The cost of everyday things aren’t always what they seems. While some things start out looking like a good deal, owning them can cost more than we bargained for.
Here are some common things from everyday life that cost more than you thought.
1. A smartphone
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What you think you’re getting: A $200 phone.
What you’re actually getting: A contract for $2,000 worth of service.
Smartphones feel like a necessity for many of us and can seem like a reasonable value for this amazing piece of technology. While the purchase of a phone might seem a major cost, it’s actually everything else that adds up to much more. Voice and data plans alone can exceed $100 per month. That’s before adding accessories, insurance, and app downloads.
Don’t forget: You’re typically locked into a 2-year contract, so your smartphone costs can exceed $2,000 over this period.
2. Mutual funds
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What you think you’re getting: A path to riches in retirement with minimal effort.
What you’re actually getting: Fees that eat away at your returns.
Mutual funds typically charge extra fees called an “expense ratio,” which usually hovers around 1.5 percent. This can be a high price to pay compared to 0.25% of index funds.
3. A job
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What you think you’re getting: A fat paycheck.
What you’re actually getting: Extra expenses like clothes for work, lunches, and commuting costs that reduce your effective salary.
What? A job? Bet you thought it was all about making money, right? While I’m not saying that you shouldn’t have a job, your net income from working is likely a lot less than you think.
Don’t forget about all the time you spend at and getting to and from work as well. Add it all up, and a $50,000 salary earner can be taking home just $8.06 for each hour of activities related to his job.
4. Your collections
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What you think you’re getting: A win-win of a hobby that can also be decorative.
What you’re actually getting: Expensive clutter-producers.
Collections can make for a fun hobby. But many collectors make the mistake of thinking it’s an investment. Many collections aren’t nearly as valuable as they seem. Once-popular collectibles like Ty Beanie Babies and Hummel figurines have now seen their markets saturated, driving the values way down.
5. Your house
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What you think you’re getting: A place to live along with a solid investment.
What you’re actually getting: A money pit with returns much lower than the stock market.
When making the jump from renting to homeownership, many think they’re getting a great deal by simply exchanging a rent payment for a mortgage payment. Building equity while getting a mortgage interest deduction makes this a sweet deal, right? Not necessarily. Costs like property taxes, maintenance costs, and insurance can really drive up the price.
And if you’re still banking on a big increase in home value, you may be mistaken again. Historically, homeownership is a bad investment with inflation-adjusted returns of around 1 percent, far lower than the roughly 8% the S&P 500 returns.
6. Your car
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What you think you’re getting: A convenient and affordable way to get around.
What you’re actually getting: Huge depreciation, fuel costs, and interest charges.
It’s not just the price of the car that matters. You need to continuously shell out more money to operate your car, too. Add it up, and you’re looking at at least $5,300 per year for the first five years of ownership, according to Consumer Reports.
However, that figure is for the cheapest car on the list, a Honda Fit. Luxury SUVs can cost $13,000 per year with some pickup trucks almost that high, too.
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What you think you’re getting: Cheap entertainment compared to the movie theater
What you’re actually getting: A huge time and opportunity sink that costs you monthly.
While unwinding in front of the TV every night is an American pastime, the amount we do so is likely the most damaging factor. Putting aside the monthly cable subscription costs, missed opportunities can cost much more. If you worked a minimum-wage job instead of watching the American average of 31.5 hours of TV each week, you’d earn almost $12,000 every year!
8. Bottled water
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What you think you’re getting: Better water than tap for on the go.
What you’re actually getting: The same water at up to 2,000 times the cost.
Perhaps tap and bottled water are still on the grand scale of our budget, but price increase is rather remarkable. Drinking eight glasses a day of bottled water can cost $1,400 a year, compared to just 50 cents by drinking from the tap. Reader’s Digest reports about 25 percent of bottled water comes from “public sources” (i.e., the same place as tap water).
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What you think you’re getting: A relaxing time off with primarily airfare and lodging to pay for.
What you’re actually getting: Food, ground transportation, and entertainment costs that ballon the total expense.
I love traveling and am happy to pay to do it, but nearly every trip I’ve been on has cost much more than I originally planned. It’s easy to assume that the major costs of a vacation are a plane ticket and hotel, but restaurants, admission to attractions, and getting around can end up costing just as much if you aren’t careful. Currency exchange fees and airline fees add even more to the cost. Don’t forget that if you don’t have paid time off from work the cost of your trip will be even higher.