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Earn $10 Million by Not Building Model Trains

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Did that get your attention? Good. Now you have to read the rest of this article to understand the title! ;)

A recent article, How to Earn $1 Million by Not Watching TV (note, this article is no longer available), was posted on Yahoo Finance, and attributed to TheStreet.com. This article states that people can earn $1 million or more over the course of their lives by giving up TV and its associated costs and instead investing the money they do not spend on TV. The listed costs of owning a TV and paying for the extras included the TV itself, monthly cable subscriptions, entertainment cabinet system, pay-per-view, movies, DVD/DVR, Gaming System, Games, Energy, Commercials, and Opportunity Costs.

This article holds a certain level truth for those who spend extravagant sums of money on TVs and associatated expenses, but it is definitely not true for everyone. My wife and I have basic cable and a small TV that was purchased years ago for cash. We have a nice entertainment center, a DVD player, and some DVDs, all of which are paid for. Our TV costs are relatively low.

Their arguments are technically correct, but for the most part, they are flawed.

  • TV expense: This is true. TVs can be very expensive, but they do not have to be. They assume an initial $2000 TV expenditure. Most people do not spend anything close to that.
  • Entertainment cabinet system: I don’t think this is a valid argument. For all intents and purposes this is a piece of furniture. Even if people didn’t have a TV, they would probably place another piece of furniture in the space where a TV would have been.
  • Cable: Not necessary to watch TV.
  • Pay-per-view: Most people never order pay-per-view, and if they do, it is usually not very often. I have never once ordered pay-per-view.
  • Movies: I agree. Purchasing or renting movies is an expense. But many people just watch regular TV.
  • DVD/DVR: Needed to watch movies or record TV shows – if you want to do so.
  • Gaming System/Games: I do not use either of these, and a substantial amount of people with TVs do not either.
  • Energy: They quote a minimum of $10 per month for TV associated energy costs. That really depends on how much TV you watch. Changing the level of your thermostat can have a larger effect than this.
  • Commercials: C’mon, spending $525 a month based on commercials! No way! (see article quote below for how they add up the cost of TV).
  • Opportunity Cost: “Another cost often overlooked when considering the price of watching TV is the opportunities forfeited when you choose viewing over something else. You could start a business, take on a part-time job or take care of your garden so you don’t have to pay someone else to do it. Assuming that your time is worth at least the minimum wage of $5.85 per hour, your opportunity cost is $737 a month if you view the average amount of TV.” Uh-huh… So, people are machines who need to work every waking hour for the sake of money? Please. There was an opportunity cost of me reading that article, or taking a walk, reading a book, or doing anything else that does not directly earn me money.

Here is how TheStreet.com breaks out the cost of watching TV:

So what does this all add up to? Say you’re 25 years old and you initially spend $2,000 for your TV, DVD player, entertainment cabinet and gaming system after getting your first job. Add in monthly costs of $100 for cable, $10 for electricity use, $20 for renting movies, $25 for buying games and $20 for an occasional pay-per-view event, and you’re looking at $175 a month. Add in another $525 a month extra you spend due to the influence of commercials if you are the average person, and you are costing yourself $700 a month watching TV.

If you instead invested this money and received a return of 8% compounded annually over 45 years until you’re 70 years old, you would have more than $3.7 million in your account.

There is no way I spend $700 a month watching TV, or associated spending based on commercials! They also forgot to add the opportunity cost of $737 a month, so it is very likely this sum is well over $10 million. I would figure out the exact sum, but the opportunity cost of doing so is just too high for me to do that right now. ;)

This article is written only to have an eye-catching headline. I’m sure it will be all over CNN and the local news as a “great new way to save for your future!” But then, wouldn’t everyone watching those shows immediately call their cable company to cancel their subscriptions, thus putting the news anchors out of a job?

TV can be expensive, but so can so many other things. You could write the exact same article and substitute computer for TV. There are many other hobbies that are even more expensive than watching TV, but I guess none of them make for great headlines.

But, I have to admit this article did inspire me. Here is my new plan to become a multi-millionaire:

  • I will not build and collect model trains. The associated expenditures such as purchasing new model trains, settings, accessories, subscriptions to Model Train Monthly, energy costs, lost opportunity costs, and the spending I would do based on the advertisements in Model Train Monthly would add up to millions of dollars over the course of my lifetime. If I were to forego those expenditures and instead invest my money accordingly, I would have well over $10 million by the time I reach retirement age. I know it is a huge sacrifice, but that is what I am doing. And I will watch TV instead. ;)

Published or updated January 24, 2011.
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