Are You Really Ready to Own, Reader?

Hi Reader,

Welcome to The Money Series, and if you are new here, thank you for signing up. Personal Finance can feel ambiguous and overwhelming, but I am here to help simplify the journey.

A few years ago, I had a colleague who bought a car and was meticulous about it. He kept it clean, serviced it regularly, and drove it responsibly. From the outside, it looked like a smart, affordable asset.

Then one day, I got a message from him that the car broke down on a major highway. The problem was a failed engine, and it required a full engine replacement. The cost of purchasing and fixing a new engine exceeded his monthly take-home pay, which caused a strain on his finances.

That experience, while specific to a car, is a common one. We often focus so intently on the upfront cost of a major purchase that we overlook the Total Cost of Ownership (TCO). This week, we're diving into this crucial concept, exploring the often-overlooked phantom costs and how you can stay financially savvy by factoring them into your planning.

The Purchase Price is Just the Beginning

When we think about affordability, we usually ask, “Can I afford to buy this?” But the better question is:

“Can I afford to own this?”

TCO refers to the full lifecycle cost of an asset, not just what it costs to buy, but what it takes to keep, maintain, insure, and eventually replace or dispose of it.

Phantom costs are the often-overlooked expenses that come with ownership, they are indirect but very real. These costs typically increase with the value of the asset. A Ford may be cheaper to maintain than a BMW, but both come with ‘surprise’ expenses over time.

Here’s what I mean:

Does This Mean You Shouldn’t Buy These Things? Absolutely not. But don’t judge affordability based on purchase price alone. A $25,000 car might seem “within reach,” but it can quickly become a financial burden if you’re not prepared for $4,000 in annual maintenance, insurance, and parts.

How to Stay Ahead of Phantom Costs

✅ Do your research. Talk to people who own the thing you’re eyeing. Read forums, reviews, and financial blogs. Learn what the actual costs look like over time.

✅ Build a “TCO buffer” into your budget. Create a buffer by estimating 15–20% on top of the purchase price for ongoing costs. If you can’t afford the asset with that buffer, you probably can’t afford it yet.

✅ Boost your emergency fund. Your emergency fund should reflect your lifestyle. If you’ve just bought a house or a car, include the cost of one or two major unexpected repairs per year.

✅ Review and update regularly. Costs change as assets age. Your 2-year-old car doesn’t cost the same to maintain as it did when new. Adjust your budget annually to reflect these shifts.

✅ Create a Phantom Cost Checklist. Make it a habit to run any major purchase (e.g., items over ₦500k or $500) through a checklist of direct and indirect costs. Only proceed if your finances can handle both.

Ownership goes beyond acquisition, it’s a long-term financial commitment to bills, responsibilities, and surprise invoices. Plan for the total cost, not just the purchase price, and your budget (and sanity) will thank you.

Reflect on This:

• Before your next big purchase, ask yourself: What’s the real cost of owning this? Am I prepared for it?

Reply to this email if you have questions or have had your own “phantom cost” surprise.

Till next week, I am rooting for you, money-ly!

Dee

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Disclaimer: This does not constitute financial advice. Please conduct your research or consult your financial advisor for important financial advice.