Recognize Value - not just price/cost
Frugal people typically recognize value first and price second. Value is often based on price, but it's much more than that.
The cost of an item is one thing, but recognizing its value is much more important over the long haul.
The frugal individual tries to minimize cost, but recognizes the difference between cheap stuff and items of high value.
The key is to get the best value at the lowest cost.
Cheap stuff can be just that, and it may not be worth purchasing.
Once we understand the dollar equivalent of something, it allows us to recognize value of items, activities and services based on what we think we will get out of it. In other words, it allows us to compare apples to oranges, because we know the price that is being asked for both as well as other factors that we value.
When considering the value of an item, activity or service, the frugal minded will look at cost and other value-related aspects of the purchase like:
- Unit pricing ($ per pound, ounce or item)
- Shelf life (ability to store it)
- Life expectancy
- Versatility (does it have multiple uses?)
- Functionality (is it as useful as they claim?)
- Cost of maintenance
- Cost and availability of replacement parts
- Warranty or service plan
- Quality of construction or assembly
- Safety risks
A word of caution – we can use value assessments to our disadvantage as well. It is easy to talk ourselves into a purchase if we inflate the value of an item. People engaged in frugal living keep things in perspective
Example: Years ago tiny computers came out just about the time PCs were becoming common. I know someone who bought one, expecting to store lots of records using this device. Was this of value to the purchaser?
First, the tiny keyboard was a pain – it wasn’t built for regular size fingers. It was fine if you were a person that stood about 18 inches tall. Second, what records do you really need to type into this tiny computer and store? Isn’t it just a whole lot easier and less costly to keep the paper records in a folder somewhere instead of transcribing them?
That's what I thought.
In the above example, the versatility and functionality was over estimated. I also think that the purchaser got enamored with the idea of owning a computer of some sort. These are the sales traps that advertisers and retailers set for you. Your job is not to fall into the traps.
The bottom line is to recognize value of an item and keep it in perspective. This will allow you to avoid talking yourself into buying cheap stuff that's unworthy or unnecessary.
Done with Recognize Value, back to Are You Frugal