Our home budget is never stable. Even if we planned all expenses with the utmost care, we can always “jump out” and we will have to make a proper purchase or spend money to repair a damaged kettle, sink or lawn mower. If we buy something new to our household, we usually pay attention to the price. This is why we are so eager to browse newsletters with promotions or look for something interesting on sales. However, the purchase price does not tell us exactly whether the item is cheap to use or not. Therefore, we should also pay attention to other aspects related to the purchase of a given item, as it may turn out that something that is cheap when you buy it will turn out to be very expensive to use.
What is TCO (Total Cost of Ownership)?
TCO, or Total Cost of Ownership, is translated into Polish “total cost of ownership”. In other words, it is the sum of expenses that results from obtaining, installing, using, maintaining and finally getting rid of the given equipment. So if every time you buy, we will be serious about TCO, it may turn out that something that is cheap at first glance (eg bought in promotion), in fact turns out to be extremely expensive. Thanks to this approach to shopping after some time it will turn out that shopping is not the most important low price, but cheap use. Sometimes it is better to spend more when buying, to pay lower costs for use.
Examples of using TCO
Let’s follow an example of how we can use TCO analysis on the example of a car. If we are going to buy a new vehicle, pay attention not only to its price. Let’s also take into account other direct and indirect costs associated with its operation. So pay attention to the costs associated with fuel consumption, vehicle servicing, repairs, insurance, tire replacement, etc. When we compare two different brands of cars of the same class, we will certainly see that all costs related to the operation of vehicles are different. And it may turn out that a brand that has a lower purchase price will in fact turn out to be more expensive, because spare parts for it will be more expensive, or will burn more fuel.
Another example can be a washing machine. A medium-class washing machine in the A +++ economy class, which costs PLN 1,200, consumes around 9,000 liters of water during the year. However, an economy class A washing machine, for which we will pay PLN 900, can use up to 14,000 liters of water during the year. The difference in water consumption is therefore 5,000 liters per year, which is about PLN 150 for us. It can be clearly seen that after two years, higher purchase costs have turned and we are starting to earn more on the more expensive washing machine.
Similar examples can be multiplied. TCO analysis can be done for both shoes (the more expensive endurance is usually higher, so we do not have to buy new ones longer), telephone subscriptions (lower subscription, usually means we have to pay more for calls) or any other subject.
Expensive can be cheap
For a long time in our colloquial language there has been a saying: “What cheap is expensive”. Everyone should think carefully about its meaning, because thanks to this, in our home budget we will be able to save a lot of money, because we will be able to better plan our expenses.