subscribe to the RSS Feed

Friday, April 18, 2014

Marginal “Return” on Purchases

Posted by Dave on February 12, 2013

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.

At the age of 33, I picked up a habit that most people who have made it this far into life managed to avoid.  Last fall, I decided I liked coffee.  I could blame peer pressure on this new expense, as my wife has had coffee for most of her life, but really I just like it and decided why not enjoy a cup or two a day?

One of the benefits to my wife with me picking up her habit is that it was easier for her to justify purchasing a Keurig coffee maker that she had been ogling for almost a year.  With only one of us in the house drinking coffee, it didn’t really make sense to both take up the counter space as well as to spend the approximately $150 on a single-use machine.  She bargained hard and in the end (after much deliberation) ended up getting one of these machines.

When I was examining the purchase, I looked at what my wife by herself was currently spending on coffee.  Although she occasionally made coffee at home, she mostly was going to a shop down the street which roasted its own beans and was locally owned (and happened to be on her walk to work).  A cup of coffee there was $1.80…..expensive right? (The “Latte” factor discussion had no impact on her coffee spending).

One of the main factors that was stopping her from just bringing a much cheaper cup from home was the quality of the coffee.  She had tried buying fresh coffee from the coffee shop and using our coffee machine, or our French Press, and neither really measured up.  Prior to purchasing a Keurig, we had tried several types of coffee from my mom’s machine and she really enjoyed it.

An average K-Cup (for use in the machine) costs between $0.60 and $1.00 (from what I could find), so I figured the machine would pay for itself if she used it for about a half year or so (saving $1 per cup x 180 days). We found a Canadian site which sold coffee “pods” (essentially coffee tea bags) that we tried and enjoyed and got the cost down to under $0.40 per cup, while significantly reducing the amount of waste caused by the K-cups. The coffee is roasted in Canada and most are Fair-Trade-Organic (which is perhaps a sketchy label, but makes us feel better). This significant reduction in marginal cost both reduced the amount of time the machine took before it “paid” for itself, as well as decreased the overall cost per cup in the morning.

So, we now have a Keurig machine sitting on our counter. My wife really likes it, and we both really enjoy the convenience in the morning, as well as having the ability to switch flavours of coffee more easily.

Much to my wife’s dismay, this convoluted type of thinking goes into many of the purchases (or lack of purchases) made around the house. It’s the reason we don’t have a clothes dryer or a dishwasher, opting for an indoor/outdoor line and a rack to dry clothes on, and our wrinkly hands to wash dishes for two. We also used this type of marginal “return” when looking at cars to purchase. I really liked a couple of hybrid cars when we were shopping, but figured gas would have to more than double in price to make it worthwhile (financially) to spend almost double the $11,000 (after taxes) cost for a 2-year old Nissan Versa.

For me, especially with larger-cost items I need a reason or some sort of calculation to “justify” the purchase. It allows me to reduce the risk of buyer’s remorse and ensure that the purchase is really worthwhile having.

How do you decide when (or when not to) buy consumer goods?

Comments

7 Responses to “Marginal “Return” on Purchases”
  1. TheOtherdave says:

    Hey Dave, to bring your costs per cup down even lower you can buy reusabe coffee pods and put your own coffee in it. This also reduces the waste created from the disposable products and creates a level of independace from the company(s) that make the disposable cups if they raise their prices, go out of business, or change to a “new standard”

  2. George says:

    Ah, the indefineable convenience/comfort factor!

    Latest purchase has been fishing waders. My 20-year-old $30 neoprene hip waders developed a leak at a flex point… fixing them wasn’t really an option unless material could be “welded” into place.

    Comparable new hip waders are $60 now, about the same as inflation. High-end breathable chest waders are $250-$300, but you also have to add the cost of $100-200 for boots. The boots might last a lifetime, but the waders are consumable items and will eventually leak.

    However, offsetting the higher cost, chest waders let you get into deeper water and the breathable fabric is much lighter and more comfortable than insulated neoprene.

    I carefully weighed the pros & cons. The decision to go with chest waders was made when I saw someone cross a favored stream with chest waders at a safe location that is not possible in hip waders.

    Now, having used the chest waders and boots for the first time, I know I won’t be going back to neoprene hip waders. The utility of the new gear is more than enough to compensate for the higher price.

  3. Sheryl says:

    I take my time about purchases as well. My cooking pots cost a bit more, but they are Canadian made and are guaranteed for 25 years.

    Usually, the items I buy, I expect to have a very long time, and will do a cost analysis to make sure any “extras” are worth it.

    BTW, I was hesitant to get a Keurig due to the cost per cup (I have not been in the habit of picking up a coffee for about 15 years). I ended up with a machine when a points program I was in was closing, and the coffee maker was the only thing left that I could use. It is one of their pro series, and the reusable K-Cup does not work.

    I use some little plastic discs I bought from

    http://www.my-cap.com

    I am able to reuse the pods many times before I toss them out (waving my eco friendly flag), as well as getting the cost per cup down to the same as my old drip coffee maker. I’d recommend them to anyone with a Keurig.

  4. Heather says:

    Dave/Sheryl

    I have a Keurig and am curious abou how these tea bag or discs work. Can you explain? What is your favourite coffee from these sites? I usually just buy the Timothys from Costco.

  5. Sheryl says:

    @ Heather

    When I got my machine, I also received some free boxes of pods from the Keurig website, so I have tried a few flavors.
    For regular coffee, I like a medium roast and can’t tell much difference between most I’ve tried. For decaf, my favorite is Caribou Coffee, smooth and flavorful, I can assume their regular coffee is just as good. For flavored coffee, I enjoyed Belgium Chocolate (Van Houtte) as well as the Kahlua.

    The discs are easy to use. After you have used a pod, let it cool down. Peel the foil off the top and dump out the used grinds (this is easier if you let them completely dry out). Then I rinse the pod out to remove any sediment, and allow them to dry again.
    Then I fill them with my own coffee, (to about a quarter inch from the top) and then the plastic disc is inserted in the top (to act as a new “foil”). Use the pod to make a cup of coffee like you would a new one from the store. When the disc is used, remove it from the pod, wash and dry, and it is ready to be used again.
    I have 12 discs, so I do this about once a week and keep them in an airtight container until I’m ready to use it. The site also sells the plastic cups and replacement filters if you are not wanting to clean the old ones, but then the price per cup starts going up again.

  6. Dave says:

    @ TheOtherDave – I was looking at something like the solofill for just that reason….I can get coffee from a local roastery (a walk down the street from me) then.

    @ George – You’ve moved yourself up to a higher wader “bracket” : )

    @ Sheryl – We were lucky enough to get a good set of high-end stainless steel pots and pans for a wedding present….they’ll last forever (I just need to use some barkeepers friend on them once in a while).

    @ Heather – the tea bag system uses an adaptor – you just kind of stuff the coffee in there and brew as normal. My wife likes them because they are relatively easy to clean up, and are a little less wasteful than the cups.

  7. Joel says:

    My wife and I got a coffe maker as a wedding present. After 3 years the pot (a thermos insulated type one) started to leak. We thought about getting one of those single serve machines but then saw a regular black and decker coffee maker for sale on kijiji for $15. I asked the guy if he’d take $5 and he said yes. We ran water and vinegar through it a couple times and for the past year it has been going strong. We might not be coffee connoisseurs, but that $5 coffee maker brews tastier coffee than any single serve machine I have tried. Maybe it’s the fact that we got a sweet deal or that we can brew a pot on Saturday mornings (or Sunday brunches) instead of making 4-5 “single servings”, but I’d say the return has been pretty good.

home | top