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Calculating Cost Per Use

Calculating Cost Per Use

 

                Being a savvy shopper is an important part of being financially stable.  There are many aspects to consider when making a purchase.  One way to evaluate a purchase is to estimate its cost per use, rather than focus on the purchase price.  Is a $150 pair of jeans a better deal than a $50 pair? Is a $60-per-month gym membership worth it? Should you spend $20 more for a better coffee maker?

                The answer is, of course, that it depends. To determine cost per use, simply divide the purchase price by the number of times you’ll use the item. And be conservative: studies show that consumers, especially if they’re excited about a purchase, tend to overestimate use.

                Still, cost-per-use is a great aid in deciding whether to buy an item, comparing possible purchases, evaluating an upgrade in a product or deciding between subscribing and paying as you go.

                Tracking or estimating use is the best first step. Of course, cost per use doesn’t work for everything. For example, you use life insurance only once, making its cost incalculable. But here are a few examples of how calculating a cost per use can help.

                Clothing –Obviously, the more you wear an item of clothing, the lower the cost. For a $500 winter coat that you wear 100 to 150 times per year over five years the cost is 67 cents to $1 each time you wear it.   If you buy a trendy top for $20 and wear it only three times, it costs you $6.67 per wear which make the $20 top six times more expensive than a $500 coat.

                Subscriptions - Consider a DVD movies-by-mail subscription. . Is it the best option, compared to renting, using pay per view from your TV package or paying for a movie channel, such as HBO?   While each of those options has so many different options, they are not easy to compare, the cost per use comparison can help you evaluate them.

                Items Used Daily - Items you use daily do well in a cost-per-use analysis. Mattresses, coffee makers and computer monitors are examples. If you buy a bigger, better computer monitor that costs $100 more and use it daily for four years, your additional cost per day is 7 cents. On the other hand, infrequently used items get expensive.

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