Cost Per Use Model


This is an excerpt from the book, The Wealthy English Teacher: Teach, Travel, and Secure Your Financial Future, available on Amazon.

Cost Per Use Model

After you have paid off your debts and invested some money, you are perhaps contemplating purchasing a toy of some sort with your “long-term fun money” account. A helpful way to look at a bigger purchase is the cost per use model. For example, I recently bought a stand up paddleboard for about $600, which is quite expensive in my world. However, I had used this item numerous times before while I was on vacation, knew that I was addicted, and also that I would use it a lot.

Cost Per Use Example

Cost: $600
Usage: 2-3 times a week, 6 months of the year
Total usage: 60 times/year
Cost per use, first year: $10/use
Cost per use, after 2 years: $5/use (based on 120 total uses)

Considering that the cost for a rental is around $40 here in Korea, the cost per use in the first year of only $10 is extremely cheap. I also hope to be able to sell the board for $200-300 when I leave Korea, which further reduces my cost per use. If I had only used the board three times per year, for two years, my cost per use would have been $100, which obviously would not have been a good purchase for me. However, at $5 per use after two years, it is a very good deal and an excellent frugal hobby, despite the initial high cost.

Cost Per Hour

Another way to think about cost per use is cost per hour. Recently my friends bought a nice flat screen TV and had it installed on the wall. The total cost for the TV and installation was around $500. I asked my friends how much TV they watch and they laughed and said way too much, probably around twenty hours per week for the two of them together.

Cost Per Hour Example

Cost: $500
Total usage/week: 20 hours
Total usage/year: 1,040 hours
Cost per use, first year: $0.48/hour
Cost per use, after 2 years: $0.24/hour (based on 2080 total hours of use)

Clearly, this is an extremely cheap hobby for my friends because what else could they do that costs so little, but which they are happy to do for such large amounts of time each week. If they only watched TV for one hour per week, clearly this purchase would have been a poor choice for them because the cost per hour used would have been very high.

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  1. […] probably 200 times. My bicycle was around 500,000, but I’ve ridden it more than 4000km. See: The Cost per Use Model for help in making big […]