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Comment by mbleigh | Hacker News Reader

This is actually a more dangerous way to think about purchases because it presumes that all of one's income is disposable. If one makes $40,000 a year but have $18,000 a year in rent and $6,000 a year in food and other expenses then I can't really just say "well, this $3,000 flatscreen is expensive but it's only really three or four weeks worth of work."

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I think the way my grandparents did it is still best: Set aside a certain amount of money from each paycheck that is designated for non-essential purchases. Money from that can be spent however you want. But that's the only account you can dip into, so it doesn't come into conflict with essentials or the rainy day fund. All you have to worry about losing by jackpotting the account is the ability to buy more toys for a while.

If you were to modify the calculator to account for this, the fixed costs should be deducted from salary and divided among all the hours worked?

So if you made $40,000 a year and had $10,000 in fixed costs, you deduct taxes & whatnot, the $10k, and then divide by 2000 hours. This gives you a true "net income after expenses" per hour. Yes?

Sure, but as someone on salary I tend to find disposable income and then calculate that spread evenly over time. AKA I have 1,000$ this month to spend however I like that's 1000/31 = 32$ a day or 1.30$ an hour.

I do this because I can't work more hours to make up for extra spending I can only wait till more money shows up.

I have always thought about my purchases this way, but consider it an additive labour cost. i.e. Do I really want to work an additional four weeks worth of work on top of what I am already doing for this TV? The answer is almost always no. Even for small items, where I could realistically work it off in minutes, the answer is still often no.

Also, whenever possible, I try to employ the two year rule: If I still want something after two years, it is probably worth purchasing. If I have forgotten about it, I would have forgotten about it in my possession as well.

Agreed.

Further, how much would that $20 purchase net you over an invested lifetime, at whatever reasonable rate of return you care to estimate with?

Further, if you buy it with a credit card that you never pay off (so common), how much more are you really paying with essentially a lifetime of credit card interest? And how much would that net you over an invested lifetime?

how much would that $20 purchase net you over an invested lifetime

$27

(Assumptions: You save it at age 20, it grows at 5%, and you spend it when you're 80.)

$373.58? $27 assumes a 0.5% return.

Ugh, you're right. That was embarrassing.

Where do you get a five percent return on investment?

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