,
we must first think about what our time is worth.
Does the time we save with convenience pay for itself or is it costing us a lot more than the convenience that we get.
Examples of the cost of convenience from the car buying blog.
Time savings Buying a full price car, it saves time researching better deals. Let us assume that we saved $3,000 off the price of a new car, and that we took 10 hours researching it. So our time was worth $300 an hour. If we make less than $300 an hour on our job, then it was worth it.
We buy an older car that has depreciated. So what is the value of the time we spend making repairs, that we wouldn’t spend on a new car?
If the new car was $30,000 and the used car is $15,000. So we saved $15,000.
Let's assume that we make 2 repairs each year that cost $300 each for 5 years, or 10 repairs total.
That would be $600 a year, times 5 or $3,000.
We saved $15,000 - $3,000 in repairs, that equals $12,000 savings.
Let us assume that it took 2 hours for each repair, times 10 repairs or 20 hours of our time total.
$12,000 in savings divided by 20 hours of our time = $600 an hour.
Financing Interest allows you to buy a new car with very little down payment that will need fewer repairs, saving your time.
As of January 2021 interest rates are very low.
Let us assume a more typical interest rate of 7% on a new car loan for 6 years. The total interest is $12,600.
So now the total cost of the car is $42,600.
Is the convenience of financing a new car worth that much to you?
Status there's no real time saving with status.
Buying a house, The interest on a 30 year loan can be as much as the house is worth. But there are other ways to rethink the core value of a house. We will cover that in a future blog.