Imagine you are at the mall shopping for a new pair of dress shoes. Do you invest in that $400 pair of premium dress shoes, or do you go for the more affordable pair at $100? The concept of cost per use is a powerful tool that helps us make smarter purchasing decisions. Once you apply the concept to your everyday life, especially on big-ticket items, you’ll mostly like save yourself money in the long run!
For those who are mathematically inclined, the cost per use formula can be described as follows:
Cost per use = Price/Number of uses over expected useful life
In other words, it is the expected cost you are paying for each use of the item over the course of the useful life of the item.
How do you apply this in real life? Try asking yourself these questions:
How often will you be able to use the item?
Consider the dress shoe examples above. Let’s assume you work in a corporate office setting where you need to wear business attire at work. It makes sense to invest in a quality pair of dress shoes from companies like Allen Edmonds or Church’s. On the other hand, if you only wear dress shoes once in a while for formal occasions such as weddings and funerals, it is probably a smarter choice to go for more affordable choices such as Zara or Topman. You probably won’t get the same quality but there will be no sacrifices on style points.
Also, consider whether you already own anything similar. The more similar items you already own, the fewer uses you will get out of your next potential purchase.
Durability/longevity of the item
More often than not, you will get a better quality product by paying more. As move further up in price though, you will eventually experience diminishing marginal returns (we will talk about finding the sweet spot in a future article). Therefore, investing more in a quality product upfront might actually save you money in the long run.
Continuing with our example of dress shoes, if you buy a quality pair of shoes with a Goodyear welted sole, you only need to replace the sole when it wears out, as the leather is usually extremely durable and will last you a very long time provided that you take good care of the leather. Say you buy a pair $100 shoes but it breaks down in a year, while a $400 pair of shoes will last you 5 years before you need to resole it for $100 and wear it for another 5 years. The cost of buying $100 shoes over a 10 year period is actually $1000 while a buying the $400 shoes will only cost you $500 in total.
How willing are you to use the item?
Sometimes, psychologically, we might avoid wearing expensive items in our wardrobe for the fear of it getting dirty or breaking. By doing so, you are actually spiking your cost of per use due to your unwillingness to use the item. Continuing further with our dress shoe example, don’t be afraid to wear your nice pair of shoes. Instead, learn how to take good care of your shoes by polishing them on a regular basis, which helps extend the useful life of the shoes as much as possible.
Be a smart shopper!
Next time you purchase an item, remember to ask yourself the questions above to make sure you get a good cost per use on your purchase. A word of caution, do not abuse the cost per use concept to justify your impulsive decisions to buy expensive luxury items. Be honest with yourself, and you will find yourself saving money in the long run by being smart with your purchase decisions.