What else could that buy?

Every dollar is worth the same

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Episode Transcript

Speaker 1 (00:03):
Welcome to Before Breakfast, a production of I Heart Radio.
Good Morning, This is Laura. Welcome to the Before Breakfast podcast.
Today's tip is to think about the opportunity cost of
big expenditures. We have a tendency to think of things

(00:23):
in categories and then judge what is acceptable for spending
in each category. But with money, categories don't really mean anything.
Every dollar is worth the same, and by choosing to
spend less than normal on some big things, we can
free up money for all sorts of fun without having
to be too frugal or feel much deprivation. This episode

(00:48):
is first airing right around Valentine's Day, which is a
common day for big expenditures, dinners, flowers, gifts, even engagement rings.
People might send a send price e roses on Valentine's
Day because this is expected, but the same amount of
cash devoted to other flowers could mean a nice grocery

(01:09):
store bouquet every week for months. Valentine's Day roses seem normal,
but when you expand the category a bit, you can
get a lot more happiness for the same amount of cash.
This is even more true with big expenditures like houses
and cars. It is a trope in personal finance literature

(01:29):
to scold people about buying lattes or avocado toast or
anything along those lines. But let's look at two people
with a take home pay of five thousand dollars a month.
One spends thirty percent on housing, which is a month.
The other spends twenty eight percent, which is four a month. Now,

(01:51):
those seem like they're in very similar ballparks when it
comes to something as big as housing. It's all normal, right,
But the person paying percent could buy a latte every
single work day and still be able to save the
exact same amount as the person paying The person looks

(02:11):
on the surface to be profligate all those lattes, but
not really. They're having their housing, their savings, and their
latteest too. So if you also want to build up
savings without depriving yourself, look at the big stuff. First, housing,
your location, both the cost of living in any local

(02:34):
tax rates. You know how this goes, drive your car
for an extra two years, and then you have the
cash to fund a weekly date night babysitter, which do
you think will make life more fun? Or maybe you're
getting engaged this winter so exciting I have interviewed a
few couples in the past who opted out of the
diamond size comparison race chose something completely different. A huge

(02:59):
rock of some other riety might run a few hundred
dollars compared to a few thousand, and Wow, for many people,
this could double your emergency fund. Lots of people are
looking at mortgage rates right now. It is true that
they are at historic lows. Shopping around for a good
rate really matters. Two tenths of a percentage point over

(03:21):
thirty years on a three hundred thousand dollar loan can
give you enough extra cash in your budget to take
a friend out to lunch every month for three straight decades.
It's worth it to get this right. And if you
do get it right, then enjoy your lunches, all three
hundred sixty of them. The personal finance scolds can think

(03:44):
you're spending for not brown bagging it and for treating
someone too, but you know what, You're actually spending your
money just right. So today, think about whatever money is
going out of your life when it's in a bigger category,
ask yourself what else could that buy. You might be
surprised how easy it is to buy happiness in the meantime,

(04:09):
this is Laura. Thanks for listening and here's to making
the most of our time. Hey, everybody, I'd love to
hear from you. You can send me your tips, your questions,
or anything else. Just connect with me on Twitter, Facebook

(04:30):
and Instagram at Before Breakfast Pod. That's b E the
number four, then Breakfast p o D. You can also
shoot me an email at Before Breakfast podcast at i
heart media dot com that Before Breakfast is spelled out
with all the letters. Thanks so much, I look forward
to staying in touch. Before Breakfast is a production of

(04:56):
I Heart Radio. For more podcasts from my heart Radio,
visit the i heart Radio app, Apple Podcasts, or wherever
you listen to your favorite shows. Yeah,