Recently we started reading Dan Ariely’s Predictably Irrational, and it got us thinking about some things that ultimately cost us more in the long run. Information asymmetries exist for several reasons, many of which give some people more control over situations than others. The idea of “cheap” does not always mean economical. “Sticking it out” may maintain the status quo, but it certainly jeopardizes the future. We will get into some of this shortly. Warning: these five hidden costs might alarm you. Now, without further ado, onto the list.
1. The Used Car
Maybe one of the most obvious hidden costs, the used car rarely lightens the financial burden on “financially savvy” consumer. We have all been there. A mother or a father gives their child a choice: use the family car; or settle for a “new” car. Wanting that air of individuality and personalness, the child requests the new car. Turns out “new” does not mean new. The father comes home with a twelve-year-old Kia Sorrento. The car looks nice enough but has 160,000 miles. The parents agree that they got a good deal on this twelve-year-old Sorrento, only $5,300 (arbitrarily selected number).
The child drives the car around for a couple of years, tallying thousands of miles in the process. Soon the annual inspection comes up, and the mechanic rejects the car. She cites shoddy brakes, past-due windshield wipers, and decaying brake lines as reasons for the rejection. That $5,300 now becomes $6,000-$7,000, $700-$1,000 in labor and parts. The Band-Aid goes on, and the car keeps going for a several hundred more miles. But sooner rather than later, the “Check Engine” light comes on. The mechanic inspects it. Nothing wrong. But then the gearbox doesn’t function properly. Hard shifts and labored acceleration ensue. Into the shop the Kia goes. After a day and a half and a diagnostic later, the mechanic returns with the issue: the transmission needs replacing. Another $4,000 to $6,000 down the drain. Now the parents and child are in $10,000-$13,000 in the whole, and no longer than two years have elapsed. Getting the picture?
Savvy people appreciate the gravity of their decisions to buy a used car. “You buy the car ‘as is’, and you bear the risk of ownership.” In the moment, those couple thousand dollars hear and there look awfully miniscule compared to the initial price you paid for the used car. But, reality sinks in. You should have bought or lease a car that will actually give you peace of mind.
In today’s world, the emotional allure of cheap often clouds our judgment regarding the long-term peace of mind we desire in life. The used car does not cost us a lot in the present. But once things start failing, the costs accrue. These ex post costs shift to us, the buyers. While not visible up front, used cars actually harm us as consumers more than actually buying a new car. Because we fail to put a premium on our peace of mind in the present, we often suffer the costs associated with a used car more so than if we had financed the new car. Accordingly, the hidden costs associated with used cars actually disadvantage us financially and emotionally than paying those monthly payments (which actually go to the new car’s actual MSRP). But we are just getting started.
2. “Sticking It Out”
How many of us have been in a relationship or work environment that was more trouble than it was worth? The verbally abusive boss or emotionally unavailable significant other drives us to the point of frustration and tears only to come back and apologize for their actions. What about the prolonged relationship with an emotionally abusive parent? We all experience situations like this every day, trying to justify why we still engage with these people. But at what point does the status quo jeopardize our sanity and mental or emotional well-being?
People experience these situations every day and complain about the horrible treatment they receive. Their friends or family tell them to “stick it out” for a few more weeks or years so they can enjoy some benefit that might not even be worth it. We hear the horror stories of well-compensated employees breaking their backs to defend their bosses’ abusive tendencies without ever considering that they have possibly permanently damaged their emotional well-being. “If only I can stick it out for a few more months, I can cash my chips for whatever I choose to do.” This noble thought typically precedes problems.
In today’s world, there are thousands of people who endure unfavorable situations for some unnecessary justification. When they eventually break, others cannot so easily put them back together. We all know someone who have chosen the status quo instead of their emotional health. Despite considerable efforts to alert them to the harm they have caused themselves, we watch them suffer. This suffering goes from hidden to overt very quickly. But it could have been avoided.
As more and more comes out about self-love and emotional well-being, we start to see the treatments to the symptoms of an endemic in society. But what if choosing ourselves first over something else can stop the damage before it even happens? Usually “sticking it out” comes from pride, proving others that we can withstand whatever turmoil we encounter. But prioritizing what we want from life early on can shield us from suffering severe emotional and mental anguish down the road. Knowing one’s self can go a long way in preventing the hidden costs associated with “sticking it out” in unfavorable, and often painful, situations.
3. Keeping the Toxic Person in Your Life
We have that one toxic person in our lives that we just cannot cut ties with. Whether it is a close friend, a coworker, or even a parent, we tolerate more from these people’s drama than others. While this cost could fall into the previous entry on this list, it differs greatly. Toxic people typically anchor us to something that we want to escape but cannot find the strength to burn the bridge. Our favorite show is Suits. In the first season, co-main character Mike Ross maintains a friendship with Trevor Evans. Despite nearly getting busted for drug-trafficking, getting assaulted by drug dealers, and even losing his job, Mike kept Trevor in his life. Harvey Specter and Mike’s grandmother noted frequently that Trevor only brought Mike down, but Mike chose to kept him in his life. Can you think of someone like that in your life?
We can. It took nearly seven years for one of our friends to recognize their parents’ toxic tendencies. They constantly tried rationalizing their parents’ behavior and foolishly thought they’d change only to find out how unrealistic those expectations were. As unpleasant as those realizations were, they were not sticking it out in a bad situation; they were trying to justify keeping an anchor tethered to their life. They soon realized that their emotional health took quite the toll from keeping that toxicity in their life.
When we have people close to us, it can be hard to realize how bad the relationship really is. Whether it is like Mike Ross nearly losing everything because of a terrible “friend” or our friend suffering emotional turmoil because of their parents, the costs of those relationship do not show themselves until much, much later, usually when the damage might already be done. Toxicity often leads to wasted time on people who do not deserve it. Our time is valuable, and letting toxicity linger in our lives typically lead to lost energy that could have been expended somewhere else.
4. All Work and No Play
This one should come as no surprise, but we often do not see the costs of all work and no play until it’s too late. The costs of this one might be obvious to those around us, but they are usually hidden to the person focused on nothing but work. We constantly hear the term “balance”, but we never fully understand it. What we prioritize matters, but in the moment we do not appreciate the effects. Typically, the costs of all work and no play include relationships, physical fitness, and mental health. Every hardworking entrepreneur eventually realizes these costs once the excitement of their endeavors wears off.
Unlike the costs of the used car, which have ex post costs that are hidden by emotion, the costs associated with all work and no play are heavily documented. Having a trusted friend tell us that we have neglected relationships can help alert us and correct things. Accordingly, we are not going to go too much further on this entry.
People always say to keep an open mind. Those people are objectively right. Open-mindedness allows us to try new things, see new places, and meet new people. It also allows us to grow into the people we want to be in this world. But closed-mindedness has permeated every aspect of daily life. Whether it is a resistance to eating healthy or an inability to try something new, closed-mindedness has some of the most devastating hidden costs of any item on this list. Why? Let’s see.
Keeping a closed mind prevents us from examining our lives. Self-reflection is one of the best mental exercises we can do. But often, people convince themselves that what’s there in their lives is all they need, that they do not need change. We see this everything, even in our own families. By keeping a closed mind, people generally suffer the costs associated with stagnation. One of our favorite YouTube channels says that life is a game where we make real decisions that dictate the narrative, not a movie with a predetermined script. People with closed minds automatically put themselves in the movie category.
Closed-mindedness also deteriorates our relationships. While toxicity and “sticking it out” can also deteriorate relationships, closed mindedness plants a more dormant seed for deterioration. Most relationships fizzle out because of lack of communication, failure to try new things, and settling for mediocrity. These causes stem from closed-mindedness, the inability to hear what partners have to say, to step out of comfort zones, and wanting to grow together. In couples where one of the members is less receptive to the other’s needs and suggestions, resentment slowly creeps in. Once that resentment sets in, the relationship has already suffered deterioration.
Finally, closed-mindedness leads to missed opportunities. In business, life, and relationships, near limitless opportunities exist. Every day presents a chance to discover something new that could enhance our lives. But often, people choose what they have because it’s easier, more comfortable, and familiar. People choose to stay close to home because it’s less unknown. That level of closed-mindedness immediately blockades any opportunity for discovery. It is in those discoveries that we find what we really want out of life. Whether it is a new relationship, a favorite vacation spot, or even a go-to signature dish, discovering new things goes a long way in enhance life. But that enhancement, or even enrichment, cannot exist for the closed-minded person. Even new, unfamiliar ideas might provide the mechanisms needed to jumpstart our lives. But we miss out on all of this by keeping a closed mind.