The High Cost of Modern Living

[crispus]

I came across this article today on the Get Rich Slowly Blog. The High Cost of Modern Living

I often think about how so called necessities of life have changed radically since I was a kid. Once we have tasted the fruit it is hard to go back to the simpler life, even if it means we have to work to support this habit.

 

[Leonidas]

I often think about how so called necessities of life have changed radically since I was a kid. Once we have tasted the fruit it is hard to go back to the simpler life, even if it means we have to work to support this habit.

From the article:

But even if you were so un-hip as to not wait in 11-hour long lines or pay people to move up, you are still paying a lot for that iPhone — or just about any other cell phone, for that matter. And by “you,” I mean “me,” since I have just such a gadget myself. Let’s look at the numbers:

• My monthly bill came to $73. Multiply that by 12, and you get $876 a year. But that’s not all!
• That bill was paid with after-tax money. Assuming I have a combined state and federal tax rate of 30%, I had to earn $1,251 — that’s $876/(1 - 0.30), for those curious about the math — then hand over a chunk to Uncle Sam and Aunt Virginia (my state) to have enough after-tax dollars to pay the cell-phone bill.

Why work for it when you can invest your way there? I've made enough on a couple of hundred shares of AAPL this year to have an iPhone for every day of the month. And my T dividends pay my cell bill without any problem.

And it pays to be semi-cheap as well. I waited a couple of weeks after the crazies were in line buying iPhone 4's, and walked in and got a nice 32Gig iPhone 3G3 for cheap (and with no waiting in line).

 

[Onward]

I loved it.

“In 1957, the average American earned about $10,000 (adjusted for inflation) and lived without a dishwasher, clothes dryer, television, or air conditioner” — and more people reported being “very happy” than do now.

Or as Thoreau said, we have become the tools of our tools.

 

[Leonidas]

Or as Thoreau said, we have become the tools of our tools.

They can take the TV, telephone, dishwasher, etc....but they'll get the air conditioner only when the survivors can pry it out of my cold, dead, hands!

 

[Texas Proud]

Interesting link in the list...

Chocolate Covered Bacon Recipe


And we only thought that we were the only ones that talked about bacon...

 

[bbbamI]

They can take the TV, telephone, dishwasher, etc....but they'll get the air conditioner only when the survivors can pry it out of my cold, dead, hands!

Yeah....I agree. They don't EVEN want to tangle with me.

 

[Coderguy]

Interesting link in the list...

Chocolate Covered Bacon Recipe


And we only thought that we were the only ones that talked about bacon...

Had it Wisconsin state fair; only good if the chocolate is thin and the bacon crisp; otherwise it's one of the worst things I've ever tasted.

 

[MasterBlaster]

Interesting link in the list...

Chocolate Covered Bacon Recipe


And we only thought that we were the only ones that talked about bacon...

I prefer the taste of the chocolate covered women better

 

[crispus]

They can take the TV, telephone, dishwasher, etc....but they'll get the air conditioner only when the survivors can pry it out of my cold, dead, hands!

I agree completely, especially with this summer here regularly with temps. touching the 100 degree mark.

 

[Bimmerbill]

I saw an ad for bacon flavored tooth picks...

 

[happy2bretired]

Most married women in 1957 stayed home to do the housework...that was their job. Unless they were very well off, most of them didn't have dishwashers and used a manual washing machine with a wringer, hanging the wash outside to dry. They didn't spend nearly as much on time saving gadgets since the women were home trudging away. (bet many of them were happy too)

Now, of course, most women work outside the home...doubling the pay and needing all sorts of time saving gadgets.

Boy, are we spoiled.

 

[Ronnieboy]

And it pays to be semi-cheap as well. I waited a couple of weeks after the crazies were in line buying iPhone 4's, and walked in and got a nice 32Gig iPhone 3G3 for cheap (and with no waiting in line).

And one that worked

 

[TromboneAl]

The article says, "In 1957, the average American earned about $10,000... "

But according to this it was more like $30,000 (in 2006 dollars):

 

[ERD50]

Some truth to all this, but there are some offsetting factors. I agree you need to be careful not to succumb to "keeping up with the Joneses" , but that was always true.

OFFSETS:

HOME PHONE: I get unlimited local & long distance and multiple extensions for less $ than the cost of leasing a single corded phone w/o lighted dial back in the day.

CELL PHONE: Sure, we didn't have cell phone bills back then - but if you are careful, I'd say the phone can pay for itself. My rate will be down to 83 cents per month next year, and when I do use it, it normally saves me an extra trip or buying the wrong thing, or whatever.

EFFICIENCY: My new fridge uses about 40% as much juice as the old one, which was already a very efficient model for 1992. Furnaces are 90+ rather than 45-55%.

Remember 'tune-ups'? Those cost money (or your time and $), and performance started degrading shortly after, along with mpg. And letting the car warm up on cold days, or it would stall in traffic because the choke was still adjusting?

Buying tubes for old TV, calling a serviceman to fix it? Flashlight batteries that would be dead and leaking within the year (buy a new flashlight and batteries!)? No Costcos or Amazons to bring us great deals? Valuable choices in products that we just never had before?

How much of our life was wasted, waiting for those old tube TVs to warm up, and adjusting the Horizontal, or the Vertical? (OK, just kidding on that one). Now we waste it waiting for our digital TVs to 'boot up' and cycle through dozens of channels to find out that 'nothin's on'.

These things fade from our memory, but there must be dozen of other things that required our attention and costly maintenance back then, and those needs have been designed out.

Regardless of which effect is greater, I'm not going back - no way, no how!

-ERD50

 

[FUEGO]

But so much "stuff" has gotten so much cheaper. Especially tech related stuff.

For example, our two cell phones are free (for the phone) and run a little under $4 a month each. And they are color, have built in cameras, weigh a few ounces, batteries last a week, etc.

Our 42" HDTV was $400 and gets perfect digital over the air HD programming (no comment regarding the worth of said programming's content...). I recall a couple decades ago going tv shopping with my folks and buying a much smaller tv for much for than that.

Computers.

My "portable phonograph" cost $20 and can hold thousands of songs.

The list goes on.

 

[ronocnikral]

mmm...i agree the costs of the goods are cheaper, but are they things we really need?

we were out to dinner with some friends last night and one said, "really ronocnikral?! text messaging?! really?! how can you get rid of your text messaging?!" it's like these things are now a necessitity of life.

don't even get me started on kids with cell phones, ipods and portable DVD players. yeah they (the things, not the kids) are cheaper than in 1957, but every kid wasn't running around with one of each to call their own.

but, i agree the quality of life is enjoyed by all, and turning back those pages are very difficult. for those that are willing to fend of the immediate gratification and pick & choose a few luxuries, deals are to be had!

 

[dex]

I came across this article today on the Get Rich Slowly Blog. The High Cost of Modern Living

I often think about how so called necessities of life have changed radically since I was a kid. Once we have tasted the fruit it is hard to go back to the simpler life, even if it means we have to work to support this habit.

It is a good blog article. I liked that he/she used pretax dollars to make the point about cost.

A word change to give a different view is necessities to convenience or immediacy. That is what a lot of money is going towards.

Another aspect that has changed from the past is the change to 'subscription based' living. Look at many of the things being discussed and they have an ongoing subscription cost that was not there in the past.
Free TV to monthly cable
Land Line Phone basic $ + usage to monthly cell phone cost
monthly internet fee
monthly credit card interest payment
I'm sure there are others I don't know about.

I had the point of view below when I was in the savings mode. Now I try to lean towards 'do I want to miss an experience today just to have more money in my bank account when I die?'

The High Cost of Modern Living
My point, dear reader, is that there is a current and future cost to the modern lifestyle. For every dollar we earn, we could rightfully ask: “Do I want to spend a dollar today and work longer, or do I want to spend a few dollars in the future (assuming some compound gowth), when I no longer have to work?”

 

[DoingHomework]

Why work for it when you can invest your way there? I've made enough on a couple of hundred shares of AAPL this year to have an iPhone for every day of the month. And my T dividends pay my cell bill without any problem.

I am consciously trying to invest enough in my local natural gas company, electric utility, and so forth to have the dividends pay the bills. It might not be the most efficient investing but I see it as a hedge against price hikes. There are some problems with my logic I know but the investments are a tiny fraction of all my investments so I am not concerned.

Does anyone else take this approach?

 

[RunningBum]

Why work for it when you can invest your way there? I've made enough on a couple of hundred shares of AAPL this year to have an iPhone for every day of the month. And my T dividends pay my cell bill without any problem.

I am consciously trying to invest enough in my local natural gas company, electric utility, and so forth to have the dividends pay the bills. It might not be the most efficient investing but I see it as a hedge against price hikes. There are some problems with my logic I know but the investments are a tiny fraction of all my investments so I am not concerned.

Does anyone else take this approach?

No, I don't think you can assume that price hikes correlate to higher profits for the company. Back when gas was going up to $4/gallon, some said to invest in the oil companies. So let's say you invested in BP. Then their well blows. BP's stock tanks. Let's say the spill is bad enough to create a bit of a gas shortage, and prices go up. Now you're paying more for gas, but your oil stock has dropped too.

I think that making your best investments and shopping prudently are totally separate issues. You can buy AAPL stock and make money and not be compelled to buy an iPhone. Now what does make sense is seeing a product that you and a lot of other people like, making sure that product's sales really impact that company's bottom line, and deciding to buy the stock.

 

[FUEGO]

I am consciously trying to invest enough in my local natural gas company, electric utility, and so forth to have the dividends pay the bills. It might not be the most efficient investing but I see it as a hedge against price hikes. There are some problems with my logic I know but the investments are a tiny fraction of all my investments so I am not concerned.

Does anyone else take this approach?

No;

I figure my investing roughly works itself out. I spend money on energy, consumer goods, food, cars, etc for everyday consumption purposes. I also own a broadly diversified portfolio. I imagine my ownership of companies grossly reflects what I buy (and their supply chains). If energy companies double in market share to comprise 20% of my portfolio, they are getting revenue from somewhere, and that likely means I'll be paying more for energy at the pump and in my monthly elec and nat gas bill.

 

[ERD50]

I am consciously trying to invest enough in my local natural gas company, electric utility, and so forth to have the dividends pay the bills. ...

Does anyone else take this approach?

I always wanted to, but I don't think there is any sort of correlation between the rates and the stock returns.

I've thought about things like natural gas futures to hedge my bill - there is a transaction cost to that, and overall it just didn't seem to be worth it.

-ERD50

 

[FUEGO]

I've thought about things like natural gas futures to hedge my bill - there is a transaction cost to that, and overall it just didn't seem to be worth it.

Especially considering many utilities hedge their commodity purchases already to mitigate for spot price spikes.

 

[Texas Proud]

Some truth to all this, but there are some offsetting factors. I agree you need to be careful not to succumb to "keeping up with the Joneses" , but that was always true.

OFFSETS:

HOME PHONE: I get unlimited local & long distance and multiple extensions for less $ than the cost of leasing a single corded phone w/o lighted dial back in the day.

CELL PHONE: Sure, we didn't have cell phone bills back then - but if you are careful, I'd say the phone can pay for itself. My rate will be down to 83 cents per month next year, and when I do use it, it normally saves me an extra trip or buying the wrong thing, or whatever.

EFFICIENCY: My new fridge uses about 40% as much juice as the old one, which was already a very efficient model for 1992. Furnaces are 90+ rather than 45-55%.

Remember 'tune-ups'? Those cost money (or your time and $), and performance started degrading shortly after, along with mpg. And letting the car warm up on cold days, or it would stall in traffic because the choke was still adjusting?

Buying tubes for old TV, calling a serviceman to fix it? Flashlight batteries that would be dead and leaking within the year (buy a new flashlight and batteries!)? No Costcos or Amazons to bring us great deals? Valuable choices in products that we just never had before?

How much of our life was wasted, waiting for those old tube TVs to warm up, and adjusting the Horizontal, or the Vertical? (OK, just kidding on that one). Now we waste it waiting for our digital TVs to 'boot up' and cycle through dozens of channels to find out that 'nothin's on'.

These things fade from our memory, but there must be dozen of other things that required our attention and costly maintenance back then, and those needs have been designed out.

Regardless of which effect is greater, I'm not going back - no way, no how!

-ERD50

How do you get a cell phone for 83 cents per month!!!! I want one...

 

[ERD50]

How do you get a cell phone for 83 cents per month!!!! I want one...

Learned about it on this forum. T-Mobile pre-pay and 'Gold Status'.

The first year will cost me $32 for the phone, charger and a $25 card. Add $100 (1000 minutes plus 1 year) to achieve 'Gold Status'. So $132/12 = $11/month the first month ( a little less if you can stretch that first $25 worth). After that, just $10 extends you for another year and rolls over your unused minutes, and adds 35 minutes. I rarely use even 10 minutes a month, so unless my habits change, I won't be spending more than $10/year for many years.

-ERD50

 

[Leonidas]

I am consciously trying to invest enough in my local natural gas company, electric utility, and so forth to have the dividends pay the bills. It might not be the most efficient investing but I see it as a hedge against price hikes. There are some problems with my logic I know but the investments are a tiny fraction of all my investments so I am not concerned.

Does anyone else take this approach?

Despite my prior posts about T and AAPL, I don't actually make investments on stuff or services I buy just because I buy it. (with the exception of AAPL, which was more of a surrender than seizing an opportunity).

But I do like to play a little game when paying bills and being shocked by the prices at times. When I get the AT&T bill I often squawk about the prices, but it brings a little smile to my face when I can say, "that's okay - you bitches pay me ten times that every quarter in dividends!"