Beating Broke

Stop Adding Up the Cost of Children!

June 13, 2011 By Shane Ede 22 Comments

Every few weeks, you see an article that goes into great detail on the costs of having children. In these articles, they talk about how much it costs to have a child at the hospital, to buy diapers, formula, clothes, and even talk about future costs like sports, cars, and college. But, if there’s one thing that being a father has taught me, it’s to stop adding up the cost of children. Seriously. Here’s why.

If you are one of those people who truly wants to have children, it won’t matter what they cost. You’ll want them. And, you’ll gladly find a way to pay the cost. Sure, it might be nice to know some rough estimates so that you can prepare a little. That’s mostly sane. But, some people are actually using those cost estimates as a justification for not having children. They go on to claim that it’s just not the responsible thing to do (having children) if you can’t afford them. But, here’s the thing. Almost every single one of them can afford children. It will mean changing their lifestyle, sure, but they will be able to afford a child. The folks who truly cannot afford children, aren’t off in the corner with calculators, running the numbers. It won’t ever occur to them that they can’t afford children. They’ll do just what you should do, if you want children. Have them.

No doubt, it’s scary. The numbers run from the low 5 digits to the low 7 digits over a childs lifetime. And, don’t even begin to total up the added “cost” of the time spent at t-ball games, birthday parties, and other childrens events. (Shhh! Don’t tell anyone, but most of those are really good excuses to have a bit of fun yourself.) And it’s absolute torture to try and figure out and estimate what college will cost in 18 years. But, that’s the root of my advice to you. Just don’t. Don’t add up the costs. The truth of it is that it just doesn’t matter.

Children are an incredible blessing. The experience is invaluable and without a price tag. It’s not for everyone. But, if you want to have children, just do it. You’ll be glad you did, regardless of cost.

photo credit: JD | Photography

Opportunity Cost is Bull

June 8, 2011 By Shane Ede 10 Comments

That’s right. Bull. All these experts go on and on about calculating the opportunity cost of something and adding that in to your cost analysis when deciding whether you should do something yourself, or hire it out. Heck, even I have used it before. But, we’ve all taken it way too far.

Let me ask you this; What is your opportunity cost of reading this post? Of eating your breakfast this morning? Not relevant? Bull, again. We use it to determine if we should keep cable T.V. We use it to determine the added cost of our daily commute. Personally, I’ve used it to validate paying people to do all sorts of things. Mechanics? The cost of doing it myself is too great, let them replace those brakes! Plumbers? I hate doing plumbing. Let them fix that leak! We’ve become so obsessed with being frugal and pinching our pennies that we figure out the cost of everything that we do. If the cost is too high, we should avoid doing it, or do it ourselves, our mantra goes. But, that isn’t always true! Sometimes, it’s just straight up bull.

We all want to improve our finances. That’s why we do those calculations. It’s simple mathematics. The problem with opportunity cost, however, is that most people assume a 100% efficiency. I hate to be the one to break it to you, but there is nothing that is 100% efficient. Not you, me, or anything ever created. There’s gonna be some loss. So, yes, I can figure the opportunity cost of my time. But, it depends on my using that time to be efficiently working on something that will make me money. The opportunity cost of my time at work is about $25/hour. But, that doesn’t mean that every hour I sit at home watching T.V. has an opportunity cost of $25/hour. I can’t stop watching T.V. and replace that time with paid time for work. They don’t like paying overtime. Plus, I’m paid on salary, so every extra hour I work at work, reduces the effective hourly pay. Did you catch that? Every hour over 40 hours a week that I work reduces my efficiency to earn money. If I were paid hourly, that might be slightly different. But, I’d be willing to bet, my employer would still have an aversion to paying overtime and would not allow me to work many more hours over 40.

If you’ve got side projects, like I do, there is a opportunity cost for every hour that I’m not working on them. Some side projects are extremely easy to figure the cost of. If I contract out my work on an hourly basis, my cost (for every hour I’m not working that project) is that hourly rate. But, just like my job, I can’t be 100% efficient at my side project either. I’ve got to sleep sometime. (Egads!!! The opportunity cost of sleep!!!)

The point is this; If you’re going to try and figure the opportunity cost in order to validate a decision, don’t do it blindly. Realize that you won’t be 100% efficient. Just because you disconnect the cable T.V. doesn’t mean you’re going to replace all that T.V. watching time with efficient money making time. Some of it might be spent reading a book. Or playing with kids. Or napping. 😉 Each of those may have some benefit to you, but they really don’t have much place in a financial cost analysis. Sorry, you can’t bill your kids for playtime!

The personal finance world is full of stuff like this. Mantras and rules-of-thumb that we use like crutches to validate and justify why we do what we do. It’s like an addiction. If you truly want to take control of your finances and live a better life, you’ve got to discard those addictions like you would a pack of smokes and begin to analyze what you do with a critical view. Nothing is worth using in your finances until you’ve tested and proven that it is.

photo credit: zogh

Turning Plastic into Oil

June 6, 2011 By Shane Ede 4 Comments

Typically, we hear about how much oil we use and turn into plastics. When you think about it, it does make some sense that you could then turn plastics back into oil. And you can! Watch this:

Of course, the first thing that comes to mind after watching that is, “Why can’t they do that on a much larger scale, and eliminate a huge portion of our plastic waste?” And, here’s your answer. They can. In fact, here’s an article from 2009 about just such a plant. It’s called the Envion Oil Generator, and the company was getting ready to roll the plants out nationwide at the time. I haven’t heard anything about them since then.

It’s an intriguing idea, really. Take the plastics that we create, and then waste, and turn them back into usable oil. It would probably put a fractional dent in our oil use, but any little bit is better than none, and would help make the oil supply last longer. Of course, there’s the downside that emissions would continue that much longer too, but, frankly, I don’t see the dwindling oil supply as anything more than a epic disaster, so the longer we can offset that, the better. According to that article, the plant can create oil from plastics for about $10 a ~~gallon~~(oops. Where’s my proofreaders?) Barrel. You’d think the profit margin there would be well worth building a plant or two.

What do you think? Is it a smart thing to do? Useless?

photo credit: the extinction blues