When people discuss budgeting and saving money you mainly hear about all the things people cut back on. Obviously cutting back is extremely important when it comes to saving more money, but another thing to make sure you factor in is what you WON’T cut back on.
Of course there’s several things you CAN’T cut back on: a roof over your head, enough food to survive, a mode of transportation, etc. But there’s even flexibility with the cost necessities. For example, you can choose to rent a studio or buy a 3 bedroom house or drive to work or ride a bike to work. At what point does convenience outweigh cost?
I ask myself this question a lot. The good old “cost-benefit” analysis can be used in any and situations.
Transportation
Transportation is necessary to get us from Point A to Point B. We use various modes of transportation for things like work, vacation, grocery shopping, going out to dinner, getting to a medical appointment and more. Each time we are traveling to a different destination, we must choose a mode of transportation to get us there.
For those of us who own a car (I’d say a vast majority minus those of you living in NYC or other city areas), this is our usual method of transportation. A car may not be the cheapest way to get from place to place, but it is much more convenient to have a car because it is always accessible to you and you can come and go from places as you please.
With public transportation, on the other hand, you are relying on someone else to get your from Point A to Point B. Sometimes taking a train or a bus may be significantly cheaper, but then you must depend on the bus or train schedule and that may not always align with the times you need to get somewhere.
When going on vacation, you are faced with choosing what mode of transportation to use, as well. For example, my husband and I live in New York and will be attending a wedding in North Carolina in the spring. The cheapest way to get there would certainly be to drive and we do have 2 cars to choose from. However, flying is significantly more convenient for us because we do not was to spend 10+ hours in a car.
Living Arrangement
When it comes to putting a roof over your head, this might be the choice you make that provides you with the most options to choose from. Do you want to live alone? Do you want to live with roommates? Clearly, living with roommates will always keep the cost lower (especially if those “roommates” are your parents!).
Another thing that can significantly impact the cost of your living arrangement is proximity to the nearest city. My husband and I made the choice of living in Westchester County, NY which is just outside the city.
This obviously means that we did not choose the cheapest town to live in; however, we also didn’t pick even close to the most expensive. We live in Northern Westchester, where we can make it to NYC in under an hour driving without traffic (ha). The further south in Westchester County you go, the less you get for your money.
Being that my husband knew he would be working in NYC at some point in time, we chose to live within a reasonable distance that offered us a decent amount for our money.
You also have the choice of renting versus buying. One can argue for either one from a cost-perspective, but personally I think buying a home saves you more money in the long run. Sometimes, though, renting is more convenient. If we rented an apartment in NYC, my husband’s commute would be ¼ of what it is now, but our monthly cost for housing would be nearly quadrupled.
Food
We all need food or else we will starve to death. But there are so many different options to choose from when eating. Taste preferences aside, there are so many different price categories when it comes to purchasing food.
At a grocery store, store-brand or generic foods are typically the cheapest. The next category up is common most well-known brands. Then you have premium brands and organic. Organic foods are chemical-free and somehow this makes them more expensive. It’s ironic to me, but that’s a whole different point. Luckily, grocery stores run promotions, have sales and you can utilize coupons; however, not everyone takes advantage of these things. It’s too much of an inconvenience for some people to print things out or find the sales, so they pay more money than necessary to not have to worry about those things.
Additionally, there are different price points for restaurants, too. Fast-food generally runs the cheapest, offering things like dollar menus. They offer people a quick, cheap meal. Diners and some chain restaurants are a step above this and offer reasonably quick service for an affordable price.
Then we start getting to higher-priced restaurants and the highest-price restaurants. These higher price restaurants offer more than just better quality food; they offer an experience and that is what you are paying for.
The point is there will always be a cheaper or more expensive option. In order to make a financially sound decision, you must do a cost-benefit analysis. Sure, walking to work would be the cheapest way for me to get there, but there’s a 0% chance I’ll be walking 25 miles each way to get there and back.
A car is the best way to get me from Point A to Point B where I live, unless I’m going to NYC where it makes more sense to take a train a lot of times to avoid traffic and paying to park in a garage in Manhattan (for those of you who aren’t familiar, parking in Manhattan is crazy expensive).
Doing a cost-benefit analysis for all decisions you make enables you to determine if what you’re doing really makes sense. Sometimes spending money is about more than just how much you are spending. Sometimes you need to take a little time to think about how much you getting. This will differ from person to person.
Even though I appreciate a luxury vacation and upscale restaurant, doesn’t mean everyone else can justify the cost of these things because they don’t care for these experiences. Do what makes you happy as long as it doesn’t make you broke 😉
