The 752 Rule: The True Cost of Your Wants

We all have needs and wants. But how much are your wants really costing you? Find out with the 752 rule.

So many people work long hours year after year and barely get ahead financially. They have so much stuff and so many wants.

We’ve been trained since infancy to be consumers. We are constantly targeted by advertising everywhere we look. Get a better phone, upgrade your car, buy a bigger house…it just goes on and on. However, the world’s resources have a limit.

Work. Buy. Consume. Die. Awareness of the effects of consumerism is the first step of understanding the 752 rule.
How we’ve been programmed to live

We are on the path of ecological suicide because of our want for more stuff. And being trapped in an endless cycle of consumerism has dire effects on our finances.

Let’s Talk Coffee

Say you buy a coffee everyday on your way to work or at your lunch break. The disposable cup is plastic lined and is not recyclable. It adds to the mountain of landfill. Five disposable cups a week, every week for one year equals 260 cups. Over ten years, that’s 2,600 cups into landfill – for just one person!

Now let’s talk about how the daily purchased coffee affects your bank account. If each coffee cost $5, over a week it would cost you $25.

Your daily purchased coffee over ten years would cost a whopping $18,800.

Small daily expenses can add up to a lifetime of financial frustration.

You’d be so much better off investing that $25 a week, making your coffee at home and putting it in a keep cup to drink on your way to work, or in a thermos to have later in the day. It’s also much better for the environment.

The 752 Rule and Compound Interest

You may be wondering how I came up with the figure of $18,800.

This is where the 752 Rule helps us to calculate the true cost of an expense over ten years if you had invested that money instead.

It’s based on the premise that money saved is invested at a 7% compounded rate of return over ten years. In basic terms, compound interest is when you keep the interest earned in your investment and your interest earns interest in the following years.

How compound interest is calculated

Hang on a minute, banks don’t pay 7% interest. No, they don’t, but the stock market does. A quick internet search will show you that index funds in the stock market over the past ten years have had an average annual rate of return of anywhere from between 7% to 10%.

The True Cost of Regular Casual Shopping Sprees

Let’s try another example. Each week your casual shopping sprees come to $100 a week. Fashions always change, there’s new seasons to buy for, new styles and new colours.

Based on the 752 rule, casual shopping at $100 each week multiplied by 752 equals $75,200!

If you are wanting new clothes, you could instead purchase second hand clothes from an opportunity shop, arrange a clothes swap with friends, or take on a wardrobe challenge.

Do You Really Need a New Car?

Desiring a new car? The adverts have you convinced you need a better, shinier, newer car even though there’s nothing wrong with the one you already have. It’s going to cost you $150 a week.

If you invested that money instead, using the 752 rule you’d have $112,800 after 10 years.

A recent finance article explains that keeping your current car is the most ecologically sound option of all due to the hidden cost to the environment of each new car in pollutants and waste.

What You Can Do At Home

Have a look at your spending habits and separate your needs from your wants. Consider the ecological cost of your purchases. Are there any changes you could make that would improve your bank balance and the health of the environment?

Play around with this compound interest calculator from Money Smart and figure out how much money you could save by making conscious sustainable spending choices. Ensure you set the interest rate at 7% and the investment time frame to 10 years if you are replicating the 752 rule.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator

Are you a sustainable consumer?

Want other tips on saving money? Check out my blog post Reduce Your Power Bill: Find Out how.

It's not your salary that makes you rich. It's your spending habits. Remember to use the 752 rule to figure out the true cost of your wants

Have a go at using the 752 rule with a current expense in your life.

Please share the results in the comment box below.

Cash Hippy

I'm an everyday person on a journey to save money and care for the environment at the same.

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