Today’s post is about my underwear. Sort of.
When I was young and broke, I made a discovery.
This was years ago, when I was first living on my own. I was earning almost nothing at my job back then, and I was renting a tiny (and more or less illegal) basement apartment in an old house in Mount Vernon, NY. I had to watch every penny.
Back in those days I had no washer or dryer in my apartment, so I had to go to a local laundromat to wash my clothes.
I also owned about seven pairs of underwear. This actually helped order my life: when I ran out of clearn underwear, I did the laundry. Which meant I could have a stable routine of doing the laundry once a week, on the same day every week.
It might have been orderly, but it was also a pain in the ass. I had to drive to the laundromat, park on the street, feed precious quarters into a parking meter, and feed still more precious quarters into a washer and dryer. Occasionally I had to wait a while for a machine. It was often a multi-hour project and I had to do it every week.
And then I had an epiphany: What if I bought an extra seven pairs of underwear? A load of laundry would be basically the same size whether it has seven pairs of underwear or fourteen. It’s not like the washing machine would notice the difference.
For me, however, the implications were staggering. I’d only have to go to the laundromat every two weeks!
A 416% ROI
And then I thought through the numbers. It cost me maybe twenty-five bucks to buy those extra seven pairs of underwear (hey, it was the early 90s, things were cheaper). That up-front cost enabled me to do laundry half as often: every other week instead of every single week. This produced a savings of $3 for washing and drying, plus another buck or so in savings on parking. And of course it saved me time too. Essentially, I’d be able to cut my laundry costs and my time costs in half.
I kept thinking about the numbers. If this twenty-five dollar investment yielded some four dollars in savings every two weeks, this meant that my new underwear would fully pay for itself in just over twelve weeks! And those seven new pairs of underwear would pay for themselves more than four times over in just the first year. Even more wild was calculating the annualized returns: a staggering 416%.
Let me repeat that for emphasis: I was earning an annual return of 416 percent * on my new underwear.
That is some great underwear.
This was years before I began my Wall Street career, but I’m sure readers can see why I went on to become an investment analyst. So it shouldn’t be a surprise that I looked at this little investment and thought, hmmm... can I push the numbers even further? What if I bought an entire month’s worth of underwear?
If it cost me twenty-five bucks to take my underwear collection from seven pairs to fourteen pairs, it would probably cost another sixty-five bucks to buy, say, another eighteen pairs of underwear, bringing my total collection comfortably above thirty. Enough underwear to last more than a month.
Now I’d have to go to the laundromat once a month instead of every two weeks, which would save me another incremental $4 a month.
This, then, translates into an attractive 86% return ** on those additional eighteen pairs of underwear. They’d almost pay for themselves in just the first year, and I’d save still more of my time.
Of course, you’d have to be blind to miss the diminishing returns. The 400+% returns on underwear pairs #8-14 are truly extraordinary. World class. However, the incremental value of pairs #15-32 are just really good.
You could see then how the thousandth pair of underwear probably wouldn’t add much incremental value at all to my life. I’d have other clothing to wash in the meantime, so I wouldn’t really save money, or trips to the laundromat. Worse, I’d be living with bales of underwear everywhere in my basement apartment, which might inhibit my social life.
But it sure is fun to imagine doing laundry just once every three years, isn’t it?
Okay. The point of this post isn’t about trying to save a little money by owning 30+ pairs of underwear. To be honest, this post isn’t really about underwear at all. The underwear is just a metaphor.
The point of this post is to think about your possessions, your activities and your time using a lens of efficiency and scale.
Many of us presume there’s an unavoidable trade-off between saving time and saving money. That in order to save money, you have to waste time, and vice-versa. That applying a frugal, money-saving idea to your life somehow means things like laboring for hours making your own laundry detergent or painstakingly grinding your own cashew nut butter. Or something.
This is an either-or fallacy. Yes, sure, sometimes there are tradeoffs between time and money. But often, if you think carefully and creatively, there are amazing solutions in many life domains that save both time and money.
Of course if you don’t believe these kinds of solutions exist, you’ll be right. You won’t find them.
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* The math: $4 a week in laundry x 52 weeks = $208 in costs annually.
$4 every two weeks = $104 annually, a savings of $104 a year.
$104 in savings / $25 in underwear costs = 4.16, or a 416% return.
** Once again, the math: $4 every two weeks (or $104 annually) drops to $4 a month (or $48 annually), a savings of $56. ($104 - $48 = $56)
$56 / $65 = 0.86, or an 86% return.
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