Oh look. The new widget just came out. It seems fantastic. I really want it. And it's only $300.
My husband makes (let's say) $15/hour.
That means he will have worked 20 hours to give me the widget. Half of an entire work week has been spent toiling just so that I can have the latest and greatest.
The new widget cost us 20 hours of life energy. Was it worth it?
Maybe the new widget is. Maybe it's a game system that we spend thousands of hours playing, making each hour of entertainment come for pennies over its lifespan.
But maybe that $300 is from me being careless. I get pulled over and receive a $300 speeding ticket because I wasn't paying attention to where the speed limit changed and there was construction going on.
My husband now has spend twenty hours of life energy because I was merely distracted. That really sucks.
What if neither of us feel like cooking. Is our going out to eat for $30 worth two hours of his work? Wouldn't it be easier to spend fifteen minutes boiling some pasta?
This isn't really anything new or shocking, merely a reminder of a concept that's written about quite a lot in personal finance blogs and books.
But here's a twist...
Let's say that we charged that $300 gaming system and weren't able to pay it off. Assuming I have an interest rate of 15.99% (which is average for my current credit cards) and it takes me five years of payments on the cards to nail that specific purchase (I've been paying on the card but for stuff I had bought even before the $300 gaming system) there will now be $663.82 on the card. (Roughly, as that's with monthly interest compounding and not daily compounding.)
The game system has now cost us a full work week and five year's worth of stress. We probably resent the system because not only does it remind us of our poor decision making skills, it's also now available for $199. And, on top of that, the one we bought may not even be functional. What if it broke in year three?
Was the dinner out that I charged in 2002 for $35 worth $35 plus eight years of interest and stress? I couldn't even tell you what I ordered or if it was good.
I'm not trying to use this as a stick to beat myself over past purchases, but more as a yard stick for the future when credit tempts us. Once our debts are discharged it's up to us to resist. No one is going to look over our shoulders and shake their finger at us. It's going to be a test. Did we learn our lesson? Are we going to file bankruptcy again eight years from now? Hell yes, and hell no. But... it's easy looking at a computer screen, deeply in debt, in the process of filing chapter 7, to be strong and have resolve and to say things. Three years from now when the newest gadget comes out and "it's only $300" will be another story.