- To find out if something is worth the money, I ask myself three questions.
- How much is this item really worth? How much is this item worth? to me?
- And finally, are there cheaper alternatives that still meet my needs?
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We buy things all the time without thinking twice about the price. But for certain purchases, more emotions (and money) are involved. Not to mention rising inflation, many of us have taken a closer look at how much things really cost, from groceries to gas.
There’s no worse feeling than buyer’s remorse (AKA regret about buying something), especially when it’s expensive. As a financial planner, I always recommend taking the time to think through your purchases to avoid buyer’s remorse. However, for larger purchases, it may take a little more work to find out if the item is actual worth the money.
If I’m weighing a major purchase, I usually take these three steps to determine if the product is worth using.
But before we begin, the very first thing you should do is make sure you can actually afford the item. Consider your personal cash flow and how purchasing this item will affect your budget in the short and long term. To me, no product that puts you in debt is worth it.
Question 1: How much is this product really worth?
When I decide to buy something, the first thing I do is calculate the intrinsic value of the item. Don’t worry – it doesn’t require a ton of math. I simply consider the item cost and how much it costs to use that item.
For example, let’s say I’m considering buying a new couch that costs $1,000. How many years do I expect this sofa to last? Do I plan to sell it on at the end, and if so, how much do I expect it to depreciate?
For the sake of this example, let’s say I only planned to keep the couch for a year. Divide the price of the couch by the number of months I plan to own it, and that means I’ll be paying an extra $83 per month just for the couch. On the flip side, if I can sell the same couch for $800 at the end of the year, it might be worth it.
Not all prices are so cut and dry, but just thinking through the cost and usage of the item can help you determine if it’s worth it to you. If you find yourself struggling to justify the price in step one, it may be a sign that you should pass on it.
Question 2: How much is this product worth to me?
It would be easy to look at every purchase from an objective, rational point of view, but that is not always possible. We are not robots!
Although it is important to think through the intrinsic value of the item, I think it is equally important to consider how much the item may be worth to you. How much you want to enjoy and use the item often goes beyond the price tag.
Before I make a purchase, I assess the product’s usefulness and frequency of use. First, how often should I actually use this item? If I buy a sleeping bag for my once-a-decade camping trip, I might stick with a cheaper model. But if it’s an espresso machine that will fuel my daily caffeine addiction, it might make sense to pay for a more advanced model.
Sometimes it’s just better to spend more on a higher quality item. I have a cordless vacuum that costs twice as much as the one I had before, but it makes cleaning a lot more fun and has lasted a lot longer.
Finally, just because it’s worth it to someone else doesn’t mean it’s worth it to you. I have a friend who owns a $500 juicer; she has had it for years and uses it every day. For her, the high upfront cost was worth it, as she now doesn’t have to pay for a daily juice at the store. I don’t drink juice too often, so that price tag probably wouldn’t make the most sense for me.
Question 3: Are there alternatives?
Sometimes the first item you see isn’t the best thing out there. The same goes for the price tag – the most expensive version or brand of a product is not always the highest quality.
Before I make a purchase, I always like to do one last check to make sure there aren’t any better options out there. I’ll usually just type the item into my phone and do a quick comparison search, just to get an idea of what other brands are selling this item, how much they’re selling it for, and if the product I’m about to buy is within average price range.
It can be difficult to compare two different brands or items, so I try to focus on certain features that I care about the most. I will also read user reviews to find out how others feel about the product.
Ultimately, there is no perfect formula for determining whether a product is worth buying. But having a three-step plan like this can curb both impulsive decisions and the dreaded buyer’s remorse.