When I think about bills, I annualize them. $30 a month? That’s $360 a year. $5/mo? $60 a year.
I use this to help me grasp the long term cost of all my decisions, but nobody else I know does this.
For instance, my brother and I are moving soon into 2 separate apartments (we currently share a 2 bedroom) and the new complex doesn’t have Google Fiber Internet. I complained to my brother that on top of everything else I’ll have to pay $5/mo extra for Google extended storage I was getting for free.
He said it’s only $5/mo, just get and don’t worry about it. I was like, that’s $60 a year which is basically a Costco membership. He said “oh hmm, good point yeah”
So I’ll work on reducing my storage usage on Google to be able to stay on the free tier, but am I alone in thinking this way about everything I buy?
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Since I use budgeting software, the monthly to yearly totals are always there in my face, so I don’t have to “think” about applying this to bills.
But I like to use that way of thinking to illustrate how “small” purchases add up.
Some people, for example, get a coffee every day. “But it’s only $2”. OK, but would you want to pay $730 a year for bad coffee?
Apply that to smoking, drinking, eating out, etc., and you can see how these optional expenses can destroy your wallet over time.
The next level of this is to calculate the amount you would need to have saved to support the cost in retirement. E.g. if you have a $60 annual cost, you need to save $1500 just to cover it for the rest of your life (following the 25x rule for retirement savings).
I don’t do it, no.
I think tricks of this sort highly depend on your individual brain and what things make it go, “Oh.” And that tends to be slightly different for everyone, as different people are more or less sensitive to certain things or ways of framing an idea.
I tend to buy subscriptions at the yearly rate because it saves money over a monthly subscription (except Adobe…fuck Adobe). The affordability of monthly installments is bought, in a sense, by paying more over time.
So, no, you’re definitely not alone.
It’s also cool to do this with savings pots. When people have a hard time saving, they’ll say things like “what’s the point in saving £10 a month towards X, that’s nothing”. I usually point out the annual figure, since a lot of people don’t think that way.
That said, personally I do this too much, and it can make it hard to spend and too enticing to save. But that’s a different topic…
