Should You Pay as a Group, Or Just Buy It Yourself?


Let’s say that you were going out to dinner with a group of friends.  You get to the restaurant, pick up the menu, and start to think about an appetizer.  Then one friend asks if you want to each pay for your own, or just split the check evenly as a group.

Let’s say that you chose the latter.  What now are the motives of the group?  If you are all good friends and need to maintain a good relationship, everyone might have the tendency to pick modest things on the menu to not appear like they are trying to take advantage of the others.  You might also pick things that are about equal in value to what you hear others ordering.  Some individuals, however, either because they are clueless or because they see this as an opportunity to get something for less, may load up on expensive drinks, have the shrimp cocktail for an appetizer, and then have the live Maine lobster as his meal, capping things off with the monster sundae.   I’ve been in situations at dinners, usually when one person is paying, where the bill of one person easily equals the meals of four others if they are just having waters and foregoing deserts.

So what happens when people start to order more?  Let’s say that you go out and do this regularly, with everyone splitting the check.  The next time after a couple of people start ordering a lot of extras, you might order drinks and the more expensive meal since you figure you should “get your money’s worth” or because “others are doing it.”  You might pick the most expensive things on the menu since it costs the same whether you do so or you just have a bowl of soup.  The size of the check will grow as people add on more and more until eventually everyone is paying the price of the most expensive thing on the menu when they split the bill since that will be the average meal cost.

Let’s now say that two of the people in your group are between jobs or students in college while everyone else is working.  Perhaps you’ll just let them eat for free or pay a reduced rate, while everyone else makes up the difference for them.  That will mean that everyone pays a bit more than it would have cost them to just buy their meals.  Maybe this would mean that those who had service jobs would then also need to be supplemented by the doctors and lawyers in the group.  This would lead to a spiral with fewer and fewer people in the group paying the full amount, until eventually the doctors and lawyers might be the only ones paying.  They might then decide at some point to skip the diner party entirely since they’re paying $500 a piece for a $50 meal.

Finally, as things became complicated, maybe you’d ask the restaurant to just collect the money from the diners, each according to his/her ability to pay, and then take care of the payment of the bill.  A single-payer system.  For this service the restaurant might charge a fee.  If they were doing this for enough people, they might need to hire on special staff, build offices in which to do the work, and buy some equipment like computers to help them.  If they were the ones deciding on what was needed and they had the ability to collect money from the diners as needed, they might build lavish offices, give themselves big salaries, and maybe even waste some of the money on restaurant conventions and team building weekends.  There would probably be some people who would outright steal money since collecting so much money together in one place is a big temptation.  This would all mean that the group would be paying more for dinner than they would have if they had just paid for the meal themselves.

So what’s the point of all this except that asking for separate checks might be the way to go?  People often look to government to provide things for them, but forget that they are the ones who will be paying for them.  Ask someone if they would like to have mass transit and they think of sitting leisurely on a train texting to friends rather than sitting in traffic.  They don’t think that maybe they would need to pay so much in taxes and fares that they would not be able to afford a car anymore, so that they then would not have a choice but to take the train.

Actually, government services are similar to gyms:  If everyone who buys a gym membership goes regularly, it would be miserable and not worth the cost.  Gyms count on people signing up in January for a perpetual membership, then losing interest by March or April.  Otherwise, the gym would be too crowded and not worth the cost.  Likewise, a subway that is nearly empty most of the time, with plenty of seats even during morning and evening rush hour is great.  If everyone always rode the subway, however, such that you could never get a seat and would need to spend a couple of hours per day packed in with a group of sweaty strangers, suddenly sitting in your car listening to the radio doesn’t sound that bad even if there is traffic.  You would need to pack the subways all of the time, however, to even come close to having fares pay for the cost of operations.  Otherwise, people who don’t ride the subway end up paying a large share of the costs through subsidies.  If you look at the costs of virtually any train mass transit system, you’ll find it would actually be cheaper to just buy cars and pay for the gas for those who do ride the trains.

In any case, you’ll always end up paying more than you would if everyone just paid their own way.  This is because of all of the people needed to administer the program, all of the buildings and equipment needed, all of the waste and fraud that results, and the general incompetence that occurs when you have that large an operation with people who get paid whether they provide good service and keep costs in line or not.  So the next time you think that the government should provide some service or product, ask yourself whether you would still want it if you were paying for it yourself.  Because you will be.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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