How You Treat Your Goods Could Reflect How You Manage Money

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Preserved Red BarnDisposable. It’s a word used far too often in describing items we view as single-use and easily replaceable, like disposable utensils or razors.

Reduction in material quality, craftsmanship, and of course, labor rates has super-charged almost all durable goods – making them readily available and extremely affordable. As a result, we’ve grown out of the smaller disposable items like diapers and napkins into larger products like toasters and microwaves.

Hard to believe for $10 you can buy a toaster. For that small cost, it’s not “worth” the time to fix a broken one and instead we default to buying new, allowing the product to become disposable. Once that happens it’s near impossible to realize the product’s full potential. We’re constantly replacing the item before we squeeze out all of its usefulness.

And think about cell phones. The cost of a new battery for an old phone generally outweighs the cost of a new phone. And if you’re phone is much more than 2 years old, you may even have difficulty finding the parts if you decide to try.

When we know things can be replaced, we tend to stop taking care of what we have. As we lose that vigor in maintaining our goods, our rate of disposal accelerates and we end up needing to replace more and more often. But this has been the exact marketing strategy of many businesses as Giles Slade talks about in his book, Made To Break.

All of this leads away from a very important concept – preservation.

When we aren’t preserving what we have, we lose sense of its value. And here’s where it translates into personal finance. Interestingly enough, we refer to our take-home pay as disposable income – one’s personal income less their personal taxes. Yet we don’t talk about wealth preservation until someone is nearing retirement.

Like with cheap cell phones, we become accustomed to discarding what we see as replaceable. Being paid on a bi-monthly basis provides that same sense of recurrence. Instead of concerning ourselves with preserving what we’ve already received, we spend it frivolously knowing it will be replaced in another 2 weeks.

Think of it this way – how differently would you manage your take-home pay if it was given on an annual, lump-sum basis?

Keep in mind that this is different from saving. Saving is an action, preservation is a mindset. You can save money than just as easily spend it, whereas through preservation you are always trying to stretch those dollars in all aspects of saving and spending. Of course, this becomes the basis of optimization.

Preservation through saving considers a collection of factors, primarily: anticipated return, expected risk, and known fees. This is why investors look at the efficient frontier (risk vs. return) or wait to sell profitable investments to avoid short term capital gains. And why retirees look towards income producing products like bonds, CD ladders, and blue-chip dividend aristocrats or avoid products with a host of costs in order to maintain their wealth.

Preservation through spending comes from many different directions. It could be as basic as reducing your purchase costs by negotiating the best possible deals or it could be in how much you are willing to spend, in terms of time or money, for maintaining & servicing your already purchased items.

Often things we tend to neglect, something as simple as vacuuming the air conditioner or refrigerator cooling coils will go a long way towards extending their lifespan. Or more often, disconnects seem to exist between the purchase price and maintenance costs, so we forgo the service to save a few bucks now only to pay far more in the future.

Ultimately it won’t matter how much money we make or how little we spend. It will boil down to how well we preserve whatever it is that we do have.

So how do you treat your goods? Are you vigilant about keeping things in top condition and embody the “well-oiled machine” saying? Now look at your finances, can you see the similarities? Do you apply the same principles and work to maintain everything as best you can?

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15 Responses
  1. Thought provoking.

    I would say my personal life and investing life are pretty much exact opposites. I’m pretty astute with risk and reward in my finances, but do a terrible job of the same calculations when it comes to “real life.” The risk reward for procrastinating is pretty much always terrible, but I somehow manage to do it.

    I think it’s particularly interesting when applied to budgeting. Do you treat some portion of your income as “disposable,” and if so, why? I think most people would have to admit they do.

    1. Fin Engr

      Rachel:

      At least you’ve got the financial end covered! I see procrastinating as boredom. Its evident you’re “invested” in your finances, but maybe not so much with the mundane parts of real life. Racking my brain for a better closer, but can’t think of anything :/

      As far as disposable income, you’re right that everyone considers a portion of it disposable. As long as you eat, you can’t really avoid it ;)

  2. It’s a disgrace really. We should be working towards quality and being proud in owning these items, I think.

    Just think the Pyramids are still standing here in Cairo because they were built with care and value in mind. Can any modern monument or building ever last that long? Ever houses built 200 years ago are still solid but new housing barely lasts it’s mortgage term.

    This disposable culture reflects in personal relationships too as well as our relationship with money.

    1. Fin Engr

      Forest:

      Oh man – breezing through an engineering magazine, they made that same point for a concrete ad. And that was an analogy I didn’t even think to draw. It’s incredible to think how durable those structures were back then and how now a projected lifespan may be 100 years (at best).

  3. I was not raised with the ‘disposable’ mindset because we did not have much money growing up. I was taught to make things last as long as you could because you did not know when you would get new ones. Work and school clothes that got worn out or stained and could not be repaired became ‘house clothes’. I budget carefully and plan my purchases to be good quality that will last me instead of disposable things that will break down and need frequent replacing.

    1. Fin Engr

      Lulu:

      The not knowing part is what’s really key. Nowadays if something breaks, there’s a store only a few blocks away. It probably sells the replacement part or a new model, and is open from 6am to 10pm. This has removed that sense of insecurity. We not only know, but except, for things to be ready for us on an as needed basis.

  4. I am a big fan of figuring out costs per use. I’ll spend $250 on a purse that I’m going to carry for everyday for 2-3 years or more. That’s pennies a day!

    I hate the idea of a “disposable” society. I blame a lot of it on Wal-Mart & other discount stores. I would rather spend more on quality than less on quantity.

    1. Fin Engr

      Tara:

      You are dead-on with that point. Since things are so cheap & accessible, it’s easy just be wasteful and “just get a new one”. Glad you work on a unit cost basis, it really surprise you at times.

  5. Interesting thoughts. Does our tendency of “out with the old, in with the new” mean that we don’t take as good care of our durables as we should, thus leading to unnecessary expenses?

    I think that this constant recycling when it comes to phones and things like that is just fine, since you get a better device than the one you gave away. Also, why would you spend time and effort in repairing a $10 toaster when you can buy a new one for $10? But, maybe the habit of just replacing things means that we don’t pay as much attention to where it still makes sense to take care of durables, like high quality furniture, for example.

    1. Just to add, it could also mean we pay more over the long run. Perhaps buying 10 $10 toasters when we could have bought 1 $25 toaster that would have lasted just as long… even if it means a bit more maintenance.

    2. Fin Engr

      Invest It Wisely –

      Yes, definitely. As we shorten the shelf life of products we effectively reduce the level of care as well…

      Right – it does come down to time vs money and really goes into a “valuation” of the good. So with the $10 toaster its less about the item’s value and more about eliminating/reducing waste (just like with debts).

  6. An excellent article. Good discussion about disposable vs. preservation. My wife thought I took it too far with my old CD player though. I was the last person in the gym to bring a CD player with me when everyone else had an iPod. My rationale was that the CD player was still working so it wasnt time to buy a new music player! Wife strongly disagreed………..

    1. Fin Engr

      @ Mike:

      HA! :) If you still got the same enjoyment and audio out of your CD player – so be it! I get into many of the same “rationale” disputes with my own wife. She ended up getting me an iPod and I do have to admit, I love listening to podcasts – I probably listen to more of that than actual music nowadays. Happy Belated Thanksgiving!

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