Should I Buy That?
A common question I get is “Uncle Biv, I’m considering buying….should I do it?” The answer, of course, entirely depends. There are a lot of factors at play when considering a new purchase. Do you simply want it, or do you need it? Do you have something that already performs this function, or is it an entirely new piece of gear? How often will you use it? How much does it cost? The first question is philosophical, and only you can truly answer it. The second question is easy; go look on your gear wall for the answer. Look at your calendar to figure out how often you’ll use it. Those are all relatively simple answers. What often trips people up, however, is the last question. How much does that widget actually cost me?
calculating costs
Cost is something that we can calculate. Everyone knows this! We just go to the store and look at the sticker price. Bing, bang, boom, we know the cost. Right? Not quite. Cost includes more than just the sticker price at the store. It also includes taxes (sales tax, and special taxes for things like fishing gear and hunting equipment), delivery fees (if we buy online), operating costs, and supply costs. We can generally break costs into three categories; upfront costs, fixed costs, and variable costs. Added together, you get the total cost of a piece of equipment. By understanding each of these costs, you have a better chance of capturing exactly how much something costs you to operate - and when it’s worth it to have it. You’re able to answer questions like, “Will this save me money in the long term?” and “When will I break even on this?”. Let’s have an example; we’ll look at buying a freeze-dryer.
Upfront costs
As of this writing, a real freeze dryer machine will set us back $1,795.00 (on sale). That will provide us 434 square inches of tray space on four trays, and comes with 50 bags and 50 oxygen absorbers included. According to the specs, the machine will have to have its oil changed every 20 to 30 batches. Shipping is included, and I’ll pay $120.48 in taxes. This brings the total upfront cost to $1915.48 for a small freeze dryer. That’s step one.
fixed operating costs
Now that we know my “upfront” cost of the freeze dryer, I need to figure out my fixed operating costs. In this example, fixed operating costs are things that I can expect to pay no matter what I’m freeze drying, or how long I’m doing it. For example, no matter what I freeze dry I will expect to use freeze dryer oil and have to replace it every 20 cycles. Freeze dryer oil costs $15.98 per quart, and my pump holds three cups. There are four cups in a quart, so I’ll have a leftover cup every time (that’s ok). I will also use a food bag for every meal I make, and I will use an oxygen absorber for every food bag. I start off with 50 of these in the kit (that’s nice!) but I’ll have to replace them as I use them. The branded bags and oxygen absorbers cost $24.99 for bags and $19.99 for absorbers.
My fixed operating costs can be calculated like this: per meal, I will burn 1/20th of 3 cups of freezer oil, 1 bag, and 1 oxygen absorber. A cup of freezer oil is $15.98/4 or $3.995 a cup, and $0.5993 (3 cups/20) per cycle. A single bag is $24.99/50 and an absorber is $19.99/50, or $0.4998 and $0.3998 each. So my fixed cost per meal is $0.4998+$0.3998+($0.5998/number meals in cycle). If I assume that I can make four meals per cycle every time (there are four trays) then my fixed cost per meal is ~$1.05 ($1.049). This is step two.
variable costs
My variable costs for this machine are the cost of the food I am converting into hiking meals and the cost of the electricity it takes to run the machine. Depending on your power bill, you may be charged different prices per hour to operate your machine, and that may also change with season. Also, not every meal will require the same amount of freeze drying time. Some will require 24 hours, some 36. It depends on the recipe. Let’s look at a simple example; freeze dried chili mac.
I will make freeze dried chili mac using a pound of beef, olive oil, yellow onion, garlic, chili powder, cumin, smoked paprika, salt, kindey beans, diced tomatoes, tomato sauce, elbow macaroni, water, and a cup of shredded cheese. I can make about six servings with this handy recipe (let me know if you want it) and it’ll cost me about $12.50. I’ll split this 4 ways to get an average food cost of ~$3.13 ($3.125).
My energy cost is a variable, but I figure I’ll run the freeze-dryer for 24 hours to make this meal. The national average price per kilowatt hour is $0.1747, and my freeze dryer uses 0.99 KW/hr, so my hourly cost is $0.173. For a 24 hour freeze dry session that’ll cost me $4.15. Divided per meal (I make four each time) it’ll be ~$1.04 ($1.037). So my total variable operating cost for chili mac is $4.17 per meal.
comparisons & Break even
In this simple example, I did not take into account the cost of the asset depreciating, factor in for planned maintenance, or take into account various costs of meals. I like to keep things relatively simple. That said, we can accurately say that a freeze dryer is a good investment because it will only cost me $5.22 per meal (fixed + variable) compared to the $11.99 I pay for the same food from a vendor. Right?
Not quite. You see, when we compare only our fixed and operational costs we don’t get a full picture. To figure out how much our meals actually cost, we need to figure out how much it costs to own the machine. That purchase price determines our “break even” point. The real question we’re asking ourselves is this; “How many meals do I need to make before this machine has paid for itself?”
Our upfront cost is $1915.48 for our freeze dryer. Our fixed + variable costs for a chili mac meal is $5.22. The cost of a freeze dried chili mac meal sold commercially is $11.99. These three numbers help me figure out my breakeven point using a simple formula:
UPFRONT COST / (COMMERCIAL COST - DIY COST) = MEALS TO BREAK EVEN
So in this instance, $1915.48/($11.99-$5.22) is $1915.48/$6.77 or 282.936 (let’s call it 283) meals. How does this work? Well, we take what we paid for the equipment and we divide it by the “money saved” or unrealized profit from eating our own meals instead of buying someone else’s. That amount, in the case of chili mac, is $6.77. Every time we eat our chili mac instead of buying someone else’s, we save $6.77 which goes towards “paying us back” for the machine. After 283 meals, we pay for the machine which is our “break even” point. Anything beyond that and we’re generating “profit” for ourselves. No one is dropping $6.77 into our bank account every meal, but the equivalent exchange is happening. $6.77 that was in our back account stays there because we didn’t spend it on a commercial chili-mac meal. Now we can use that money to do something good, like pay off our debts, save for a downpayment on a house, or pay for a white water rafting trip.
is it valuable?
With the ability to determine the upfront costs, fixed costs, variable costs, and break even point we can begin to compare between things and determine the value of having something. For example, you may run the numbers on a larger, more expensive, freeze dryer and realize that your savings per meal was closer to $7.30, and your break even point was 255 meals instead of 283. That would be a good point of comparison between models that could drive you to wait and buy the larger one. Or not, if you needed the freeze dryer sooner.
That said, another aspect of determining value is figuring out “is it worth it?” Which we can define as “will I achieve break even in a reasonable span of time?”. This varies by individual. Let’s look at four cases.
Casual Backpacker. Marie is a casual backpacker who goes on three trips a year with friends. Each trip is two to three days long. She purchases, on average, 7 freeze dried meals per year. It would take Marie over 40 years to break even on her freeze dryer. This is not worth it for Marie.
Serious Hiker. Paul is a serious hiker who is planning to through-hike the Appalachian trail. He estimates it will take him six months (180 days). Outside of thru-hiking the trail, Paul goes on a two to three day hiking trip every month. On average he purchases 24 freeze dried meals a year. This year he plans to purchase 200. It would take Paul four and half years to break even on his freeze dryer, assuming he through hikes on year one, then sustains 24 a year for the next three years. This might be worth it for Paul.
Family Hikers. Jon is a dedicated family hiker. He goes on four to five camping trips with his wife and their two children every year. They camp around 16 nights a year. As he purchases meals for the whole family, Jon buys 64 freeze dried meals a year. It would take Jon and his family four and half years to break even on his freeze dryer. This is likely a worth it for Jon and his family.
Friendly Co-Op. Julia decides she wants to save money on hiking food and buy a freeze drier. She has a lot of hiking friends and she offers to keep the freeze-dryer in her home and pay the electricity cost if others will help her split the up front costs. Julia gets three friends to help her out, lowering the upfront cost to $478.87 per person. Julia will break even on her hiking meals in 71 meals. If Julia normally purchases 24 freeze dried meals per year, she would break even in slightly less than three years. This is likely worth it for Julia.
These four cases illuminate different considerations for different groups of people that help to determine the value proposition of owning a freeze dryer. Ask yourself a similar question - how often will I use this? How long will it take me to break even? Is the convenience worth it if I don’t break even? Only you can answer that.
The 1 for 1 rule
But before you run out and purchase a new freeze dryer, or any other widget that will make your life “easier”, take a moment and consider what you have on hand. Do you have a piece of equipment or gear that fulfills the same, or a similar, purpose? If so I invite you to execute the one for one rule; one in, one out. Let’s say you are headed out to buy a new pair of hiking boots because there’s a sale. You’re excited to get an upgrade because your boots, while still in good repair, are not as comfortable as you’d like. When you get back from the sale with your new boots you have a few choices: 1) Save your old boots “just in case”, 2) Throw your old boots away, 3) Sell your old boots 4) Donate or give away your old boots. I implore you to use the one for one rule; if you’re upgrading or replacing, save yourself the space and headache and get rid of the old ones. If it’s destroyed beyond use, consider it for the landfill. However, if it’s still got life I highly recommend selling it online or at a local commissions store OR donating it to someone who needs it. You’ll be doing them a good turn, and helping yourself free up some closet space at the same time.
uncle biv’s seventh rule: abu
Lastly, I wouldn’t be doing my due diligence if I didn’t tell you to always follow Uncle Biv’s Seventh Rule: ABU - always buy used. You can have nice things by buying used at a lower cost. Most people don’t use the things they have, and eventually they get rid of them. For example, you can get a used freeze dryer for $1500 bucks or so. That’ll save you around $400 dollars (59 chili-macs), and you’ll only have 224 to go until you’ve broken even. How about that?
Want Uncle Biv to help you cost-analyze something? Interested to know more about the personal finance considerations of camping? Have a question? Ask Uncle Biv