This article was originally written for and published in The Business Bulletin.
Figures don't lie, but liars figure.
I heard my Dad use that saying over and over again. And I myself even accused him of applying a little make-up to his financial statements sometimes! How about some practical application of the old saying?
This morning I jumped in the pickup along with my 3 school children with just about enough time to make it to School. Glanced at the gas gauge on the way out the drive and my heart sank when I saw it was on empty. A brief discussion followed with my children about what to do. The majority wanted to risk it, their logic being that if we ran out of gas it would be more exciting. However, the gas probably would have run out after I had dropped them off and was driving alone!
So I invoked my executive authority to override the majority vote and stopped at the corner station. Now I have personal issues with that particular station, but that’s another story for another day. Suffice it to say that I didn’t want to fill my tank there. So I sent one of my boys in with a $5 bill and started pumping. Let me tell you it didn’t take long to get $5 worth of gas in my tank, I was finished before he got back to the pickup! I got 1.4 gallons of gas in exchange for an Abe Lincoln bill. The truth hit home to me right there about figures not lying!
As we pulled out of station and drove to school just slow enough to avoid a fine, I decided to give a little math lesson. I have a couple of boys that love to say “I HATE math!” I told them I had put in only 1.4 gallons and would make it to school and back to town to fill the tank all the way up. One of the boys asked whether I couldn’t make it to Lake Charles and back (50 miles one way). So I helped them do the math: At 18 miles per gallon you can drive 18 miles on one gallon. So with about a gallon and a half, you can drive 18 plus ½ of 18. They knew that was 9, so 18 plus 9 is 27. WOW! The light came on. You couldn’t even GET to Lake Charles, let alone make it back. So we estimated to get to Lake Charles and back would cost about 4 five dollar bills. (27 times 4 is around 100 miles for a round trip). So the TRUTH is: It takes $20 just to pay the gas to go to Lake Charles and back! That doesn’t say anything for the other variable expenses, like tires, repairs and the fixed expenses like insurance. Figures truly don’t lie, do they? Sometimes they just kind of remain silent in “don’t want to know” land though…
So now we get to the part about liars figuring. For quite a few years I’ve been putting my gas into my vehicles on a credit card. Yes, I get frequent flier miles, so that’s all good, you know. So the price gradually goes up for gas, and I just have that all mixed in with my other things I charge on the card and it doesn’t really hit home to me. Sure, I get a shock when one day at the pump it shuts off at $75 and I am not full yet! But I’m still not homing in on the truth about how expensive gas is. I don’t really want to know how much it’s costing me because I really don’t want to cut back on driving, right? Now I don’t call myself a liar, but I am avoiding the truth by not letting the figures talk to me. And how many other times do we do this, especially if we don’t want to cut back?
Let’s say we want to farm hay: We might say, “Of course I’m making money on my hay. I can plan on 4 cuttings at 60 bales/acre per cutting. At $5.50/bale that’s roughly $1,300 an acre. And I know my fertilizer is less than $500/acre per year. Throw in a little twine and fuel at about $100/acre. So I know I’m making $700 an acre.” What we don’t stop to figure is that we have investment in equipment that must be replaced periodically. We have the cost of renting or owning the land. We have dry years with low yields and occasional years of higher fertilizer costs when we need to apply lime. We have repairs and rained on hay that sells at a lower price. Above that, we need to value our labor for something, if nothing else, to maintain a little self-worth.
I will often have a client come in and tell me, “With gas getting so high these days, I had to go out and buy me something that got some better gas mileage.” Now the truth is, they just had “new paint” fever. But they “figured” it out in a way that would justify the purchase, right or wrong. How many gallons of gas do you need to save to buy a $35,000 vehicle? You do the math, but I think you need to save about 10,000 gallons to cover the purchase alone, let alone taxes and insurance, etc.
Now let’s take those figures a little farther. If your old vehicle got 15 mpg and your new vehicle gets 25 mpg, you’re looking at a difference of 10 mpg, correct? Now we already have a headache, so shall we stop here? No, let’s go on. If you normally drive 100,000 miles on a vehicle before trading, you would save 10,000 gallons of gas during the life of the vehicle, right? WRONG, it’s not that easy, I was just checking to be sure you were awake! Take the gallons of gas your old vehicle would use in 100,000 miles: 100,000 / 15 mpg = 6,667 gallons. Now take the gallons of gas your new vehicle would use in 100,000 miles: 100,000 / 25 mpg = 4,000 gallons. So you’re saving 2,667 gallons over the life of the vehicle (6,667 – 4,000) At $3.50/gallon you would only save $9,335. Nuff said.
When I was a boy, getting into that age where I was being more and more embarrassed about things, we drove a big baby blue 1975 Chevy station wagon. I remember lying in the back of that thing on the way to Kansas listening to the clunk of the tires on the cracks in the road and doing mental math. I remember having to use numbers that were a little optimistic in order to prove to my Dad that we could afford to get rid of the old gas hog with a 400 engine and get us a car like the rest of the families had. I somehow convinced him it would be a good investment (or at least I thought I did). But as adults, maybe we do need to do a little “arm’s length” figuring and let the figures talk to us. Otherwise it’s really just a matter of liars figuring!
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