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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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).
The time value of money crosses my mind similarly. The value of this $5 today if invested instead would be worth XX in X years. Lol
That’s a great way to look at it.
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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.
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…
I’d guess this is normal for people who budget. Same as @vynlwombat I consider how many years I’ll use it. I also amortize capital expenses which is useful for figuring out how affordable something is to me.
In the past I’ve put together a budget with all annualized services and amortized capital expenses to figure out what is the most spendy/find outliers.
I calculate the yearly cost. Or at times, I’ll calculate how many hours I need to work to “earn” it
I’m…sort of inverse? I daily-ize them.
That way on a day to day basis I know if I’m trending up…or down…or what have you. If my “daily” cost to exist passes some threshold, it’s cause for alarm.
Yes, I do this with savings too. If I reduced a monthly bill by $20 that’s an extra $240 dollars I have per year.
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.
I do this too but I also consider how many years I’ll use something or subscribe to it.
I also do this, I’m not entirely sure how much storage you were getting for free but if you look into Google 1 I am getting 200 gigs for $30 a year. But I have a Google “family” and it provides a separate 200 gb to each member
I do it all the time. I don’t know when I started doing it. But it became really obvious after I stopped getting cable. Cut the cable = $100 a month saved = $1200 a year! = $3600 after 3 years Omigosh I’ve saved at least $10k now since I cut cable.
Cable sucks! Great job!
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