The true costs of things you buy

**Denvergirlie** · 02-23-2009, 09:45 AM

*** If you are on MDC, you'll see I posted this over there as well, but thought it was too telling to just introduce to only one online community.

*** I posted here in general chat, as I belive it can help the entire FV community and could in turn be posted in just about every subforum and be of assistance in changing the mind set we all fall into from time to time.

I am in the 25% income tax bracket, and using this calculator (http://www.moneychimp.com/features/tax_brackets.htm) my effective tax rate across the board is 17.82% for Federal taxes.
State income tax in Colorado is another 4.63% and then account for Social Security, 6.2% and Medicare taxes, 1.45%.

So every dollar I earn is effectively taxed at 30.1% before I even get any of my money.

So the $10 lunch at the deli really costs me $13.01 in actual earnings.

A car that costs $20K, really means it would cost me $26,020 in earnings.

I know I get caught in the trap of “oh it’s just a dollar”($1.30) or “oh it’s just $20” ($26.02)

But in reading a book this weekend I realized that I often forget to account for the real cost of things. How many hours I have to work to pay for ‘X” item.

I am on a salary, so I in turn figured out my hourly wage assuming I work 40 hours a week (ha, ha, ha I wish only 40 hours a week, but for math purposes stuck with 40).

My effectively hourly wage is thus $24.48, but I only get to take home $17.11 of that.

So now that take out pizza on Friday that cost $20 ($26.06), really means that I have to work 1.06 hours to pay for it.

I am going to try and keep this in mind more as our biggest money drain is eating out/ take out. If I take the 1.06 hours I have to work to pay for that pizza, I bet I can motivate myself to cook something in less than that 1.06 hours I have to work for it.

Have any of you considered the true cost of the things you buy and equate that back into how many hours you have to work to earn the money to pay for “X” item.

**Milly** · 02-23-2009, 09:53 AM

Originally Posted by Denvergirlie

*** If you are on MDC, you'll see I posted this over there as well, but thought it was too telling to just introduce to only one online community.

I'm sorry to sound like an ignoramus, but what's MDC?

Great post, BTW.

**Spirit Deer** · 02-23-2009, 09:55 AM

Yeah, we frequently do that. And don't forget to include the sales tax in the things you buy, too, which further increases your tax burden when you buy something rather than doing the work yourself.

**Denvergirlie** · 02-23-2009, 10:00 AM

Originally Posted by Milly

I'm sorry to sound like an ignoramus, but what's MDC?

Great post, BTW.

MDC is another forum board, I know there are some folks on this board as well as on that one. I will not promote that board on this board, but wanted to give a heads up should those folks see the same posting.

**Denvergirlie** · 02-23-2009, 10:02 AM

Originally Posted by Spirit Deer

Yeah, we frequently do that. And don't forget to include the sales tax in the things you buy, too, which further increases your tax burden when you buy something rather than doing the work yourself.

Yep...

Denver sales tax is 3.62% except for food and liqour that is consumed immediately, that is 4%.

Of course when we pay an electric bill or phone bill or any other bill most of those have taxes or usage fees on them as well.

So turn it full cycle, turning down the thermostat 2 degrees, getting rid of cable, even paying late fees at the library.

**Spirit Deer** · 02-23-2009, 10:16 AM

Sales tax here is 6.5% here, with some larger communities tacking on another .5 or 1%. However, we're lucky in that most food and clothing is not taxed. Things like pop and candy are taxed, and so are restaurant meals. Liquor has its own set of taxes. I really hope they don't start taxing food and clothes.

**MomToTwoBoys** · 02-23-2009, 10:21 AM

Actually, true price is considered more for its lasting value than how much you pay into it. For every item that is produced and sold to the public, there are two prices: true price (which is how much the item is worth to you and to anyone else using it) and retail price (which is how much you pay for the item itself). True price measures how much the item will be made use of in your possession, what its quality is, how well it can be incorporated into another household after you've used it and if it's better than any other alternative on the market.

Retail price is how much you actually pay for it. This can, and in many cases will, include sales tax if you pay in cash and interest charges if you pay via credit card.

Retail price and true price are two aspects of an item that should highly be considered when purchasing it. An item's true price is usually a lot higher than the retail price, depending on how much you value it compared to how much value the manufacturer has put on it.

<--- wrote a section in her book about this

**Spirit Deer** · 02-23-2009, 10:39 AM

I would call that 'true value', not 'true price'. Price is cost, value is what it's actually worth to you.

I also consider that if I do a task that's worth xxx dollars, that's the equivalent of xxx in tax-free income. Another perk of all the DIY stuff I do around here.

**craftypam** · 02-25-2009, 04:43 PM

I saw awhile ago in a book about how much something costs and how many hours you have to work to earn it. AND do you like it that much
I liked that

**imagine** · 02-25-2009, 05:00 PM

Originally Posted by Spirit Deer

I really hope they don't start taxing food and clothes.

Where I live these things are taxed. Sales tax is a flat rate. Same for pop as an apple. Approx 7% added to everything.

Liquor and cigarettes might have an extra tax I don't know I don't buy those.

**jayneluvsmickey** · 02-25-2009, 08:52 PM

Originally Posted by Spirit Deer

Sales tax here is 6.5% here, with some larger communities tacking on another .5 or 1%. However, we're lucky in that most food and clothing is not taxed. Things like pop and candy are taxed, and so are restaurant meals. Liquor has its own set of taxes. I really hope they don't start taxing food and clothes.

i wish i had that tax

it's 9.5% on everything which i wasn't used to

some counties are 10%

in illinois our food tax was (when i left 8 years ago) 2% i think

anyway, it was low

indiana didn't have any at that time

**sunnysky24** · 02-25-2009, 08:58 PM

Wow i never looked at it that way. Thanks

**Debbie-cat** · 02-25-2009, 09:03 PM

It really is unbelievable isn't it? I think alot of people are beginning to realize exactly what their dollar buys.

**forHISglory** · 02-25-2009, 09:44 PM

Great thinking! Another way to look at your purchases is to consider the cost per use.

If I buy a coat for $10 and wear it 10 times, it cost me a dollar per use. But if I wear it only one time, it cost me $10 per use. So I now try to look for items that will have multiple uses and are sturdy enough to last for a long time.

**Siebrie** · 02-26-2009, 04:53 AM

Did you include travel time and time spent preparing for work, travelling to work, thinking about work, courses taken in the evening, shopping for work clothes, etc in your hourly-wage calculation? It's time you would not have spent if you did not work, so they can be included in the calculation, thereby reducing your hourly wage even more.

In the Netherlands essential items (bread and milk) are taxed at 6%, non-essential items (buns and soda) are taxed at 19%.