The High Cost of Modern Living

1953 - tv kids, snapshotWith all the hullabaloo over the release of the iPhone 4 this summer, and having just paid my monthly service bill for my own iPhone (an older version, thank you very much), I thought now would be a good time to think about how much all our modern conveniences cost us.

First off, buying the new iPhone might have cost you an additional $500 on top of the actual price of the phone, if you were the silly person who paid that much to take Jordan Richardson's place in line on the day the iPhone 4 debuted, according to an Associated Press story. Richardson then paid someone farther back in line $200 for his/her spot, making a $300 profit — but he's still out that two hundred bucks because he couldn't wait! I bet Jordan and his patron — now that it's six weeks later, and a new iPhone 4 can be bought anywhere — wish they had that money back.

But even if you were so un-hip as to not wait in 11-hour long lines or pay people to move up, you are still paying a lot for that iPhone — or just about any other cell phone, for that matter. And by “you,” I mean “me,” since I have just such a gadget myself. Let's look at the numbers:

  • My monthly bill came to $73. Multiply that by 12, and you get $876 a year. But that's not all!
  • That bill was paid with after-tax money. Assuming I have a combined state and federal tax rate of 30%, I had to earn $1,251 — that's $876/(1 – 0.30), for those curious about the math — then hand over a chunk to Uncle Sam and Aunt Virginia (my state) to have enough after-tax dollars to pay the cell-phone bill.

I'm certainly not alone in spending that much; plenty people spend even more, and that's not including the cost of the phone itself. Given that the median household income in America is approximately $50,000 a year, it's safe to say that there are people who are spending 2% to 3% of their annual income for the privilege of checking their Facebook pages in the movie theater while I'm trying to figure out what the heck is going on during Inception. (OK, a cell phone does more than that. For example, it might also give you brain cancer.)

But wait — there's more!

Summon your inner grumpy old man
Cell phones are just one of the modern conveniences that we have come to think of as necessities. As Wall Street Journal columnist Jason Zweig wrote in his thought-provoking book, Your Money and Your Brain, “In 1957, the average American earned about $10,000 (adjusted for inflation) and lived without a dishwasher, clothes dryer, television, or air conditioner” — and more people reported being “very happy” than do now. All these conveniences involve monthly fees, up-front purchases, regular repairs, accessories — or all the above.

Besides not having to live in a shoebox and lick the road clean every morning (text version for those who can't watch video at work), kids today have all kinds of luxuries that weren't around 50 years ago. Here's some of the other Stuff that the past half-century has spawned to consume our money:

  • Cable TV
  • High-speed Internet
  • Netflix
  • Tiger Woods
  • GPS devices
  • Chocolate-covered ants
  • The ShamWow!
  • Computers, laptops, printers, monitors, keyboards, software, cables, mice, mice pads, speakers, and assorted USB-related doodads
  • Mel Gibson
  • Houses that are twice the average size of houses in the 1950s
  • Satellite radio
  • TVs the size of waterbeds (side note: let's bring back the waterbed!)
  • e-Book readers and the books you have to buy for them, instead of getting books free from the library (can someone explain the allure of these things, because I don't get it)
  • TiVo or other digital video recorders
  • ATM fees
  • Magazines profiting from the inability of Tiger Woods and Mel Gibson to control their anatomical apertures
  • iPods or some other MP3 player
  • Chocolate-covered scorpions
  • Security and medical alert services
  • Lobbyists
  • Video game consoles and their $50 games
  • Handheld video game devices and their $30 games
  • The SlapChop!
  • iRobot vacuum cleaners
  • Summer camps galore (my kids and their friends attend more camps in a summer than I did during my entire childhood)
  • Additional freezers and fridges in the garage (that dispense water and ice, to boot!)
  • Little blue pills
  • Chocolate-covered bacon [J.D.'s note: Darn-tootin', I'm trying this recipe!]
  • Lottery tickets, which can be purchased online or through a recurring “subscription” (“Never miss a drawing! No waiting in line!”)
  • Multiple digital cameras and video recorders
  • Hats of meat
  • TVs and DVD players in cars
  • Smoothies, Frappuccinos, Bloomin' Onions, Chia Pets (tastes sorta like parsley, or chicken)
  • Child car seats and booster seats
  • Prostitutes who bite your tongue (as hired by the guy who promotes the SlapChop and the ShamWow)!
  • Books that explain what the heck was going on during Inception
  • Gym memberships
  • Children
  • Chocolate-covered women

Not all these items are luxuries. Many enhance safety and productivity, and provide just the right combination of sweetness, crunchiness, and antennae-ness. Plus, since average household income has quintupled, we can afford more Stuff.

On the other hand, the list also demonstrates why some people might have trouble saving money. I often receive emails from readers who are in the second half of their working careers and yet have saved very little for retirement. A while back, I read a Washington Post article about a family that was struggling financially, including this description of their life: “The house is small, and the blare of Nickelodeon from the TV chokes the day.” Of course, Nickelodeon can only be accessed by paying for cable TV (a luxury we finally succumbed to last January).

My point, dear reader, is that there is a current and future cost to the modern lifestyle. For every dollar we earn, we could rightfully ask: “Do I want to spend a dollar today and work longer, or do I want to spend a few dollars in the future (assuming some compound gowth), when I no longer have to work?”

For some purchases, we'd undoubtedly still spend the money today. However, others may be providing less current satisfaction than what that money could provide in the future. Just something to think about. I know I'll keep it in mind when my cell-phone service contract runs out this spring, and I evaluate whether the $1,251 I have to earn every year for it is worth the $102,609 I could have (assuming a 6% annual return and 3% inflation rate of the cost of cell service) 30 years from now.

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Brian
Brian
9 years ago

The appeal of an ebook reader to me (I don’t have one yet) is that I can put the huge number of PDFs I have (from academic papers to old D&D adventures) onto a portable device that reads much like a book (ie, NOT the iPhone).

Also, there apparently is development on the library front, although I haven’t investigated it much. http://www.google.com/search?q=ebook+library

Rebecca
Rebecca
9 years ago

Great article! This is exactly the point I’ve been making when people complain that these days you can’t live on a blue-collar income like you could in the 50’s. He did a great job of showing how our toys have become “necessities”.

Jane
Jane
9 years ago

Yes, many public library systems now offer e-lending. I’ve checked out several already. It works just like paper books, only I don’t have to drive to the library to get them!

Great article! Our “needs” have become more and more expensive. It’s hard to break the cycle.

John
John
9 years ago

I always enjoy future value calculations when thinking about expenses that I think are outrageous. The monthly cell phone expense is something that bothers me and to think that some of my friends spend up to $200 a month is simply not logical, to me anyways.

Rob
Rob
9 years ago

I was thinking about this just the other day. With as far as we have come as an industrialized nation, life seems awfully complicated.

Our gadgets (and I have plenty…I’m a total geek) are supposed to make our lives easier. But perhaps they are making life more difficult?

Beth
Beth
9 years ago

Wow — those numbers really put things in perspective! I keep reading about how people can’t afford to save for retirement. If you can’t meet that 10% target, why spend 2-3% of your income on a phone?

Nicole
Nicole
9 years ago

As I briefly rely on a poor but free wireless signal, waiting for Verizon to send that darn modem, I WISH I had an iphone… or one of those little doohickeys that looks like a USB key that gives your computer internet by magic. But yeah, the combination of monthly expense and the negatives to the ability to being able to check my email from anywhere have kept me from this technological advance. Someday we may give in. I have never regretted the purchase of the Garmin. but until then, you kids stay off my lawn. p.s. The Chocolate covered… Read more »

Nicole
Nicole
9 years ago

On eReaders:

As long as you don’t have a Kindle, you can check out books at the library (Amazon is in the business of selling books, it makes no sense for them to give you this feature). Go to overdrive.com to find out if its avaliable in your area.

To me, the appeal is that I can make the book fit my needs. For example, big text at the gym, regular text for regular reading. Also, its easier to fit in my purse than an actual book. Word lookup is a nice additon too.

What Pigs Don't Know
What Pigs Don't Know
9 years ago

Great post! I agree with everything you said. Where have our priorities gone? Instead of family, saving, and simplicity we concentrate on celebrity’s lives, electronics, entertainment, and spending every last cent we earn. And we’re all still unhappy. I’d say it’s time to return to our roots. -Carrie

JakeIL7
JakeIL7
9 years ago

You know, when people do cell phone analysis it bugs me just a little. There are a few problems with the analysis in this article: 1. The assumption is that your iPhone is not replacing anything. First, what if you *need* a cell phone? You can get one that is cheaper than an iPhone but let us just assume that the INCREMENTAL cost is the cost of the data plan: $30/month. OK, so maybe you don’t *need* a cell. Well, what about that landline in your house? It can cost you $30/month just for a dial tone in some areas.… Read more »

Nicole
Nicole
9 years ago

Jake– the idea is how many additional hours would you need to work in order to get the equivalent amount of money. I get that you’re saying all of your spending is post-tax unless you can get a preferred savings vehicle. Most people with 401(k)s aren’t contributing the max, and there’s also 529 plans for folks expecting future education expenses and SEPAs for the self-employed… also HSAs… but you’re right that for people with only IRA options they might have to take into account their debt and other savings options (and heck, sales tax if you have choices over which… Read more »

Rob Bennett
Rob Bennett
9 years ago

It is perfectly natural that we would devote more money to non-essentials as we become a richer people. There is nothing wrong with this. This is as it should be. These non-essentials enhance our lives in important ways. Why shouldn’t we buy stuff we didn’t buy in earlier days now that we are richer? The problem is that the marketing skill of the people who sell us stuff has increased dramatically in recent decades while the skill of consumers to figure out what spending makes sense and what spending does not make sense is still back at the caveman level… Read more »

smirktastic
smirktastic
9 years ago

The amount of money we spend on our cell phone bill truly pains me. All those taxes and mystery fees really grind my gears. Also – why is high speed internet linked to chocolate ants?

Kevin
Kevin
9 years ago

Minor nitpick regarding buying books for an e-reader instead of going to the library: you can borrow e-books from the library. At least, around here you can. Seems kind of weird, but somehow it works. You can “check out” the book online, download it to your e-reader (for free, of course), and it expires after 3 weeks.

Beth
Beth
9 years ago

I loved this article — which is not to say that I don’t love the data plan on my cell phone just as much. What I take away is mindful spending. I like Dave Ramsey’s phrase of “naming every dollar” and yeah, some of my dollars are named “phone” but none of them are named “cable”. That’s my trade off.

DreamChaser57
DreamChaser57
9 years ago

Getting beyond the e-reader tangent, I am not sure American households always spend their hard earned dollars consciously and purposefully. For example, my husband and I dutifully paid our Sprint/Nextel bill for quite a while, it was $135-$175 a month -we switched to a pay as you go phone with basic options and now typically pay between $25-50 a month. Another poignant example, an acquaintance shared that she has a friend who is in very real danger of having her condo foreclosed on -yet she seems powerless to cut non-essentials, and opines that she just has to have a professional… Read more »

Steve
Steve
9 years ago

Yes, it was interesting to see all the cell phone cameras taking pictures of Michelle Obama as she served food at a soup kitchen. Even the homeless have phones!

Coley
Coley
9 years ago

I’m not quite buying that argument that in 1957 the average American earned $10k adjusted for inflation. Something’s not quite right about that statistic, and I’d welcome the opportunity to examine the original source. If the poverty level today is something like $20k, that’s saying that in 1957, the average income was about half the poverty minimum. A quick google for historic census data www2.census.gov/prod2/popscan/p60-029.pdf shows that the median household income in 1957, which admittedly is not the same thing as average income but is important in context, was estimated at $5,000 annually. Furthermore, according to inflationdata.com, between Jan 1957… Read more »

Lou Lamoureux
Lou Lamoureux
9 years ago

Hi,
I’m pretty sure that Mel Gibson and Tiger Woods had control of their anatomical APPENDAGES (a projecting part of a living organism with a distinct appearance and function) when they were visiting APERTURES (opening, hole).
Sincerely,
Lou

Frankerson P
Frankerson P
9 years ago

Ouch! I’m feeling the conviction from this one. I had only a pre-paid cell phone for almost two years, but then jumped into an iPhone and went from paying about $50 a year to $70 per month. Toss in cable, home phone, water softener, and a car payment…so much wasted on things I don’t really need.

Kevin M
Kevin M
9 years ago

Great list and a good reminder that some things we think are needs are really wants. This reminds me of the book The Progress Paradox – the basic point being that our world has progressed so much in the past couple generations, but no one is happier for it. @Rob – I’d love to see a guest post explaining your theories that 50 year old saving advice doesn’t work and what alternatives you suggest. @Coley – the difference of course being that our grandparents saved for the TV and didn’t use credit to buy it (and end up paying 3x… Read more »

DCS
DCS
9 years ago

My house was built in 1941. I still don’t have a dishwasher or a smartphone.

My life is meaningless void of manual dishcare done under a cloud of telecommunicative inferiority.

Dan53
Dan53
9 years ago

I often wonder as I watch people from my work sit outside at break time what percent of their income is going off into the air? Some make as little as $9.50/hour, but: – They have cell phones. – Some smoke like crazy at $5/pack. – They pay for tattoos and piercings. – They sit in their car with the engine running. – They buy expensive snacks from vending machines. – They show up in the morning with Dunkin Donuts coffees. Even estimating conservatively, I’d guess we’re talking about $12/day. Maybe 10%-15% of their incomes. Crazy! (Of course I’m sending… Read more »

Jason
Jason
9 years ago

These rosy-colored glass blog posts about life “way back when” seem to concentrate on money … but not on time. Sure, with no dishwasher, washer/dryer, etc you aren’t going to be saving money, but somebody still has to do the laundry and the dishes, and that takes time. I guess you either hired out or did it yourself. Or, more accurately the woman stayed home and the man went to work. I’m also reasonably sure that the blogs (written on dead trees back then) talked about the high cost of modern living versus the gold old days of 1910, along… Read more »

Kevin
Kevin
9 years ago

“whether the $1,251 I have to earn every year for it is worth the $102,609 I could have (assuming a 6% annual return and 3% inflation rate of the cost of cell service) 30 years from now.” When I crunched these numbers, I came up with $145,954, not $102,609. If it were a small difference, I wouldn’t bring it up, but that’s a pretty big discrepancy (off by 42%). In my calculations, I “invested” $104.25/month ($1,251 divided by 12 months), earning 6% return, and increasing the monthly amount by 3% each December. At first, I thought maybe it was because… Read more »

Financial Samurai
Financial Samurai
9 years ago

I think the conclusion is that the economy is VERY strong and rebounding if people are buying all this stuff.

Furthermore, I think people have an inherit desire to help out the SF Bay Area economy as good citizens!

Buy more Apple products folks! 🙂

Best, Sam

Scott Wynn
Scott Wynn
9 years ago

What about the reduction in costs due to technology and modern life? For example, VOIP telephone service has brought the cost of phone service way down with long distance charges and sometimes even international calls to no additional cost. I do agree with you though. We were just talking about this the other day. Products are being produced for the purpose of selling additional products. Look at the Swiffer Sweeper. Good, cheap mop/broom that seems like a good buy at the time until you have to buy all the replacement cleaning supplies like the disposable sheets and liquid spray. By… Read more »

Robert Brokamp
Robert Brokamp
9 years ago
KC
KC
9 years ago

I’m actually getting an iPhone4 very soon. My husband gets it for free since he’s participating in a research project. He gets a Blackberry from work so no need to carry the iPhone, too. Before the iPhone I carried a Palm Treo (an early smart phone) also paid for through this project. But before that, when I paid for it, I carried a Virgin mobile prepay phone. It only made phone calls and only cost me $30 to purchase and $80/year for minutes that I never used up. Now, don’t get me wrong – I like the services of a… Read more »

Coley
Coley
9 years ago

“@Coley – the difference of course being that our grandparents saved for the TV and didn’t use credit to buy it (and end up paying 3x what it originally costs thanks to interest).” Kevin M., I’m certainly not one to recommend purchasing a TV on credit, but I’d rather credit-spend three times the $500 cost of today’s LCD than make a cash payment of $10,000 for one in 1957. If I had more time to play on Google, I’d like to do an inflation-adjusted comparison of the cost of telephone service in 1957, plus a reasonable amount of long-distance usage,… Read more »

TosaJen
TosaJen
9 years ago

I think what affects our tendency to buy “modern” gadgets is the people we hang out with. We could have chosen to live in a neighborhood where “the Joneses” own expensive houses and cars, have the latest cell phones, send their kids to private school, and so forth. I think the pressure on our family (especially the kids) to feel bad for not having what the neighbors have would have been hard to deal with. Instead, we chose a different neighborhood, where our spending is closer to average. Among our friends, everyone is making tradeoffs of housing vs. hobbies vs.… Read more »

Barb
Barb
9 years ago

I’m always wary when someone talks about the good life “way back when”. For one thing,as someone who remembers in 57, say, my parents were middle income folks just a few years out of college. They had a dishwasher, a real stove and a black and white tv. They were not rich by any means. But my mom wasnt washing clothes on a washrack. While I agree that the leaps and bounds of technology leave more opportunities for spending, it seems to me they also make more opportunities for saving money. I’ve been to two in theater movies in the… Read more »

SMU Cox MBA
SMU Cox MBA
9 years ago

I am personally getting ready to ditch my satellite dish. I live in a rural area but now that I have reliable internet, I’m upgrading my internet service – which will cost me an extra $20 per month. But I’m dropping my $90/mo dish bill. A net savings of $70 a month that can go toward letting me out of the cube farm much earlier.

Poultry in Motion
Poultry in Motion
9 years ago

I laughed so hard I almost cried..lol. Mel Gibson and chocolate covered women…licking the road clean…that’s just great stuff and a great article!

Thanks for the laugh and a good financial note this morning, you’ve made my day better =)

Trina
Trina
9 years ago

From a strictly environmental perspective, the constant drive for upgraded technology does much more harm than good. Yes, we save paper by using email, and cut down on plastic record albums (remember those?) and CD’s by using MP3 players, and save some trees by using e-books. However, computers and all those related devices don’t last long even if you’re not a consummate upgrader. They break easily, crash, wear out and no longer meet speed requirements. So all those plastic, chemical-laden, petroleum-based devices end up in landfills, while the demand for more increases production of new devices which become future environmental… Read more »

Silentmeow
Silentmeow
9 years ago

Some libraries have ebook databases containing books and periodicals. As long as your book isn’t full of pretty pictures, ebooks are great (if you forked over the $ for an iPad even picture books are great).

Why do we pay so much money for imperfect technology? Specifically I’m referring to cell phones. Dropped calls, bad connections, crappy batteries, disposable phones. I’m glad my company pays for mine. I would never fork out the money for it.

Maggie
Maggie
9 years ago

I have a smartphone, and yes, it does cost a lot of money, but I feel like I get a lot for the money: 1. I don’t have to pay for a landline. 2. I have free GPS navigation with turn-by-turn directions, so I don’t have to buy a separate GPS device and can save time and money by finding the most efficient route. 3. I can listen to both mp3s and my own personal radio station through Pandora, so I don’t have to buy CDs or satellite radio. 4. I can take photos on my 5 megapixel camera, so… Read more »

Samantha
Samantha
9 years ago

I spend a lot of money on my old 3G iPhone, but I justify it by doing a ton of work with it. I read the news, write blog entries, send business emails, post Craigslist ads, etc. I do have a few games on it, but I don’t really use them much. I am constantly looking for new ways to take advantage of this expensive tool to keep it working for me. I also constantly try to find less expensive ways I could be getting the same work done (I’ve been considering transitioning to an Android with a cheaper plan).… Read more »

Christopher
Christopher
9 years ago

At the end of the article, Robert wrote: “For every dollar we earn, we could rightfully ask: ‘Do I want to spend a dollar today and work longer, or do I want to spend a few dollars in the future (assuming some compound growth), when I no longer have to work?'” This is, in its simplest form, the argument behind the wonderful book _Your Money or Your Life_ by Joe Dominguez and Vicki Robin. However, in order to be fully absorbed, it is necessary to follow their process of converting the dollars you spend into “life energy.” Basically, you take… Read more »

sora
sora
9 years ago

Talking specifically about the iphone (or other smartphones) – I for one do not understand the obsession with them; people are always showing the latest one off, but I just don’t get it? If I need the ineternet, it is at home or in the office – the 2 places where I spend the majority of my day. I really don’t need it anyplace else. I can definitely see the need for them for people that are on the road a lot for work. But other than that, what does one really need it for? I pay a combined $40… Read more »

shash
shash
9 years ago

This was a good read and too appropriate for today… FedEx will be delivering my refurbished 3GS Iphone in the next hour or two. I thought I’d never want nor be able to justify buying an Iphone, but it’s come down to this… a need for a simpler life. I am hoping that it will replace the following: -a dying Palm Zire -a now dead landline (boo, Verizon, boo) -a cell phone that has been flagging of late It is a gadget and yes, the plan can cost but for me it could: -save me carrying multiple items -organize my… Read more »

SAFTM
SAFTM
9 years ago

I agree with a lot on this. But there is a lot more that goes into the calculations. Where there is give there is take. I personally get books from the library, but I do like having books to refer to in my home. I have a small collection, but realize that I don’t reference them very often. I guess if you’re a book hoarder and buy books an ereader could save you money though. How? Sell the books you will never read again. Chances are you could buy the ereader with that money. Then what do you do with… Read more »

Raghu Bilhana
Raghu Bilhana
9 years ago

Robert

Why were Child car seats and Children added to the list.

Child car seats are for safety for the kids. I agree to all the other items on the list but not these two. Just wanted to know your point of view why these two were added.

Coley
Coley
9 years ago

It’s always interesting to hear people list all the apps on their i-Phone and how much conveinence they bring. Of course, the money that my wife and I save by not having i-Phones is almost enough to completely pay for the services of our semi-monthly housekeeper. I’m not aware of any i-Phone apps that scrub all your toilets, polish the floors, and clean the whole house from top to bottom twice a month, but for about the same amount of money, I think that’s alot of conveinence. But for many people, when I mention that we employ a housekeeper, they… Read more »

cheapcookies
cheapcookies
9 years ago

Despite the high cost of living, it is still popular.

I-phones? Haha. TRAC-PHONES.

$97 a year gets me 1000 to 1200 minutes if I buy it right with a bonus code.

That’s < 8.25 a month, not $73.

With intelligent use, I can make 1000 minutes go 11-12 months.

Heidi
Heidi
9 years ago

Opportunity cost for Chocolate covered bacon: Well, for starters my husband’s double bypass was over $120,000. Healthy arteries are the ultimate investment!

Robert Brokamp
Robert Brokamp
9 years ago

@Raghu I added car seats as just an example of something we buy today that wasn’t around decades ago (anyone my age remembers jumping around in the back of a station wagon with no thought of child seats, let alone seat belts). I don’t mean that everything on the list is a waste of money, just that we have more stuff to buy. And I added children as a joke. The Department of Agriculture (moo!) estimates that it costs $205,000 to $475,000 to raise a kid to age 17 (http://www.cnpp.usda.gov/Publications/CRC/crc2009.pdf). So they’re not cheap. But I don’t consider them luxuries… Read more »

Alison Wiley
Alison Wiley
9 years ago

Good post, Robert! I’m in agreement with most everything you wrote. Yet, I think you left something out, related to the opportunities we lose when we get hooked by modern conveniences like the iPhone. You inspired me to post about that: http://www.diamondcutlife.org/grabbing-back-our-lost-opportunities/

J.D. Roth
J.D. Roth
9 years ago

You all know that I think Robert’s posts are hilarious, right? I look forward to them twice a month. This one had me busting a gut. I loved watching the Monty Python skit (which I’d never seen before) because it reminds me of me and my cousin as we try to compare how poor we were growing up. (Nick: “My dad would drill a hole through a nickel because it was cheaper than buying a washer.”)

Steve @ MakingAMillionDollars
Steve @ MakingAMillionDollars
9 years ago

Really liked the article! Another thing we lose is quality time with friends and loved ones. I guess you could say sitting down for hours playing video games or surfing the net is quality time if hanging out with friends, but many times we are so consumed by the electronics I would not really classify it as quality time, not to mention the time not spent with family. The cost is also enormous when you really take it all into consideration as your article points out. When I was younger I remember bike tag or kick the can with tons… Read more »