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15 Little Life Hacks

Total costs of ownership and why Indians hate dry cleaning

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A while ago, I wrote about a different way of looking at spending called TCO, or total cost of ownership. TCO tries to factor in the total cost of buying something, not just the sticker price. Companies do this because they are smart and have lots of people that can do mind-numbing math all day. Unfortunately, most individual people don’t, so we just look at the price tag, not the real and full costs of an item.

As I wrote earlier:

I went on a cruise with my family a few months ago…Within ten minutes of boarding, we were presented the Coke Deal by 5 separate cruise employees. The “deal” was that you would get unlimited Coke for $27 (per person) for the 7-day cruise. Without it, though, you’d have to pay about $2.50/drink for the cruise…

I found it interesting because it showed how the total cost of something is often WAY higher than the sticker price.

Buy a new house and you have to shop at a more expensive grocery store. Buy nice pants and you’ll have to get them hemmed. And on and on.

After my talk in Detroit a few weeks ago, I met up with friends in Ann Arbor and went out. There’s still smoking in bars there, so my clothes smelled disgusting afterwards and I took them to get dry cleaned.

cleaner-receipt

Look how much it cost. I almost fainted.

First let me say that Indians hate two things more than anything: Paying for dry cleaning and, inexplicably, paying for shipping by postal service. I think dry cleaning is pretty self-explanatory with the ‘I-already-paid-for-this-damn-coat-now-why-should-I-have-to-pay-more- I’ll-just-stick-a-Bounce-sheet-in-the-pocket-and-let-it-sit-outside’ mentality. But for shipping, I really have no idea. I swear to god, I have asked my parents to ship me a t-shirt I needed, or some set of papers, and they turn into the most relucant people on earth. They will cook me 25 full meals or drive hours to attend some random event of mine, but they HATE paying for shipping. After 24 years, I still do not understand why.

Anyway, when I bought those clothes, I never factored in having to dry clean them. I just said, ‘Oh, it costs $50 for this shirt!” That was me just looking at the sticker price, not TCO. When you buy your car, are you honest about factoring in emergency repairs that you’ll have to make? (The ones that are, coincidentally, really expensive?) What about for your house? Or even for costs of the new neighborhood you’re moving into?

It’s not just about direct financial costs to you, either. For example, shipping bottled water has unseen costs to the environment. “Just supplying Americans with plastic water bottles for one year consumes more than 47 million gallons of oil, enough to take 100,000 cars off the road and 1 billion pounds of carbon dioxide out of the atmosphere,” the Chronicle wrote. (More fascinating analysis on the true costs of bottled water here, and my previous rant about bottled water here.)

Total cost of ownership is really hard and I usually fail at doing it. But when you try to factor in unexpected costs of your new purchase from day 1, you can be more accurate about how much something really costs.

Do you have any other examples of TCO?

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jenna
jenna
9 years 5 months ago

I actually have to put dry cleaning as a line item in my budget…it’s miserable. Women have that 3 wardrobe condundrum – business formal, business casual, weekend wear…men can usally get away with shirt tie and blazer – remove blazer and tie – you have business casual – women on the other hand – $75/mo in dry cleaning!! 🙁

Alex Gierus
9 years 5 months ago

TCO is something most people can understand pretty easily so, for me, your example about the true cost of bottled water is more interesting.

outwiththejive
outwiththejive
9 years 5 months ago
I think people (including myself) often fail to recognize what they are giving up in order to purchase something–the consideration of opportunity costs, which can be painfully high. Benjamin Franklin wrote something excellent about this: “And again, pride is as loud a beggar as want, and a great deal more saucy. When you have bought one fine thing you must buy ten more, that your appearance maybe all of a piece; but Poor Dick says, ’tis easier to suppress the first desire than to satisfy all that follow it.” I have found this to be true in my life. One… Read more »
Sara
Sara
9 years 5 months ago
I think this is an excellent post. Another example is on this is cars. A lot of people justify buying a car like a BMW saying it will last 10+ years if you take care of it, even though the cost up front is significantly higher than say, a Ford. However, think about how much it costs to FIX a BMW if something does go wrong or you get in an accident. A small fortune. Especially if you do something to your front bumper. Your insurance costs are also significantly more because the replacement and repair costs are higher. When… Read more »
Cymru Llewes
Cymru Llewes
9 years 5 months ago

The news story making the rounds on how a GM Hummer is more environmental sound than a Toyota Prius.

I don’t think most people factor in the total cost of ownership of their pets. They see signs for Free Kitten! or Free Puppy! and they don’t see the sign that says $22/10 lbs of food, lack of time because of clean up duties, vet bills, registration fee in the city/town they live in and so on.

Stella
Stella
9 years 5 months ago
When we were broke, I used to say that all I wanted was to have enough money for season tickets to see my favorite team. Now we spend about $3500 a year on our season tickets. I love baseball and it’s a luxury I enjoy a great deal, but the first time I saw how much of our food budget was going for hot dogs, nachos and beer? Yikes. It came to almost another thousand bucks. That doesn’t even count the wear and tear on my body from eating junk food. A little planning reduced the cost (we bring our… Read more »
outwiththejive
outwiththejive
9 years 5 months ago

I concur with Cymru: even cute little kittens have hidden expenses. Heck, at my apartment complex we have to pay $35/month for PET RENT! Ridiculous, IMHO. (That’s $420/year, BTW) That cat had better be able to do taxes and mow the lawn.

sfordinarygirl
9 years 5 months ago
What about the total cost of home ownership? I went to visit my mother a few weeks ago and there was a list of things to fix at home – the bathroom plumbing, the kitchen sink was clogged, the sliding door latch broke and the yard needed sprucing up. I didn’t realize owning a home was more than just living in it. There’s also making sure the roof doesn’t leak and when that does, you can count on sinking a few thousand into that. While you get a lot of tax benefits, the house requires regular maintenance and upkeep, costing… Read more »
TJ
TJ
9 years 5 months ago
You are missing one important thing that companies also do, which is ROI- Return On Investment. If the ROI is higher than the TCO, then things are rosy. ROI doesn’t need to be striaght cash directly related to the original purchase. In your dry cleaning example, I dry clean my clothes (maybe three/four times a year – most people wash their clothes way too frequently) because it a) frees up time for me to do other things b) keeps me from running up my water bill at home c) keeps me from ruining my shirts after wearing them and washing… Read more »
Alex
9 years 5 months ago

So, what was all included in this bill of $69.25? And how much is the itemized bill?

dimes
9 years 5 months ago

What are your clothes made of that dry cleaning them is soo expensive? I’m really picky about the types of clothing I buy, because I’m too cheap to get stuff dry cleaned unless I MUST, and I’m too lazy to bother with much handwashing or ironing. I know *you* love to iron, so why not get clothing you can wash and iron yourself? Checking the labels before you buy can save you lots of money and aggravation in the long run.

Kenneth Blakely
Kenneth Blakely
9 years 5 months ago

Try to calculate the TCO for a woman and watch HAL go down the tubes like an overloaded phaser…

Elise
9 years 5 months ago
I think that people have stopped thinking about the total cost of ownership of computers because they have become so cheap over time. A lot of people balk about the cost of purchasing a Mac vs purchasing a Dell or a HP off the shelf at their local Best Buy but they don’t stop to think of all of the additional costs they rack up by buying that discount Winbox. First of all a Mac will retain its value which means that when you’re done with it five or ten years down the road you can still sell it for… Read more »
kms2
9 years 5 months ago

As long as the clothes aren’t wool, I usually wash the “dry clean only” items and then hang dry them.

I have yet to get a cat because of the TCO reason. I’m sure my rent will increase and then I’ll have to pay for food, litter stuff, and vet bills.

chickpea
chickpea
9 years 5 months ago

I have to agree with dimes, that’s a hefty dry cleaning bill.

Was it just a suit you got dry cleaned, or a huge bag of clothes that you’ve been meaning to drop off?

JW
JW
9 years 5 months ago

Let me be the third (I think) to say that you go to a pricey dry-cleaner if that bill was only for one suit of smoke-infused clothes. If you’re willing to go to the East Bay for dry cleaning there’s a place in Berkeley that cleaned like 8 shirts, 2 jackets and a couple sweaters for something in the $50-60 range.

Eric
9 years 5 months ago
A simple TCO adjustment I noticed while working in college is accounting for money lost by not working. This isn’t really a factor for people with salaried positions and paid vacation time, but for those who work hourly or independently, it’s easy to forget about the money you’re not making. Example: I just took a 6-day trip to New York City. I work as a contractor, so I obviously didn’t bill any time during that vacation, though I missed 3 entire work days. That’s 24 hours * my hourly rate in money that I didn’t make because I was on… Read more »
pdq
pdq
9 years 5 months ago

Inkjet printer ink. When the ink refill kits cost more than the inkjet itself, you know something is fishy.

Black and white laser printers are still the way to go for cost per page.

Alex
9 years 5 months ago

Hmmm, so that’s like $10/item…sounds like a pricey dry cleaner. I pay like $2/shirt and $5/pair of pants. It’s definitely worth the time it saves me, rather than me ironing it myself (and I’m 100% sure I could never do it as neatly as they do).

MyNameIsMatt
9 years 5 months ago
TCO is an excellent idea in theory, but as you note, it tends to fall apart in practice. Part of the challenge is that most people are primed to consume in America. We’re driven for more than just one of an nice item, or all of the accessories for an item as other commenters have noted. To me, that’s both a cultural and person problem, and not some universal trait we all had. It would be great having TCO be a simple math equation or something that’s easy to look up online, but really it’s all about experience. If you’ve… Read more »
limeade
9 years 5 months ago

I agree that it’s an important concept to keep in mind, but I wouldn’t stress too much about finding an actual figure.

Simply put, realize that when you buy something it’s going to end up costing you more in the end.

-limeade

Moneymonk
9 years 5 months ago

Buy in haste, repent at Leisure !

JeremyT
JeremyT
9 years 5 months ago

My dad always pointed out that a Corvette (or other sports car) cost more than the price tag due to the expensive tires and more frequent tire replacement required. Thanks for the reminder!

Mike
9 years 5 months ago
Ramit, this is a great post. I once bought a pair of jeans for $150, (which I know is giving you a seizure just hearing it, but I’ve worn them over 150 times and I love them, so I’m ok with it). Anyways, the jeans were long so after a while I brought them to Nordstrom to get them hemmed. Since I dind’t buy them there the tailoring ended up being $36! $36 just to have someone cut and sow these things, which probably took 10 minutes max. So the total cost of the jeans was actually $186. That’s a… Read more »
asif
asif
9 years 5 months ago

How about TCO for Microsoft Windows which includes in addition to the original license fees-

* Upgrade licenses – 95->98->ME->xp->Vista->…
* Other software witout which you can not do anything – word processing, spreadsheet , Exchange etc
* Anti-Virus licenses

Suresh
Suresh
9 years 5 months ago
Hmm.. very similar to the new car is valid blog you provided some time back. I try to get as much value I can. Recently I bought a puma jacket for 1800 INR[dont faint!].. & this is the highest value purchase I bought in the entire year. Question for pet lovers: 1) Cant we make money & have a pet? For example, rabbit furs have great value. [Note for PETA: No, you dont need to kill them to remove their hair.. its just like their beard] 2) Can you run “Pet creche” in your spare time? Most pet owners feel… Read more »
srinath
srinath
9 years 5 months ago

I’m Indian but this is the first time I’ve heard about Indians hating paying for shipping.. although I do try to buy products from sites which have free shipping.. Still its an excellent article and you’ve reinforced what I’ve suspected for a long time.

Brian
Brian
9 years 5 months ago

Sara:

My BMW comes with a 9-year warranty, free maintainance for the duration of the factory warranty (including all fluids, wiper blades, etc), and only costs me $4 more per month to insure than my older Mazda economy car.

So, you were saying?

Zachary
9 years 5 months ago

How about the TCO of getting married? hahaha!

Enrique
Enrique
9 years 5 months ago

I guess there it goes the coffee at Starbucks. You could make a cup of coffee by yourself for 10 cents instead of paying $4 plus dollars at Starbucks.

MyNameIsMatt
9 years 5 months ago
#25 & #31, and others, I wouldn’t worry so much about the specific item if reasonable for you. If you’re not going bankrupt buying pants or coffee, then it could be one of your simple pleasures. One of those things that you just enjoy more than other things, and hence, you like a specific type. TCO is just a way of realizing hidden costs that you might normally overlook. So, that $4 of coffee might actually cost much more environmentally having to cut forests down, not doing crop rotations, flying it to the US, packaging, and then disposal of the… Read more »
mike
9 years 5 months ago
Ramit, I am surprised you fell for the standard (flawed) economic arguments concerning the bottled water. If the water wasn’t manufactured/shipped it isn’t a given that the fuel and resources used would be left unused or “saved”; they would be used for the next best economic purpose (which very well could be shipping some other good). Also, the reason why bottled water exists at all is due to the fact that potable water is too cheap. There is lack of investment in water infrastructure concerning not only its creation/distribution but also in its marketing. If potable was made to be… Read more »
NIUIcePrincess
9 years 5 months ago

I definitely use TCO when I buy clothes now. I realized I was spending so much on dry cleaning when I buy certain sweaters and pants…so now I check the label. If it says dry clean only, I put it back!

EI
9 years 5 months ago

Very interesting post Ramit.

It is something I try to do when buying something, but most of the time, it skip through the process. Unless it is for something important like a car or a house…

But in the end, it also take away part of the pleasure of pleasing ourselves… sometimes we just follow our impulsion 🙂

Deepak Shenoy
9 years 5 months ago
Shaving razors, for one. They make them cheap so you’ll buy the ridiculously overpriced, overdesigned blades. I pay, so I shouldn’t complain so much. Linux for another. The fact that it’s free makes all the geeks I know wonder why everyone isn’t using it. Because it costs something to own! If you get to India – there’s the TCO for diesel vs. petrol cars. Diesel is 35% cheaper than petrol. But diesel cars are 20% more expensive (go figure), and require more long term repairs unless you go higher end. On the face of it, diesel looks a better option… Read more »
Sara
Sara
9 years 5 months ago
Brian: That’s a very good point. You do get an awesome warranty and service package. Mainly I was thinking of my friend who is a die-hard BMW fan who got into a front-end collision with his slightly older BMW. The whole front grill, which is one piece on a BMW (at least his model), had to be replaced. There are only two machines on the east coast that fix those grills, and he had to wait long enough to get it fixed that he had to get a rental car for several weeks. The repair also cost $6000. He paid… Read more »
Dan
Dan
9 years 5 months ago
Hobbies – Most of us do not understand the cost of hobbies we are involved in – not including Time Spent. I picked up golf last year because it was necessary for my profession. I was curious how much it was going to cost me now, later and how i can project future cost to create better budgets for myself. I am a cost/risk analyst for DoD company so we deal a lot with TOC (total ownership cost) and CAIV (cost as indep. variable). If you look at the hobbies you do and cost associated – especially sports – you… Read more »
Jeannie
Jeannie
9 years 5 months ago

I bought a Picture Mate at home photo lab. I didn’t even realize the paper and cartridge costs more than taking my photos to the local drugstore to be developed. It was a hard lesson to learn, but you can be sure I now take into account the TCO of something before I purchase it.

J.R.
J.R.
9 years 5 months ago

I work for sales at IBM. We use TCO to aid in making the sale all the time. IBM is -generally- best of breed product-wise. But we generally also have the highest up front cost.

In comes the TCO idea, where we can show that over the long haul, we’ll come out cheaper than HP, Dell, EMC, etc. Again, it depends on the product and it’s life cycle, but TCO is the only way we’ll win when looking at only price.

Hazzard
9 years 5 months ago

I think one of the biggest mistakes people make is when they buy a house farther out of the city and don’t factor in the TCO of owning that house. Some people will end up spending $800+ on gas each month for the extended commute and still feel like they are doing great because they were able to get a $200 reduction in their house payment by moving farther out.

Paul
Paul
9 years 5 months ago

Not sure why the Indian designation is relevant here…
Are you suggesting that non-Indians enjoy paying for dry cleaning and shipping?

mariobox
9 years 5 months ago
Cars have to be the best example, if only because of the irresistible “low monthly payment” that buyers usually fall for. I find Edmunds.com TCO(tm) tool very useful and would recommend it to anybody thinking of buying a new car. An often overlooked aspect of the true cost to own analysis is also the opportunity cost (i.e. the money you would make if you just saved the money and invested it). My favorite example on TCO would be clothes. I have noticed that I use 20% of my clothes 80% of the time, which means that the other 80% rarely… Read more »
Carlin
Carlin
9 years 5 months ago

TCO for the average person would be time consuming and not cost effective. Being aware of the idea that something is going to cost you more than the purchase price is a good thing, but trying to get a good estimate of the additional costs over your ownership time for something like a house is impractical, so don’t feel bad if you don’t project out the ownership costs of your house over the 10 years you plan to own it.

sri
sri
9 years 5 months ago

TJ brought up a good point. What about ROI? If the person u met at the smokey old pool bar (and clear mountain mornings), was for a business transaction, then then the dry cleaning was absolutely worth it.

I think almost everything has a TCO. You buy pringles for $1….but if it makes u fat and as a result u join a gym and try to lose the fat…does that cost go in the TCO of the pringles? Ok I better quit before i go on rambling!!

sri
sri
9 years 5 months ago

Ramit,

I agree with Paul. You think Amazon.com offers free shipping because Indians hate paying for shipping? Is that who they are targetting?

Yatin R. Vora
Yatin R. Vora
9 years 5 months ago

I am an Indian too, and I own a dry cleaning store. Guess what? I dont have any Indian customer! You are right, Indians hate to pay for dry cleaning! By the way, your high dry cleaning bill is because it was cleaned in San Francisco. Next time try Tokyo. It will make you cry and want to go back to San Francisco.
Yatin.

sri
sri
9 years 5 months ago

Yatin,

Do you have customers from Ghana, Mongolia, Russia etc? If you dont, then you can make similar conclusions too.

I fail to believe that you never had indian customers.
I know many indians who dry clean their clothes.

Its almost like saying if u had a gas station and u never had indian customers, then indians hate paying for gas!!

Shak R
9 years 5 months ago
Here’s a simple example: air travel. I’ll be visiting India in a few weeks and you’d be surprised at the TCO for the trip. Those thinking the ticket is the only expense are incredibly uninformed. Since my old passport expired, and I had only planned this trip a week ago, theres the expedited passport costs which is easily $250 if through a private company. Let’s not forget the VISA cost, the time spent driving to D.C. to get it, and then the air fare. New luggage set? Gifts? And that’s before my stay in India begins.
trackback

[…] Total Costs of Ownership – And Why Indians Hate Dry Cleaning An interesting perspective on the costs of owning something that most people overlook. When you buy clothes, you’re also buying the costs of maintaining those clothes, for example. You don’t just spend $250 on a Nintendo Wii – there’s also the cost of electricity, the cost of time, the cost of new games and peripherals, etc. The same is true for anything, which means that the true cost is much higher than you initially think. (@ i will teach you to be rich) […]

april
april
9 years 5 months ago
I found out by accident that some clothes that say dry clean only don’t HAVE to be dry cleaned. Silks, satins, suits (Express makes suits you can machine wash, though), etc. should probably be dry cleaned, but many others don’t have to be if they go in a mesh bag on the delicate cycle, using Dreft or its equivalent. Def. don’t put these items in the dryer, just lie flat to dry. This is actually how you are supposed to care for cashmere, as harsh dry cleaning chemicals are bad for the natural fibers in it. Second tip: Dryell. I… Read more »
MoneyChangesThings
9 years 5 months ago

Printer cartridges! That’s the biggest “gotcha” going. I switched to a laser printer and while the cartridges go further than ink jet, they still cost 1/4 of the cost of the printer. I thought $100 for the printer was the deal of the decade, but you have to figure out the cost per copy.

MoneyChangesThings
9 years 5 months ago

About that Coke deal on the cruise. I am willing to spend a chunk up front for a nice time, but I would hate having to pay for my drinks on a cruise. Not like you can walk across the street and find a cheaper bar!
Cruises should be all inclusive. Though I guess coming up with appropriate clothes is not included in the price…. Another COO.

j
j
9 years 5 months ago

theres a good chance youre punjabi and not indian. yes, there is a difference

ali
ali
9 years 5 months ago

#41 – Hazzard, I totally agree with you. I’ve spoken about the same topics several times with my friends and they still think they’ll cut cost by moving out of main city (in my case Toronto, Ontario -Canada)

Hey Ramit, man that’s a hefty bill -OUCH….on the other hand, if your wardrobe is made up of expensive apparel, e.g. Armani, versace and Brooks like me 🙂 I wouldnt mine paying to get them cleaned professionaly as I want to make sure the ROI in the long run is better

Just my 2 cents

Jayna
Jayna
9 years 5 months ago

When I was in Germany about a decade ago, I was impressed to find that my college friends referred to the cost of driving in their cars as around $3 per mile – their assumption was that they should consider walking versus driving in terms of all costs divided by miles driven – gas, car, insurance, repairs, parking, etc. It would be a lot easier to make the decision to walk based on those kinda numbers!

chanchow
chanchow
9 years 5 months ago

Reading that Indian people hate to pay for shipping made me laugh. I married into a Bengali family. An aunt on my husband’s side decided to give us a full set of china (made in Bangladesh) for our wedding anniversary. Instead of shipping it to us, she is having relatives visiting from the motherland bring it to us here in US bit by bit. It’ll be a few years before the set is complete.

trackback

[…] Sethi blogs about total cost of ownership and how it can make some items much more expensive than they may initially appear when you consider […]

Marco
Marco
9 years 4 months ago
Living in the Bay Area, one of the most important costs of product ownership is real estate to store your stuff. An extra bedroom to store stuff costs about $800/mo for a few hundred square feet of space. Overall renters pay a marginal cost of about $30/year per square foot here. So buying that new $99 inkjet printer that requires a 6 square foot stand is also going to cost you $180 in real estate costs every year, in addition to the hundred or more that it costs to replace the inkjet cartridges every 6 months before they dry up.
Katherine
Katherine
9 years 4 months ago
As someone who used to work in textiles – let me tell you something. A lot of the items marked “Dry Clean” can, in fact, be washed. The secret is looking at the fabric content and doing a spot test on lining or an inconspicuous spot – google it and you can find a lot of good tips, but basically, if it doesn’t run, wash it in cold and line dry, you should be fine. THERE IS NO REASON I’VE FOUND YOU CAN’T WASH NATURAL FABRICS like linen and wool if the dye doesn’t run. This drives me insane, it’s… Read more »
Cady
8 years 10 months ago
I don’t know how Zachary and Kenneth managed to post comments from thirty years ago, but I’m impressed. I couldn’t possibly say why women make up a smaller proportion of your readers than men, but it seems to me that those kinds of comments must hold a clue. What struck me about this post was that the dry-cleaning bill came as a surprise. It seemed reasonable to me for seven items, but there are two reasons for that: 1. I only go to non-toxic dry-cleaners (because of stories like this – talk about your TCO!), and I guess that is… Read more »
janie
1 year 2 months ago

Dry cleaning service is very much helpful, it saves a lot of time and provides neat and clean clothes in reasonable price. I think Indians think about it.

Mycleaningstore
11 months 19 days ago

There is nothing to dislike dry cleaning because it helps a lot.

Coin Laundry Singapore
11 months 3 days ago

Dry cleaning is the best way for new clothes.

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