It should be noted that there's a nonobvious opportunity cost here; specifically, money spent on the more expensive product can't be invested.
For example, mechanical keyboards seem like something that costs more up front that's cheaper in the long run. They cost about an order of magnitude more than membrane keyboards, but last about ten times longer, so you only need one mechanical keyboard to ten membrane keyboards, so the cost equals out in the end. Since the typing experience is much better on mechanical keyboards, by paying more up front, you essentially get a much-improved typing experience for free.
But, the extra money you spent on the nice keyboard could've been invested (or used to pay down debt) instead. If there's a an annual real interest rate of 10%, then buying 10 membrane keyboards at $10 over 10 years and investing the money you didn't spend nets $45, not counting re-investing (1). Note that these numbers are made up to make the math simple; in particular, the real real interest rate isn't that high.
Also, the membrane keyboard you buy in year 10 isn't going to be the membrane keyboard you buy in year 1.
(1) Using present value, in year 1, instead of paying $100 (cost of the mechanical keyboard, ten times the cost of the membrane keyboard), I pay $10 and invest $90 which, at 10%, yields $9. In year 2, you pull $10 out of the investment to buy the second membrane keyboard, so now you have $80 invested, yielding $8 returns. 9+8+...+1 = (9^2 + 9)/2 = 45.
Correct. But then again note that there is the seperate issue of depreciating and appreciating assets: I can resell the mechanical keyboard as it is usable even after years. I can not resell the membrane keyboard because it is worn out.
A more extreme example is cars: A new low-budget car loses about a third of its resale value immediately after you buy it. A used luxury car might even appreciate in value.
Follow-Up to: A Guide to Rational Investing Financial Planning Sequence (defunct) The Rational Investor
What are your recommendations and ideas about financial effectiveness?
This post is created in response to a comment on this Altruistic Effectiveness post and thus may have a slight focus on EA. But it is nonetheless meant as a general request for financial effectiveness information (effectiveness as in return on invested time mostly). I think this could accumulate a lot of advice and become part of the Repository Repository (which surprisingly has not much advice of this kind yet).
I seed this with a few posts about this found on LessWrong in the comments. What other posts and links about financial effectiveness do you know of?
Rules:
General Advice (from Guide to Rational Investing):
So what are your recommendations? You may give advanced as well as simple advice. The more the better for this to become a real repository. You may also repeat or link advice given elsewere on LessWrong.