How to decide whether a purchase is worth it, by cost per use and hours of work

Most purchases are settled by two divisions. Cost per use is the price divided by the number of times you will honestly use the thing; hours of work is the price divided by what you earn in an hour after tax. A $300 jacket worn 150 times costs $2 a wear and twelve hours of work; a $300 gadget used six times costs $50 a use and the same twelve hours. The first test says whether the price is reasonable for what it does, the second says what it costs in the only currency you cannot earn back, and a waiting period for anything over a threshold you set gives both tests time to be run before the purchase rather than after.

Why the price alone decides nothing

A price is a number with no context. Three hundred dollars is expensive for a thing used twice and cheap for a thing used every day for five years, and the sticker cannot tell you which. The two tests put the price in context: against the use it will get, and against the work it took to earn. Both are honest only if the inputs are: the number of uses is the number you will actually get, not the number you would like to, and the hourly figure is after-tax pay, not salary divided by two thousand.

The two tests

1. Find your after-tax hourly pay. Monthly take-home pay divided by the hours worked in a month: $4,400 over 173 hours is about $25 an hour. A salaried worker uses the real hours, including the ones after five.
2. Estimate the honest number of uses, over the item's life. A jacket worn three days a week for a year is 150 wears; a gadget for a hobby you tried last summer is six uses, and you know it.
3. Divide the price by the uses, and ask whether that figure is reasonable for what one use gives you.
4. Divide the price by the hourly pay, and ask whether that many hours at work is a fair trade for it.
5. If either answer is no, wait. If both are yes and the price is over your threshold, wait anyway, for the period you set, and buy at the end of it if the answers are still yes.

A worked table, six purchases

After-tax pay is $25 an hour.

The jacket and the gadget cost the same and pass and fail the same test, which is the point of running it. The concert shows the limit of cost per use: an experience is used once by definition, and the honest test for it is the hours, seven and a fifth, against what the evening is worth. The appliance's "ten uses" is the kind of estimate that a waiting period corrects, usually downward.

Set a waiting period by price

A waiting period is the tests' enforcement. Below a threshold, no wait; above it, a fixed delay before the purchase, during which the honest number of uses tends to fall and the want tends to either survive or evaporate.

The thresholds are the household's to set; the shape is what matters. A purchase that survives its wait with both tests still passing is bought without guilt, because it was decided twice. One that does not survive was never a purchase, and the money is still there. Anything over the top threshold gets a line in the budget rather than a card; see How to save for a big purchase inside your budget instead of on a card.

When the tests disagree

Cost per use says yes and hours of work says no when a thing is used constantly but expensive relative to income, a $1,200 phone at $25 an hour being 48 hours of work for a device used a thousand times. The question then is whether the cheaper version fails the per-use test: a $500 phone used the same thousand times is $0.50 a use against $1.20, and twenty hours against forty-eight, and the difference is what the premium buys.

Hours of work says yes and cost per use says no for cheap things used rarely, a $30 kitchen tool used twice. Cheap is not worth; the tool is $15 a use and probably a drawer's worth of similar decisions, and the per-use test is the one that catches the small purchases that add up.

Common mistakes

• Using salary divided by two thousand for the hourly figure. After-tax pay over real hours is usually a third lower, and the tests are a third more honest.
• Counting hoped-for uses. The number is what you will do, from what you have done with similar things.
• Running cost per use on experiences. They are used once; the hours test is the one for them.
• Skipping the wait because it's on sale. A sale is a price with a deadline, and the deadline is the reason to wait.
• Applying the tests to needs. A car repair to get to work is not a decision; the tests are for the purchases that are.
• Treating a passed test as an obligation. Both tests passing means the purchase is reasonable, not that it must happen.

Common questions

How do I know if a purchase is worth it? Divide the price by the number of times you will honestly use it, and by your after-tax hourly pay. If the cost per use is reasonable for what each use gives you and the hours of work are a fair trade, and the answers hold through a waiting period sized to the price, buy it.

What is a good cost per use? There is no fixed figure; it depends on what one use gives you. A dollar a wear for clothing, a few dollars a use for tools, and tens of dollars a use for something that replaces a paid service are typical of purchases people are glad of. Fifty dollars a use for a gadget is typical of ones they are not.

How do I calculate my real hourly wage? Take-home pay for a month divided by the hours the job actually took that month, including commuting if you count it and the evenings if they happen. The figure is usually well below salary divided by two thousand, and it is the honest one.

Does the waiting period really work? For most households, most of the time. A want that survives a week is usually a want; one that does not was a mood, and the money is still there. The waiting period costs nothing and it is the only part of the method that runs without arithmetic.

What about purchases that save money, like a better coffee maker? Run the test on the saving: a $90 coffee maker that replaces $3 coffees at 500 uses is $0.18 a use against $3, and the hours test is 3.6 hours for a device that returns $1,500 over its life. Those are the easy ones, and the tests say so quickly.

How Zypper handles this

Zypper gives the tests their inputs. Take-home pay is an income category on the budget page, with Earned shown against the amount each month, which is the numerator of the hourly figure, and a large purchase that goes through the waiting period gets a category that carries its balance with Roll over unspent budget and shows the balance climbing toward the price. The cash flow page grouped by merchant shows what the purchases that passed the tests actually cost over the year, and a tag on each considered purchase lets the transactions page total them at the year's end, which is the audit of the method itself. See Creating your budget, Rolling over unspent budget, and Organizing transactions with tags for the details, or get started with Zypper to run the next purchase through the tests.