How Expensive is it?
How expensive is it?
How to decide whether to buy or not
1) Things that appear reasonable to you can appear expensive to some and cheap to some
2) Between Time and Money one must value Time ahead of Money
3) Rakesh Jhunjhunwala had famously said, “you will fall short of time and not money”
4) Unfortunately Time can’t compound like Money
5) So if you lose time, you have no way to get it back whereas if you lose money you can certainly get it back
6) Amitabh Bachchan became bankrupt at the end of his career but he managed not only to recover his losses but grow it manifold in just a few years
7) Always therefore measure the cost of anything against the time you will need to work to pay for it
8) If you have a passive income stream, then calculate how long it will take your passive income to generate the purchase price for the item
9) There is no better way to help you make “buy or rent” decisions
10) Hence all of us must calculate our time cost
11) Figure out the money generation capacity of your assets
12) If you have low yielding assets it’s your problem. That is why investing is not equal to putting in the bank mindlessly
13) Figure out your money generating capacity from your active income
14) Divide your monthly money generating power 24 hours × 30 days to arrive at your hourly rate
15) Your hourly rate will also help you to rebalance your active hours and passive hours
16) If your hourly rate is extremely healthy and high, it will indicate that you can afford to relax a bit more
17) Once you have done this then simply use the formula
18) Price = Price of Item / Service / Hourly Rate
19) Let’s say you are wanting to by an iPhone costing Rs 100000
20) If earn 1 lac a month, your hourly rate is
21) 100000/ (24×30) = Rs 140 approx.
22) And the cost of the iPhone for you is Rs 100000/140 which is approximately 720 hours or an entire month
23) Now do you think it is worth buying the iPhone or not?
24) It is up to you to decide
I rest my case