# True Cost of Holiday Shopping Calculator

Time for my annual Black Friday Buzzkill calculator! π Can you hear that sound? Sleigh bells a-jingling? Carol singers? No, it’s credit cards a-swiping as part of what is now officially BUY BUY BUY season.

Here’s a mental trick that I use to temper my “self-gifting” urges. We know that every dollar saved now will be worth much more in the future. I made this calculator to help visualize this fact and push me to forgo short-term (temporary) pleasure for long-term gain.

 Step 1: Pick Your Purchase: Starbucks Drink – \$4 iPad Mini – \$299 Flatscreen HDTV – \$1300 \$ Name Your Own Impulse Buy Price Step 2: Pick your estimated annual return (default is 6%): 4%     6%     8% Step 3: Pick your time horizon (default is 30 years): 10 years    20 years    30 years    40 years Assuming a 3% inflation rate, the inflation-adjusted TrueCost™ of your impulse buy in years is:

\$600 for a cashmere sweater? \$7,000 Flatscreen TV? Ouch. This is not to say the occasional splurge is never worth it. (I do like me a steaming hot Peppermint Latte.) Perhaps it is. But I hope that this calculator can provide a little perspective while you are barraged by retailers to buy stuff you really don’t need. Who cares if you get 30% off when it’s so expensive?

1. Dennis says:

Would be cool to have another field for each item: your economic value of this item now (and possibly in the future). After all they key is still to show that you might be buying something you “don’t need”.

2. I don’t think your calculator is working correctly. I clicked on the iPad mini at 6% for 10 years and came up with \$242.71, less than the purchase price.

3. J says:

The calculator is in fact not working for the iPad Mini. Instead of pricing the item at \$329, it is actually pricing off of \$149. Other than that, this is an intriguing tool. Using the manual option works consistently.

4. J says:

Additionally, the Flatscreen TV is priced internally at \$1500, not \$1300.

5. Absolutely love this tool… hopefully will put the cost of ‘luxuries’ in perspective for some people!

6. Klaas says:

Yeah, you can see in the javascript source that the iPad and TV are actually set to \$149 and \$1500. I think the “name your own” option working right, though.

7. hawks5999 says:

The ipad must be using the \$Deflation subroutine

8. \$2,790 for a recent computer purchase in 20 years at 4%. Ouch.

I won’t even add up all the lattes over the years!

9. Gordon says:

I second what fern says. For 30 years I’m getting that the future value of an ipad mini should be coming in around \$799 at 6% interest, adjusted 3% down for inflation, compounding annually. This calc is giving \$644.

10. gt says:

\$450 sweater? \$1,000 MP3 Player? \$7,000 Flatscreen TV?

is this a joke?
that \$4 ‘coffee’ will cost \$7 in 10 years anyway. rampant inflation will eat away our money so spend now.

and 4, 6, and 8%? can we have normal (for the last 5 years) rates, like 1 or 0.6% after tax.

11. Moobs says:

gt,

I hope you are not making 1 or 0.6% on your investments. This is meant illustrate an alternative to “investing” your money, not keeping it in a savings account.

That being said, I’d like to see 10% and 12% as options added to this simulation.

12. You guys are sharp! I thought I was passing the values into the old javascript file, but they were actually hardcoded in (not smart on my part). The old values were for a \$149 iPod Mini and a \$1,500 flatscreen I think I’ve fixed it now, thanks.

13. I think there’s another problem with your calculator. It says that it takes into account 3% inflation, but my quick calculations make it look like you’re using a ~1% inflation rate*.

Also, these estimated annual returns are after tax, so slightly misleading under some circumstances.

*To geek out further I think your calculator isn’t exactly right, even for a 1% inflation rate. Your calculator appears to be doing:
TrueCost in n years = (today’s cost)*(1+annual return-inflation rate)^n

My thought is that it should actually be:
TrueCost in n years = (today’s cost)*(1+annual return)^n/(1+inflation rate)^n

The difference between these equations is slim enough that in real life other uncertainties would wash it out, but you’re reporting TrueCost to the nearest penny, so you might as well get it right. π

On the other hand, the difference between 1% and 3% inflation is quite large over 10s of years.

14. @Adam – Thanks for your note. Sorry I missed your comment. You are right that I am using the estimation that for example, 1.06/1.03 ~= 1.03 when it actually = 1.0291… For example if I said \$100 at 6% for 30 years with 3% inflation, your formula would be \$236 while mine would return \$243.

In any case, you are correct that if I’m going to do this down to the penny I should have it correct down to the penny, so I have updated the javascript code. Thanks!

That’s more like it!

16. Jacob says:

What is up with these anuanal returns? Most savings and safe bets offer around 1-2% what kind of risks are you taking to get 4% return? You might be better buying the item than wasting your money on risky investments,

17. Andy says:

@Jacob: That’s exactly how the Fed wants you to think!

18. enonymous says:

great calculator but…

at 6% growth and 3% inflation, a \$299 ipad mini is worth \$707 in real dollars in 30 years.

so that’s a spread of \$408 (real). That is actually an argument for a purchase (IMHO) as opposed to delayed gratification!

not sure it’s making me not make the purchases!

19. Gary says:

@enonymous:

“not sure itβs making me not make the purchases!”

ofcourse, for you it might not. But for someone else it might be worthwhile to see the missed income on the non-invested money.

I think the author is not trying to dissuade each and every purchase (god forbid if that happens our consumption economy will collapse like a pack of cards) The idea is to dissuade unneeded / unnecessary purchases.

20. Ryan says:

I’d still like to see a 12% option. That’s what I’m getting or better on many of my mutual funds. And this year, has been especially generous since I’ve made 30%, 34% & 44% on 3 of my mutual funds.

21. Phil Maguire says:

OK. Well if it works for you great. If you really do believe that your rate of return is going to remain at 6% for even the next 10 years and epecially if you believe that inflation will remain at 3% for the same time, then good luck to you. I think your argument would have been more persuasive if you said “Anytime you spend your money frivolously, a pixie will appear and drop a ten-ton weight on your left foot”

I find a simple question suffices for me: “Which will make me happier: this flatscreen TV or adding to the financial security of myself and my family?”