Rule for Buying Depreciating and Expensive Stuff

Spending Money

I’m a fan of not buying expensive things. I always try to look for the best deals, use coupons on items when I can, use discount apps when purchasing online, and refrain from buying things I don’t need. However, there are times when I will spend money on things with a hefty price tag that add more value than the price I pay.

Things like a car, computer, house, apartment spaces, college, or a wedding. I’ll be talking about my rule for spending money on depreciating stuff like a car or a computer and not about things that are value adding like weddings, colleges, or real estate.

Depreciating assets can be a necessity. Everyone needs a computer these days and at least a car. Yes, you can take public transportation or have a bike to go to work and get groceries but it is highly inconvenient (for all four years in college, I didn’t own a car and I can say how much I detested not having  easy transportation). Asking friends to go to groceries stores didn’t help either because I didn’t want to ask frequently and become a pest.

Such smooth design

$30 and $100 Rule

My rule is to spend a maximum of $30 a month for things that are in the thousands and to spend a maximum of $100 a month for things in the tens of thousands. My Macbook Pro cost me about $1100 after taxes and my car (that I will never buy new) cost me about $10,800 after taxes.

Why This Rule for Maximum Purchase Price Makes Sense

1. No difference. Computers are a commodity. There are nitty gritty differences between one computer and another but most provide the same functionality. You can get on the internet, run excel, or finish work stuff. The extra cost to more expensive computers doesn’t provide the extra functionality that should come with the extra cost. It especially applies to cars.

The extra slick look and the feel of a newly made Mercedes Benz might look cool to others,  but the functionality of the car is the exact same, if not worse than a 5 year old car with 40,000 miles on it. Both gives you transportation, air conditioning, and cushion but the 5 year old car probably still has a better fuel efficiency rate.

Spending less money on a car to spend less money on gas can’t be beat. Maintenance cost could be higher but not that much higher if you had taken good care of it during its youth years.

2. Buying new has instant depreciation. As soon as you sign your name on the dotted lines in the dealership, put in your keys, and step on the accelerator, you just lost 10% of the car’s value. Furthermore, a car loses 10% of its value on average after the first year, as the car is priced in to have a useful life of 10 years. Higher purchase price means higher dollar amount of depreciation and paying extra money for a new car to lose extra money for depreciation doesn’t make sense.

3. The joy goes away after a week or two. I love the feeling of buying something new. The packaging shows that new product look, it’s something I’ve never had before, and I can show off to my friends. Yeah, take that Alex! I have this feeling for about a week or two. Then it becomes like any other day. I wake up, don’t have time to appreciate the fine details of my new car or laptop, go to work, and go about business as usual.

All of a sudden, I don’t appreciate the slick design of the Macbook, the smooth feeling of the mouse pad, the Apple sound it makes when I press “on.” I know if I had paid a much higher premium for the products, I would have buyer’s remorse and would hope that I haven’t missed the return deadline.

4. You’ll look cool!!… for a week or two. You show up to work in a brand new Model S Tesla and for a short time, your environmentally friendly friends are asking you for rides and saying how awesome your car looks. This will not last a long time. They might still ask you for occasional rides even after a while, but the euphoria dies down and all they will see is that you are driving the same car since the dawn of time.

Expensive Things
Not a Tesla but just as good

Do the Math!

Depending on how well you take care of it and how much you use it, a car can last about 10 years. If you drive between 8,000 – 13,000 miles a year, a 10 year estimate is doable and likely. I project that I’ll drive my car about 5,000 miles per year because I don’t use it for anything else other than going to work (5 miles to and back), grocery shopping (varies) and miscellaneous but everyone’s transportation needs are different.

As far as life of a car goes, it’s up to you to decide on the most accurate number but 10 years is a good guideline. $10,800 / 10 years = $1,080 / 12 months = $90 / month. Paying 90 dollars a month to me is cheap for the value of having easy transportation. It saves me time of going to a bus station, waiting for the bus station, and the convenience of not having to ask someone.

For a Macbook, I project that I will have it for 5 years. $1,100 / 5 years = $220 / 12 = $18 a month. A Macbook can last 5+ years but I use my Macbook everyday for at least 5 hours and I want to be conservative with my estimates. 2.5 years left to go!


One caveat with this rule is that it’s not exactly like paying $18 a month for a Macbook because you’re paying everything up front. If you paid only $18 a month for 5 years, you could have invested the other $1082 the second month, $1082 – $18 + interest the third month, etc. While it’s not exactly the same, it can be a great rule to cap your spending.

You can also argue that buying a Macbook is a premium priced decision to the alternative of buying a Windows computer but from my personal experience, Windows computers break down within the first two years, mouse pads aren’t as smooth, easy to catch a virus, and the cheaper priced ones have a slower processor, making me lose valuable time that could be used towards more productively.

Positioning for Long Term Success

Use this rule to not only cap your spending limits but to visualize how much you are paying per month. This rule only applies to products and services not related to medical bills. I will never use this rule when it comes to deciding whether to get surgery or not.

Following this rule consistently will help you lower your expenses over the long term and discipline you into researching heavily before purchasing. This can lead to a more informed decision and not having buyer’s remorse.

Readers, do you have a rule when making a large purchase? Do you calculate relative pricing more than absolute pricing?

Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

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32 thoughts on “Rule for Buying Depreciating and Expensive Stuff

  1. That’s a great criteria for evaluating purchases. You have motivated me to go back and take a look at what I’m spending an d see how it fits.

    I think the key is converting the upfront cost into a monthly expense. Then you can make apples-to-apples comparisons.

    I definitely think you are on to something here.

    • Thank you! Seeing an upfront cost broken down into payments just gives me a better idea of how much I’m spending a month and if it would be worth it. If I don’t do this and just base it off comparables, I would be unsure of my decision because the comparables might easily be expensive already. I use this rule of thumb quite regularly.

  2. I really like these numbers you came up with FS. It’s a different way to look at big lump sum purchases like computers and cars. Can you take it a step further for readers who may be looking to buy a house? I think that would be a very interesting rule with something that costs hundreds of thousands of dollars and could be lived in for who knows how long.

    • Finance Solver says:

      It certainly is. I used to wonder if I made the right choice with all the big purchases that I’ve made but now that I incorporate this rule, I can tell with much better confidence if I made the right decision or not.

      House is a harder subject to write about because it’s an appreciating asset and so have no way of deciding whether it’s expensive or not! But I will try in a future post, thanks for the idea!

  3. I’d have to disagree on both of these! Although computers are on a much more level playing field than in the past, I’d say there’s a difference in performance for people using graphics/video software or even computer games.

    Same for vehicles. I’d agree that if you’re only interested in transportation, you’re better off with a 5 year old Honda that can go at least 15 more years. However, some do find true value in the thrill of owning and driving a performance vehicle.

    • Finance Solver says:

      Fair enough! Which computer do you use, by any chance? And there is a difference in performance but it’s all about deciding whether the performance is worth the extra cost. Macs cost more than a Windows computer but the added benefit is the longer life it has and the functionality is different from a Windows which is why I was willing to spend the extra money.

      With a performance vehicle, the downside is it depreciates so much and fast that you’re almost paying more money to lose more money. Things that get the work done are the best, in my opinion!

  4. I love that you break things out into payments by the month. I am going to share that strategy with my kids who are in college and heading to college. It will make a lot more sense to them to see it explained that way! Appreciate your strategy!

    • Finance Solver says:

      That’s awesome! I figured this was another angle that people can do to make sure they know the object they are purchasing is expensively priced or not. I also try to break it down daily to see if it’s worth the daily payments but sometimes I can’t do the math in my head that fast and stick with the monthly pricing. I also had to pay my way to having spending money in college so didn’t want to overpay for a lot of the stuff that I’m buying.

      Thank you!

  5. Hey Finance Solver,

    Completely agree with your way of thinking, we try to do the same. We recently just bought a laptop and frugal’d the hell out of the buying process (post coming soon! lol).

    As long as the product isn’t the ugliest thing on the plant, we’ll be happy to get function over style.


    • Finance Solver says:

      Hey Tristan,

      Awesome! Laptops are becoming much more of a necessity these days.. It’s so hard to gain an edge over someone else without it. Looking forward to your post!

      A lot of people don’t think like that and it amazes me. Companies are doing a great job communicating that you will look like the best person out of your group to value status over functionality. To adapt, we as consumers need to be more disciplined and be able to look through the message to figure out what we actually want.

  6. I have a mac laptop, but it was a 21st birthday present so I didn’t pay, lol. I don’t tend to make any big purchases (apart from house obviously). We always buy our cars second hand as you say – buying new has instant depreciation – a good thing about buying a new car is of course the warranty but I just can’t imagine spending that much!

    • Finance Solver says:

      That’s a great gift for someone’s 21st birthday! I’m loving the zoom in features and the track pad of a Mac as compared to a Windows computer. I can’t understand people’s thought process when they buy new goods that are as durable as a car. I think most people think about their ability to pay short term and not their ability to pay long-term. Warranty can easily be replaced by good habits and not using the car too strongly!

  7. We pay cash for everything and I think that helps us keep pricing in perspective. I can’t imagine buying a new car when we would be forced to fork over the actual cash up front! I guess that’s why I drive an old beater =)

    • Finance Solver says:

      That’s a great tactic. Paying cash allows someone to actually visually see and touch how much money they are paying. Using plastic doesn’t let you see all your hard earned money being forked over to the merchant and the credit card companies which is why putting everything on the plastic has been increasing.

      Old beater with the same functionality as a new car can’t be beat! 🙂

  8. Love the strategy, thanks for sharing! I’ve made a few bigger purchases recently with moving to a new apartment, buying some new (and used) furniture. I made sure not to ever pay full price by finding coupons on ebay and paying $5 for them, but saving hundreds. In making the purchases I made sure that they were items I could own for at least 5 years. I now need to reassess and determine whether I made the cut based on your tactic.

    • No problem at all! Whoa, buying furniture for $5 is a great deal. Do you feel like the quality is fine too? Paying $5 for something that could last years can’t be beat. When I moved states, I just put everything that I would need in my car and bought everything else when I settled in. Problem is, I might move again in the next 6 months – 1 year and that’s a pickle. This metric can be a useful tool to discipline someone to not spend more than they should!

  9. I like your approach of breaking things down to a monthly cost. It gets you to think about the expense from whole new light and also highlights the benefit of having expensive purchases, like cars, last a long time!

    Well done!

    • I’ve been using this rule to visualize what I am actually spending and making sure that I’m not overspending too often. I’ve always been curious if the large cash purchases I’ve been making are too much or not, so saw the value in breaking it down to payments.

      Thanks a bunch!

  10. This is a good rule that obviously has worked out well for you. If you are financing (i.e. a house, car, etc.) do you factor in interest rate? I am happy to take out a loan for a car if it’s at a rock bottom interest rate – more $ to throw towards investments.

    • I usually don’t like to take on leverage when I invest. If something goes South the debt could ruin me forever. Sure, there may be only a 1% change of that happening but I want to put myself in a situation where I’m protected 100% with no chance of being ruined.

      If I have cash, I use everything to pay down debt, an exception I could see myself making is my mortgage.

  11. Are you allowed to scale up if you increase your salary?

    i.e. If you double your salary, is there a $60 and $200 rule?

    Or is lifestyle creep exactly the thing you’re trying to avoid here?


    • Finance Solver says:

      That’s a great point! If you increase your salary by 100%, I recommend increasing the limit by less than 100%. Cars and Laptops are a fixed, one-time (hopefully) expense so if you are given the opportunity to cement and increase your absolute dollar of savings with the increase in salary, you should definitely take it. Fixed expenses give you a lot of operating leverage so you should take full advantage of it whenever possible!

  12. that guy says:

    5 miles to work? Sounds like you need a bike not a car. Or at least a bike to make that car last 20 years instead of 10.

    Further – factor in the gym savings, future dr bill savings, etc of a bit of exercise daily and you’re really winning. Not a fan of bikes? Walk. 5 miles each way, and there’s your 10,000 steps.

    • Finance Solver says:

      I would get a bike but I’m not 100% sure that I will stay in the city after a couple of months. My company could move me around at any time in the coming months so to avoid moving costs, I’m skipping the bicycle purchase for now.

      Yep I’m definitely a fan of staying healthy and walking to anywhere that I can! However, it’s a 40 minute walk and I value my sleep a lot more because it keeps me energized and increases my productivity.

  13. Sarah @tortoise_happy says:

    We’ve not really looked at big purchases like this before, although I do this with mobile phones and generally find purchasing a handset and low cost monthly plan works best for me.

    When we replace the car, my husband works out the annual cost for 5 years, taking account of purchase price, tax, insurance, and miles per gallon and the point at which it would be uneconomical to keep the same car. Its not perfect because you don’t know how soon something key will need replacing (we don’t buy new) but it has worked for us so far. It takes quite a lot of work but fortunately he enjoys it.

    Of course (and as my husband repeatedly tells me), there are some cars that do in fact appreciate. Not that you’d want to use them to run around town in!

    • Finance Solver says:

      It’s a great rule that I follow myself!

      That’s a great analysis that your husband does. One thing that I hadn’t taken into account is insurance but that’s something I didn’t want to take into account because it’s an expense that’s going to go on forever plus it’s variable. I focused on buying things that have a one-time cost. I haven’t had to change any parts yet (knock on wood) but I know I will have to at least once every couple of years. Hopefully it lasts long enough to be dubbed ol’ reliable!

      Appreciating cars?! That sounds like it takes a lot of upkeep and storing it carefully!

  14. I think I like your rule. I’ll have to see how well it applies to purchases I’ve already made and learn how money savvy I am (or not!).

    I hear on the convenience of owning a car, but I think everyone should understand what they’re paying for that convenience. In some cities, owning a car is actually inconvenient and especially costly if one has to pay for parking. I do own a car, but I also think the combination of walking, cycling, taxis, conventional rental car, transit, and especially carsharing can be an excellent substitute for owning a car. But if carsharing’s not convenient where you live, the incremental convenience of owning a car really ratchets up.

    • Finance Solver says:

      I love this rule because I get to see if I am overpaying for something or not and gives me a point to have a good comparable, in terms of pricing, in figuring that out. The problem with comparing apples to apples is that an apple that you’re comparing could be overpriced and it’s really hard to find an exact replica of your apple.

      I agree. I really do not like finding parking, especially in the downtown area. I always try to Uber or walk if I can to get to my destination. I haven’t gotten a bike yet but I might consider getting one in the near future. In my particular city, I love the convenience of having a car to go grocery shop and get stuff that I need!

  15. I had never thought of this way, but I like it. I prefer to buy quality when it matters and when I can, but I never sit down and guess the expected life-time of a purchase. Thanks for a new financial trick for my sleeve!

    • No problem! Getting the expected life value out of a purchase I think is a novel way of figuring out whether you’re paying for great value or not. Something can be bought with little money or a lot of money but it’s hard to figure out the value you’re getting. As the saying goes, price is what you pay, value is what you get!

  16. Love the blog and I think its great you’ve figured out your finances so soon, considering you just graduated college. I graduated college 10 years ago and unfortunately I didn’t get my “financial life” in order until about 2 years ago. My wife and I now live well below our means and save like crazy. I constantly read articles and books on money, budgeting, investing, and personal finances so I can achieve financial independence by mid 40. Since your so young, if I could offer one piece of advice it would be to read Thomas Stanley’s The Millionaire Next Door. Its very enlightening to what true wealth it. Keep up the good work.

    • Finance Solver says:

      Thanks, just trying to provide value to readers! I don’t think I’ve figured it out that much, just trying to accomplish a little more every day. Reading a lot of personal finance blogs helped significantly.

      That’s awesome! I remember reading warren buffets words that the secret to being wealthy is being frugal and saving as much as you possibly can. I got surprised when I read that and if a billionaire is frugal, I can sure be frugal as well.

      I’ve heard really great things about that book and I will check it out! I have a lot of things on my reading list that I have to take care of.

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