Let me share with you a lesson that a friend of mine recently taught me about money. This relates to situations where you compare similar products or services and are trying to decide which one to go with. Obviously cost is often important if not the most important factor for many people. But here’s the lesson – cost is not always what it seems to be at first glance.
In fact, there are two different types of it – actual cost and relative cost.
So the story goes like this, my friend was looking for a new gym membership and he was trying to decide which gym to go with. He already had a membership with a great gym but he moved and what used to take him 15 minutes to get there would now take him 40 minutes to go each way. So he started to do a little research on other gyms to find something else that would be closer and cheaper, if possible – he was paying $69 per month for the existing membership.
So he found three new options and created a quick table with information to compare them side-by-side. One of the gyms was offering a membership for $10-$20 per month but they required a fairly large origination fee of either $140 or $220. So he calculated out what it would actually average per month over a one-year period and it turned out that it would be right around $30 per month. So there’s the first part of the lesson. Not everything is as it seems and it’s important to compare apples to apples which sometimes means doing a little bit of math. This was a nice 24/7 gym but it would take him 25 minutes each way to get there.
The next option was a different gym that was a bit smaller with less amenities but still nice. This one would be a 10 minute drive each way and the hours of this one would be slightly limited (not 24/7). The cost for this one would be from $14-$24 per month.
The third option was a gym that was even smaller but it was open 24/7 and it would be exactly a 2 minute drive. And the cost would be $39 per month.
So he wrote a detailed comparison on paper and it turned out that over time it would be much cheaper to go with the $39 per month option because he would save a significant amount of time, not to mention money in gas, on getting there. So the lesson is that the actual cost is what the business or the gym in this case is charging for the membership. The relative cost is going to be different for each person and it will take into account other factors such as travel time. So this is why there is no one size fits all type of a solution here and everyone needs to figure this out for themselves. This applies to a lot of different things so remember to not take everything at face value and do your calculations and due diligence before you make a decision.