Cash Flow Parasites

It's that time of the year when I'm looking back at how we spent our money, and I'm considering where it all went and how to improve things next year.

The various categories I use to budget our money does illuminate things a bit. For example our biggest expense by far is our rent plus Nebenkosten (a German term for the utilities managed by the landlord bundled into the monthly rent payment).

But beyond that, the picture becomes murkier. We have transportation costs and various utilities and our BLOW categories, but what's the glue holding that together?

I don't have a way to add this to the spreadsheet, but I'm now considering cash flow parasites as overarching spending concepts that bind several categories together. Basically, these are purchases that require other purchases over time. The initial purchase fits into the budget as a single item, but over time that initial purchase requires incremental purchases later. This is similar to lifetime cost of ownership, but it's broader.

For example, let's look at some parasites that we don't own. The most obvious example is a car. The car itself has an initial upfront cost, but there are the following obvious ongoing costs:

• Fuel
• Insurance
• Repairs
• Parking
• Registration
• If purchased with a loan, then the ongoing interest cost
• Asset depreciation

That stuff is obvious. Less obvious are the following:

• Environmental harm and contribution to air quality health problems
• Risk of accident
• Risk of regulation
• Legal risk from poor driving or impaired driving
• Risk of theft or vandalism
• Municipalities being forced to devote ever more space for automobile use
• Stress from traffic
• Overcommitment of time due to transportation flexibility
• Opportunity cost from higher amount of money in cash emergency fund to cover emergency car costs
• Opportunity cost from spent car money not invested in compounding assets
• Opportunity cost from saving the money in cash to buy the car

Whenever I think of buying a car, all this stuff pops into my head. I remember the stress of driving. I remember the major repairs. I remember the couple of accidents I was involved in (not at fault). And after considering all that, and despite the downsides of not having a car, I just can't justify buying one again.

A less high stakes example of a cash flow parasite is a television. We don't own one because a television contains the following costs:

• The television itself
• The devices attached to it
• The content played through it
• The furniture used to display it
• The floor space given over to it
• The electricity
• The time devoted to it and the feeling that it should be used due to the invested money (a kind of sunk cost fallacy)
• The ongoing maintenance and replacement/upgrading of attached devices
• The exposure to advertisements and societal propaganda that convinces us what's normal and how much money we should be spending to be like the beautiful people on TV

One reason we don't own these things is because of the high negative cash flow costs I associate with them. But that doesn't mean I don't have cash flow parasites, so where are they in our budget?

Cell phones are a big one. We use iPhones, so there was a substantial initial cost to them, which has been tolerable because of their ongoing use (we don't upgrade regularly, and I hand my model to my wife when I'm done with it). But there are ongoing negative cash flow associated with them:

• Cellular costs (contract-less month-to-month)
• App and content purchases
• Connective cloud services
• Time spent
• Internet at home
• Stress from being always connected
• Stress from the impulse to upgrade or buy companion devices
• Depreciation of the phone itself
• Exposure to what's "normal", similar to TV, but maybe even worse due to social networks functioning like a "keeping up with the Joneses" 24/7
• Maintenance (battery replacement, headphone replacement, charging cable replacement, screen repair, phone cases)
• Electricity
• Risk of theft

So what's the overall cost to it? That's really tricky. Some parasites have a clear overall cost, but some are more elusive or are shared with other cash flow parasites. I think the 30,000 foot view is probably enough to say that the costs over several years are substantial. There was a time before I had an iPhone and a time after it, and the costs before were zero since it was a whole different category of expenses. There was no parallel to what we have today.

At the same time, there are major upsides to having an iPhone. I'm just not sure that if I could get a full accounting of the exact cost that I would say they were worth that exact number. Using a smartphone means sort of stumbling into ongoing expenses, but I'm not sure how to back out of those at this point. Even if I use an iPhone for 7 years, that's still less phone-value than using a landline phone that costs maybe 30€ for potentially several decades. What exactly is the goal of having this thing? Sometimes it feels essential and sometimes it's like a casino in my pocket.

I've mentioned it before, but travel back to the US is a major expense, and it contains several categories within it. Flights and hotels are just the start when you start to look at all the costs associated with it. Most Americans don't make trans-Atlantic trips at all, but we do regularly because we live on the other side of it.

And then really, one has to look at the cost of being an expat itself. We make all sorts of spending choices that we wouldn't have to make if we lived back in the States. Right now, I think it's worth it for several big reasons, but I'm tempted to sit down and try and do a full accounting of what it's costing us to be here.

When looking at the cash flow parasites, it doesn't mean there's no value within them. Seeing our families is worth spending money. The phones do have major safety benefits and they allow easy access to a lot of free content. Living in Europe has major upsides. But I'm going to try and look at my choices much more holistically and see if there's some overarching concept that's causing me to spend a certain way.