The holidays are always a challenging time when you're on the budget. You have all these great ideas in your head for what to get your friends and family, you scour the Black Friday and Cyber Monday deals, and you have been diligent in monitoring price alerts and getting the best value for your dollar.
But here's another thing to consider - total cost. Total cost refers to how much it costs someone to own an item. It's something most car owners are familiar with, but it's not something gift givers put a tremendous amount of thought into.
Let's take three examples, starting with the absurd:
December to Remember, for years and years
We've all seen a holiday commercial mainstay - the Lexus car commercial. It involves a clever tagline of "December to Remember," a huge red bow and the absurdity of buying someone a brand new luxury vehicle for the holidays. As exciting as it would be to get a brand new Lexus, even one completely paid off, it's not as exciting once you think about how much it costs to maintain, insure and fuel a Lexus.
The cheapest sedan is the Lexus IS 250, and according to Edmunds, the true cost to own the 2013 model, excluding depreciation and financing, is a staggering $37,550 over the next five years! While some of that will overlap with whatever vehicle the recipient is currently driving, it's still a pretty sizable dollar amount since the car will generally be more expensive to maintain, repair and operate.
A car has the most obvious total cost implications, but gifting a car is also outside the realm of possibility for 99 percent of people. Let's take a look at a more reasonable example.
A pricey cup of coffee
Coffee pod machines are very popular these days because they offer two things most people love: convenience and speed. Gone are the days when you'd put on a pot of coffee and have to wait for it to brew. If you were unlucky and got the last bit in a pot, it often tasted terrible. Now, with coffee pods, you're seconds away from a piping hot cup of coffee done the way you like it. Speed and convenience are embodied in that nice little coffee pod.
But when you gift a coffee pod machine, you're also gifting a life of servitude to the little pods. Those pods aren't cheap. They can cost anywhere from 60 cents each, if you buy in bulk, to more than a dollar. They also brew just one cup each. Meanwhile, Starbucks says a pound of coffee grounds yields 64 5-ounce cups, and at $16 a pound, you're only paying 25 cents a cup - and that's for relatively expensive coffee. You can get cheaper high quality coffee, so 25 cents is on the high end.
Puppies are cute, but costly
Finally, consider this a public service announcement: Please don't give anyone the gift of a cute cuddly animal. When you saddle someone with the cost of owning a car or a coffee machine, no one suffers if the recipient doesn't have the financial wherewithal or the interest in maintaining the gift. That's not the same for a pet.
Pets are expensive. It starts with food, bedding and toys, but there are regular checkups with the veterinarian, grooming, boarding and training, and huge time commitments. There are other reasons why pets make poor gifts, but the financial ones could be detrimental to the owner.
So as you go about your shopping this December, keep the total cost of your gifts in mind before you buy them. In many cases, the price at the register is only the beginning.
Jim Wang is an entrepreneur, who founded Microblogger.com. For actionable advice on how to build your own business, join his free newsletter.
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