Mar 092017

A Car Buying Formula 

Someone once said that an old car is like virginity. Once you’ve had it for over 25 years it’s kind of hard to get rid of because nobody else wants it either. 😄 But I’m not here to give relationship advice. This is a personal finance blog after all. So in today’s post we’ll discuss one of the most common questions people face; how much is appropriate to spend on a car? For most people I would recommend the following formula.

0.01s(5h+2i) = Price to pay for a vehicle

= Monthly household spending (before accounting for the potential vehicle.)
 = Number of expected hours the car will spend on the road per person per month.
i = Monthly cost of the auto insurance.

For example, I live pretty close to work so I only spend about 20 hours on the road each month. My car insurance costs $100/month, and my monthly household spending is roughly $2,500. When these numbers are plugged into the formula we see that I should spend about $7,500 if I were looking to buy a car today.

0.01 x $2500 x (5 x 20 hrs + 2 x $100) = $7,500

Let’s look at another example. Susan and Bob are looking to buy a vehicle. It will be used primarily for Susan to drive to work, but will also be used for shopping / recreational activities for both of them. They estimate the car will be on the road for 50 hours per month. They will be in the car together for 10% of that time. Their monthly spending is $3,200. Insurance for the car is expected to cost $150/month for the type of vehicle they are looking for. Using these numbers we discover they should budget in the range of $18,400 for a car.

0.01 x $3200 x (5 x 55 hrs + 2 x $150) = $18,400

Even though the car spends 50 hours on the road, we are using 55 hours in the formula. This is because two people are expected to use the car simultaneously 10% of the time so during those times the hourly rate of utility is doubled.

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Aug 292016

Being Mindful With Spending

Mindful spending is when we only buy something that will create a net benefit to our well being, in proportion to its relative cost. The idea here is to spend money with purpose! 😀 This will reduce waste, maximize economic utility, and give us the most bang for our buck, so-to-speak. 🙂


In practice, all we need to remember are 3 simple questions when contemplating a new purchase.

  1. Why do I want this?
  2. What are the positive and negative effects this product or service will have on me, whether they be physical, practical, emotional, or spiritual?
  3. Assuming the answer to #2 has a net positive benefit, how much am I willing to pay for this?

That’s pretty much it. We can use this simple application every time we want to buy food, furniture, cars, investments, a swedish massage, real estate, and even an education. This literally works for anything that has monetary value.

Let’s take a look at how we might answer those 3 questions in real life cases below: Since mindful spending is based on individual preferences I will only be using myself in the following examples as I can’t speak for anyone else.

  • Should I buy a Nikon D5 camera?
    1) I want to take pretty photos just for fun.
    2) Helps me learn to become a better photographer. Fun to play with a new camera.
    3) $100 because I’ll probably take the camera out with me a few times, get bored with it, and never use it again.
    So in this case, I would not buy the camera since it costs thousands of dollars.
  • Should I go back to school?
    1) To increase my earning potential.
    2) Spend 2 to 4 years in full-time education. Estimated income out of school is 5% to 10% higher than now. Loss of income during time in school.
    3) (-$70,000) because after accounting for both benefits and opportunity costs of going back to school, I would lose $70,000 in the long run.
    So in this case, it’s not worth it at all. Even if I received full scholarship to attend art school for free I still wouldn’t do it.
  • Should I subscribe to Netflix?
    1) I enjoy watching its original programming.
    2) Provides entertainment value. On demand and no commercials. Uses up a lot of my limited internet bandwidth.
    3) $40/month, because for the enjoyment I get out of the service I would gladly pay $2 per hour of view time, and I watch at least 20 hours of Netflix a month.
    So in this case, I would and actually do have a Netflix subscription already since it’s only $10/month, which is cheaper than what I’m willing to pay for.

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Feb 112014

Some people think a raise in income should automatically equal a raise in their spending. But if our spending always follows our earnings then we would have to change our lifestyle habits every time we change jobs or get salary adjustments. Does this mean Elon Musk, CEO of Tesla Motors, who made $78 million last year should only drink water from Acqua di Cristallo? It’s the world’s most expensive bottled water. Each 750 ml bottle sells for $60,000. Jumpin’ jelly beans 😯 After all, Elon has to find ways to spend his money in order to match his income right? 😛

14-02-expensive_water, income spending

Thinking about income and expenses on a year by year basis leads to myopia and it’s how many people get stuck living paycheque to paycheque 🙁 They fail to see the longer term picture because they can’t escape their short term cycle of income fueled spending. What they should try to focus on instead is goal oriented spending 🙂

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Oct 312012

Some people think Halloween is just a fun time for children to dress up and eat candy. Perhaps that was true at one point in time. But today Halloween is the second most expensive holiday of the year, rivaling only Christmas. Who would’ve thunk it. Halloween is an $8 billion industry in North America and is growing every year. That’s some serious business.

What’s driving all the spending? Simple modern consumerism lead by media, pop culture, and advertisers. People want to dress up as their favorite characters from this year’s hottest movies (Avengers, Hunger games, Spiderman, Batman, etc) You’ll also see zombies influenced by the Walking Dead, and of course, the Gangnam Style guy. It is not surprising why some Halloween specialty stores set up business only in October, sell their products, and then shut down in November. They only pay one month for rent to get a piece of the $2.9 billion pie that consumers spend on costumes each year.

It’s not just costumes for people either. 11% of Canadians are expected to spend up to $59 dressing up their dog. An average family will spend $300 on Halloween this year. That includes an average of $60 per costume, and the rest on decorations and greeting cards. Canadians are also expected to spend about $320 million worth of candy. Another survey anticipates 60% of all consumers will spend over $100 this year on decorations.

With treats, costumes, decorations, and parties, it’s no wonder that Halloween can rival Christmas in terms of consumer spending. This means we have to be careful about how we plan for it. Halloween, Thanksgiving, and Christmas are all within a couple months of each other (in the US anyway) Want to spend more money on Christmas? Consider spending less on Halloween this year :0)

Happy Halloween!

Oct 132012

According to a Bank of Montreal study, impulse shopping cost Canadians $3,720 a year. These can be any kind of purchases like clothes, knickknacks, or food. That amounts to $310 a month being spent on items that are wanted, but not needed.

More than half of the people surveyed actually bought something they might not need because it was simply on sale. For people doing marketing, this means price slashing does pay off because you’re getting people to buy things they’ll probably never use. But for consumers, it means we have to be careful and think about what we’re doing next time we feel the impulse to buy something we didn’t plan for. Impulse spending isn’t necessarily bad. Many people would say they do it to cheer themselves up \(^_^)/  Can’t argue against that, as long as people can afford it. But the problem is that many of us can’t. In fact, most of the respondents regretted their purchases and 43% sometimes spent even more than they earned in a month ( ・_・) And 33% of those surveyed had to borrow money or take out a loan to cover those impulse expenses.  (・・? ) That certainly can’t be healthy for someone’s financial situation. These consequences of impulse spending are more common among people under 30, with one in three unable to afford something they need because they purchased something else they wanted. Another bit I found surprising is that men spend twice as much ($414) on impulse shopping as women ($207.) But I guess that makes sense because guys tend to spend more on pricy technology items.

Best way to curb this impulse if you can’t afford it? My suggestion is to keep track of your unplanned purchases, then give yourself a realistic budget on impulse spending and stick to it every month. Setting goals for yourself and achieving them feels much better than shopping for stuff you don’t need. Trust me, I’m a blogger 😉

Random Useless Fact:  There are about 47,000 shopping malls in the United States. California has the most with over 6000. Whyoming has the least with 55. But the largest shopping mall in North America is the West Edmonton Mall in Canada :0)