When we are watching our pennies, as many of us are in these days of COVID-19, your default position tends to be, go for the least expensive option, always.
For many of our daily needs, that's an excellent strategy. Buying in bulk, shopping the sales, clipping coupons...these are all good ideas, as a general rule.
But when we are so focused on price, we sometimes tend to forget about the other side of the equation: value.
Value, in this context, refers to things like quality of workmanship, source, warranty, and after-sales service. Generally speaking, the less expensive an item is, the lower its overall value.
Sometimes, this might not matter to us. We might choose to buy an inexpensive piece of clothing, knowing that it will likely not hold up under repeated laundering for more than a year or so. If we already have several shirts, buying another one of low quality at a low price point, because it's in a fun print or is cut in a funky style, is probably not a financially bad move.
At other times, though, it makes more sense to spend a bit more, and go for higher quality. When we are building the foundations of our wardrobe, and investing in a new suit, for example, we would be wise to choose a high-quality fabric, excellent workmanship and to buy from a store that offers custom tailoring, to ensure the garment fits us well. Value is important here, because this item will be worn frequently and needs to last for a number of years.
So, how do you decide when it makes sense to go for the cheaper option, and when to splurge? Here are a few guidelines that I use when making my own spending decisions. I hope you find them helpful:
1. Will it be a major inconvenience if the item breaks down? If so, it's worth spending a bit more for a higher-quality version (e.g. furnace, air conditioner or other major appliance).
2. Is my health at stake? I never compromise on quality when it comes to things like nutrition or safety (e.g. fresh produce and meat, or a bicycle helmet).
3. Is there an option that comes with a good warranty? If it's an item that could break down, not having to pay extra for a warranty is an attractive feature (e.g. a television).
4. Is there an option with extra features that are "neat" or "nice-to-have", but that I don't really need? It's easy to get sucked in by extra features, but if you will seldom or never use them, why bother paying for them? In this situation, I go for the basic version of the item (e.g. a car or a stereo system).
5. Will the item become obsolete within a short space of time? If so, less expensive is probably better (e.g. a piece of clothing or pair of shoes that is very trendy in the moment).
Hunting for bargains is an important and useful skill to have. Just make sure that "bargain" doesn't end up actually costing you more because you didn't consider the other critical component of the decision - value.
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