Here’s an easy exercise. Find a calculator.

Think of the last thing, you bought. What was it? A pair of pants? A sandwich? The electric bill? A tank of gas? How much did it cost? Write that down.

Now try to think of how long ago it was since you bought the same thing before that last one e.g. if you just paid your electric bill, it was probably 30 days since you paid it the last time. If you don’t know, do an honest estimate.

Take the calculator and multiply the price with 365 and divide by the number of days you found above. That’s your annual cost. Multiply this number by 25.

Now you got to ask yourself one question. If you had that amount of money, would you spend it on a life time supply of that item? If not, then that item is too expensive and you should not buy it. See a more detailed explanation for the reasons why that is.

Conversely, suppose you get offered a life time subscription to e.g. a magazine or a membership to a club as opposed to paying annual fees. Divide the lifetime cost by 25 to compare it to the annual fee. If lifetime fee divided by 25 is lower than annual fee, and you see yourself being a life time member, go for it even if it does seem expensive.

Originally posted 2007-12-11 15:50:00.