BUSINESS

45 - Wednesday, July 25, 1990 - North Shore News

Calculate long-term costs of big ticket purchases

OF COURSE we don’t need a big-screen TV. But I must
admit I have been checking the ads lately — not seriously
comparing prices but doing a little research in case...well,

just in case.

Then one day our 19-year-old
son Matt caught me at it. Before !
knew what was happening, we
were in the store staring at those
banks of TV screens.

“Come on, Dad, live a little —
spend some money,”’ said Matt as
I looked dubiously at the $3,000
price tag on one particular model.

“But,’’ I replied, ‘‘there’s
nothing wrong with our trusty
20-year-old 20-inch Trinitron.”’

A friend had got the set for use
wholesale and except for a $50
repair bill 15- years ago when
lightning blew out something, it
hasn’t cost us anything except the
electricity.

How could I justify spending
$3,000 to replace something that
wasn't even broken? (Ah, the
curse of being a pennypincher — I
mean, of being “careful with
one’s money.”’)

“Check this one out,’’ said
Matt. ‘‘It has a screen-in-screen,
feature so we can watch two
channels at once. And it’s only

BUDGET CAR and Truck Rental
plans to open a new office in
North Vancouver at 1507 Main
Street.

The grand opening of the new
office will be held on July 30.

“Our new location brings
Budget’s reputation for low costs,
friendly, efficient service to North
Vancouver,’’ said Estella Lo, gen-
eral manager of Budget Car and
Truck Rental. ‘‘We will feature a
fleet of 25 cars in a variety of
sizes and styles plus about 25
trucks and vans.”

The new Budget location will
compliment the company’s ex-
isting office in North Vancouver
at 1700 Marine Drive.

eek

WITH THE help of the federal
and provincial governments, a su-
perior method of water purifica-
tion is about to be introduced to
B.c. by a_ newly-created B.C.
company called Diapac Industries.

Mary Collins, Associate
Minister of National Defence and
Minister Responsible for the
Status of Women, Stan Hagen,
B.C. Regional and Economic De-
velopment Minister and B.C. En-
vironment Minister and West
Vancouver-Howe Sound MLA
John Reynolds announced the ap-

another $750.""

(Better yet, I thought: buy
another TV instead for that $750.
Then we could have three TVs in
the same room and watch three
different. programs at the same
time. But I didn’t say anything.)

Between stores, | took Matt
aside for a moment and said: ‘*To
help us decide about this pur-
chase, let's figure out the true cost
over the next 20 years of spending
$3,000 on a TV today.’

He wasn’t thrilled, but he did
listen as | ran the calculations.

“In an RRSP earning 10 per
cent, that $3,000 will grow to
$20,000 in 20 years. With a suc-
cessful mutual fund earning 13 per
cent, the $3,000 will grow to
almost $35,000.””

“Rut,” said Matt, ‘what will
that buy after inflation?”’

Good point.

Assuming the money earns 3.5
per cent over the inflation rate,
the $3,000 will still double to
about $6,000. If the return were

proval of a $835,000 loan for the
construction of a plant in
Squamish to produce a water clar-
ifying chemical, poly-aluminum
chloride (PAC).

‘*Industry and municipalities
regard PAC as a superior water
treatment to the aluminum and
iron salts currently used in North
America,” said Collins, the MP
for Capilano-Howe Sound.

Reynolds said the plant will
generate secure, long-term
eniployment in the Squamish area
with 15 new jobs.

“It will also result in improve-
ments to paper manufacturing and
water purification plants
throughout the province,’’ said
Reynolds.

went

PACIFIC GRANITE Moun-
taineering Inc. of Vancouver has
won a $285,765 contract to pro-
vide instruction in mountaineer-
ing, glacier training and sailing
skills to cadets at the Benff Na-
tional Army Cadet Camr for Na-
tional Defence.
The contract
September 15.

runs until

eet

BEAVER FOODS Ltd. of Van-

TERM DEPOSITS

12°%4%

30-89 DAYS

1234%
1 YEAR
5S years 12%

ALL RATES SUBJECT TO CHANGE WITHOUT NOTICE

VANCOUVER 815 West Hastings Street
VANCOUVER 5701 Granville St. at 41st Ave.
NORTH VANCOUVER Lonsdale Quay
NEW WESTMINSTER 435 Columbia Street

B WHITE ROCK 1959-152nd Street
CALGARY 506-6th Street S.W.

683-7283
263-7283
983-3773
524-2288
531-1123
266-7321

6.5 per cent over inflation, in 20
years the $3,000 would be worth
almost $11,000 in terms of today’s
purchasing power.

Ignoring both the tax saved on
the RRSP contribution and paid
on the withdrawal, ‘tit will cost us
$300-$550 a year to own that TV
— the true opportunity cost (that
is, what the money could have
earned) if the $3,000 would have

been invested in an RRSP,” |
said.

At his age, Matt wasn’t too im-
pressed with a 20-year retirement
projection (which prompted me to
add: “Of course, if you left the

couver has won a $218,000 con-
tract to supply food and food ser-
vices to CFS Holberg, a remote
radar facility on novthern Van-
couver Island, for National
Defence.

Work on the contract will
maintain two jobs until June 14,
1991.

$3,000 in your RRSP tor 50 years
carning, say, five per cent over in-
flation, your $3,000 would buy
what $34,400 buys today’).

So we looked at other alter-
natives the average person might
have.

© Spending $3,000 on a big-
screen TV could be $3,000 you
will then not have for a sun break
next winter. That’s another ‘‘op-

dollars

and sense

Mike Grenby

portunity cost.”

® Putting the $3,000 against a
25-year $75,000 mortgage at 14.5
per cent would lower the pay-
ments by $36 a month and save
about $8,000 interest.

THE DOMINION Company
recently announced the purchase
of the Georgia Hotel in downtown
Vancouver in conjunction with
Wittington Properties Ltd.

The 314-room hotel will be
leased back to the original owner,
Burrard International, under a
management contract.

Room refurbishments and im-
provements to the hotel will con-
tinue over the next several years.

LOOK WHO IS
MING TO

July 29th

Our Town, a special feature highlighting
local people, organizations, business and

industry. Watch for it!

‘THE VOICE OF NORTH AND WEST VANCOUVER:

north.shore

1139 Lonsdale Ave., North Vancouver

Working together
in our
community.

985-2131

© Paying off $3,000 on out-
standing credit card accounts
{which charge up to 33 per cent
interest) could easily save you
$1,500-$2,500 interests — again,
your opportunity cost — over the
next three years. The same applies
if you plan to buy the TV on
credit.

“Okay, Dad," said Mat, ‘'!
get the message. A_ large-screen
TV is not worth up to $550 a year
— for you.

‘*But if you aren’t going to
spend money on the TV, perhaps
this is a good time to mention the
high school graduation gift you
promised me if I did really well.
After all, it’s now more than a
year since I graduated.

“That money invested in an
RRSP earning 5.5 per cent over
the inflation rate for one year —
which you should easily have been
able to achieve — would be worth
just about the price of a CD
player { noticed today.”’

What could I say? At least |
paid with a credit card which gives
me a frequent flyer point for
every dollar spent. And by not
having to pay the bill until about
a month from now — let's see, in
an RRSP earning...

Mike Grenby is a Vancouver-
based columnist and independent
personal financial adviser; he will
answer your questions as space
allows in his column — write to
him c/o North Shore News, 1139
Lonsdale, North Vancouver V7M
2H4.

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