How To Think About Money: The Training Begins

Another great jlcollinsnh blog post really started to make me change the way I think about money. (By the way, if you haven’t read his ongoing series of blog posts about investing yet…you should start doing that asap and start here.)

Okay, so the idea is you calculate what the amount of money you want to spend on something right now would grow into if you didn’t buy the thing but bought index funds with the money instead. Interesting, right?

So, if you’re not familiar with the compound interest theory and the formula you’d have to use, click here.

I’m using 8% growth a year and check what that amount would grow into after ten years.

Okay, let’s go “shopping”!

I’d like to buy a couple of books on index investing, such as: The Boglehead’s Guide to Investing, The Intelligent Asset Allocator, A Random Walk Down Wall Street. Let’s say it’ll cost me about €100. Ten years from now that money could have grown to €215,89. Is the stuff I’ll read in these books worth 216 euros ten years from now? You bet your ass it will! By the way, these books have been on my wish list for over a year now. I intend to buy them with gift certificates…

Outdoor kitchens are all the rage now in The Netherlands. I want to do me some outdoor cooking! And by outdoor kitchens we mean a BBQ that runs on gas. Anyways, the coolest one is about €1500. That could hypothetically grow into €3238. Don’t think I love to BBQ that much. We could also go for a cheaper or second-hand version of around €300, which would equal to €647 in ten years. That’s one I might have to think about for a while.

I would also like customized skiing boots. I have wide feet and all those rentals hurt like hell. A pair of those boots would be around €350 which could grow into €755. I think those are definitely worth it. I know…I know…skiing is not very Mustachian. But hey, MMM himself enjoys a snowboarding vacation once a year.

There’s not much else worth mentioning on my wish list…a couple of games and other items in that category. They’re on my wish list so in case somebody wants to give me something and they ask for a wish list I am able to send them mine. Nothing extravagant on there, really.

Let’s say I hypothetically would want a motor bike (I used to own one) of about €5,000. In ten years that could grow into €10,794. The motor bike would definitely lose while playing this game. Renting is also the best option if you’d like to enjoy a ride every once in a while.

Do you like this approach in order to check whether the product is worth the amount you could have grown it into over the next ten years?

Love,

Mrs EconoWiser

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6 thoughts on “How To Think About Money: The Training Begins

  1. Belgostache

    Dear Ms. Econowiser,

    Indeed, skiing is one of the least moustachian activities I can think of. MMM lives only steps away from the Rocky Mountains but being from the Netherlands, where you have to go at least 1000 Km to find the closest slope, what’s your excuse? ;).

    Btw, thanks for the blog. I’m in Belgium and trying to learn how to implement moustachianism here. Your blog is providing some ideas.

    Reply
    1. econowiser Post author

      Haha, no excuses here! Just addicted to it! This summer we’ll be doing some indoor skiing in Landgraaf.
      Thanks for reading my blog and taking the time to comment on it.

      Reply
  2. donebyforty

    Hi Mrs. Econowiser!

    I also really like jlcollins’ post an I’m starting to think up a way to calculate opportunity costs when considering a purchase. I’m thinking I’ll have a 10 year, 20 year, 30 year, etc. cost, since an opportunity cost like this could go on indefinitely. And I’d want to account for inflation somehow as well. This may be a future blog post.

    As for your items, I love the idea of buying some of them used. We try a craigslist jar from time to time: when we want to buy a used item, we have to sell used items to come up with the cash. The craigslist jar giveth, and the craigslist jar taketh away.

    Reply
  3. Wim

    Try a collection of antiques. Nice to look at, usually will not wearout and sell it later when you tired looking at it and selling at a peak….

    Reply

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