Fun Finance Friday Post #5
Your dog might cost you $60,000!
“Wait what? No way! I got my dog for free from a farmer in the middle of nowhere it barely cost me a thing…”
As a financial adviser I have the privilege of preparing clients for some of life’s major decisions. Decisions like buying an engagement ring for the love of your life, buying a house, sending kids to college, or saving enough to retire and not work. All these decisions will have a cost and working with a friend, or a trusted advisor, can help in a big way. However, there are some decisions that no one really talks about.
These decisions are usually put in our daily little decisions category. Maybe it’s how often we drink Starbucks on the way to work, (Did I just pay $5 for a salted caramel mocha?) or how much I could save by paying off my car loan. As an advisor I get to point out how small decisions can really add up to being big decisions, and it is important to know that buying a dog is one of them. Yes, let me show you how owning a dog can easily cost you $60,000.
According to petbudget.com the average cost of owning a dog per year is $1,300 with a range of $500 to $2500.
Of course, there will be an initial start up cost for pet owners between $150 and $925. Then there are the ongoing food costs, veterinary costs, potential training costs, outside care costs (i.e., dog walkers or boarding while you are on vacation), and any incidental costs that might occur. (Our dog chewed a hole in our apartment carpet the day we moved out, costing us $400 of our deposit).
If you would like an extensive list of completely normal pet expenses, check out petbudget.com They do a great job setting expectations for dog ownership.
Some readers may have done the math and said $1300 a year does not equal $60,000. So let me explain… A dog typically lives 10-13 years according to a-zanimals.com (Growing up I had a German short-haired pointer that lived to be 19, but I’ll give them the benefit of the doubt.)
So, if we take 10 years at 1300 a year, we get $13,000 + startup costs. Not including the optional grooming plans, dog walking, pet boarding, incidental costs, or emergency vet visits. Most people who I share this with are surprised that their dog will likely cost this much or even more. So how does that cost get to $60,000?
Let’s look at what you may get if we were to invest our “dog money” of $1,000 at startup in an IRA account and contribute $1,300 per year for 10 years. Using a 6% annually compounded rate of return we would have $18,827 at the end of those ten years. “Not bad,” you might say, “but that’s still not $60,000.” Let’s buy a dog three different ways over a 30-year period to retirement.
Scenario #1 The Student
After 10 happy years, your beloved pet passes away, and after you’ve learned how expensive they can be, you decided not to get another one. Investing your dog money in an IRA seemed like a good idea. With 20 years left to retirement your money grows to $51,000. Congratulations! You only spent 13,000 on your dog and missed out on some potential future gains but not too bad.
Scenario #2 The Planner
You don’t own a dog but want one. You’ve also read online dogs are expensive. You want to plan it out, you are patient. You go to Blacorusa.com/retirement-calculator. You save your dog money during those first 10 years by contributing to an IRA. At year 10 you reward your patience with a cute furry friend. You no longer contribute to your IRA, but your money is hard at work for you over the next 20 years as it grows to become a $60,000 IRA account. Good for you! You know they were expensive, but you think they are worth the cost. You recognized your values, determined the costs, and got yourself a dog!
Scenario #3 The Real Cost.
You are allergic to cute and cuddly things. You never buy a dog and instead invest that portion of your budget for those 30 years in an IRA. Now you have $108,000 and you’re feeling lonely after your kids have moved out. So you buy a cute fluffy puppy now that you’ve got time to care for it and want something to love. Congratulations, you prioritized your money, but may not have realized what you truly value, luckily your grand kids aren’t too old to enjoy the puppy with you.
Of course, these aren’t the only scenarios to consider, but they do point out some significant ways I strive to help clients when making financial decisions. I am an advisor who recognizes there are things more important than money, but see how it would be irresponsible to devalue the financial impact of our decisions. The best way to overcome these obstacles is by honestly evaluating the costs and working to unite a clients financial values with their personal values. This article assumes the dog owner is not already maxing out their retirement and has at least 30 years to invest. Those two factors if changed, would significantly affect the outcomes of the scenarios. And because no two people are alike to the degree of what they value it’s important that everyone works through their financial picture independently. If you are facing a financial decision and would like to see how it may impact the bigger financial picture, reach out to us. Or if you are confident in your financial plan but want to test a few different ideas try out the retirement calculator page on our website.
Blacor USA has provided Private Investment Advice since 1959. We offer personal financial advice and planning strategies that stem from three generations of investment professionals. We are honored to serve our clients and build financial legacies that reflect their true values.
References:
The Cost of Owning a Dog - Complete Guide with Calculator - PetBudget https://www.petbudget.com/dog-cost/
Starbucks Menu Prices (Updated: June 2023) (fastfoodmenuprices.com) https://www.fastfoodmenuprices.com/starbucks-prices/
Dog Lifespan: How Long Do Dogs Live? - AZ Animals (a-z-animals.com) https://a-z-animals.com/blog/how-long-do-dogs-live/
Securities offered through International Assets Advisory, LLC (“IAA”) – Member FINRA/SIPC. Advisory services offered through International Assets Investment Management, LLC (“IAIM”) –SEC RIA.
Blacor Investments is unaffiliated with IAA and IAIM. The information provided is based on carefully selected sources, believed to be reliable, but whose accuracy or completeness cannot be guaranteed. All information and expressions of opinions are subject to change without notice and are those of Blacor Investments.
Past performance may not be indicative of future results.