Evaluating Your Purchases | Meaningful Money

❝Some people know the cost of everything but the value of nothing.❞
-Oscar Wilde

Do you know anybody so cheap that they only buy the cheapest possible things? It seems like thrift is the only thing on their minds, and if there is something that costs less than something they were already going to buy, they will go out of their way to get the cheaper thing.

Similarly, you may know people who only buy designer or name-brand items. This could be clothing, appliances, or even vehicles. To them, the only thing that matters is having the most expensive thing.

I propose that neither of these two cases is “right.” Instead, I propose that we need to consider more than just price. We don’t want to buy the cheapest or most expensive product without considering other factors. We also need to consider what we get in exchange for our money.

We all need to buy things, and when it comes time to decide whether to buy a generic version, a name-brand version, or anything in between, evaluating the quality will help us choose more wisely.

Quality tends to go up with price, but the shape of that curve isn’t constant. At the lower end of the price range, it’s possible and common even to see a lot of quality added as you look at things that cost a little more. But as it gets more and more expensive, the quality curve flattens out so that you have to pay more and more for just a little more quality.

This helps us understand that there are not simply two choices: buying the cheapest possible product or buying the most expensive one. It’s a continuum. It’s also not true that one should ALWAYS buy generic or ALWAYS by name-brand. But we want to do is understand WHY we purchase what we purchase.

In most cases, spending a little more money to pay for quality can make sense. And yet, there is a point at which it may not make sense to keep paying higher prices because the amount of quality we get doesn’t go up at the same rate.

For example, at the lower end of the price spectrum, a little more money gets you a lot more quality.

And at the high end of the price spectrum, it takes a lot more money to get a little bit more quality. This may not be worth it, but it depends on how we define “quality.”

One way to evaluate the quality of your purchase is to think about it in terms of cost per time. This could be cost per year, cost per use, or some other metric that indicates how much you use this product or how often it gets used.

This will be contextual and depends on your preferences, values, and the item you’re buying. For example, are you buying a jacket because you need it to hike or ski in cold and harsh conditions? Or, maybe you need a jacket to keep you warm between your car and office?

This exercise requires you to be honest with yourself. How many things do you have in your garage or basement that you thought you would use but ended up using once or twice? Alternatively, are you buying something you only need to use a handful of times?

If you buy something for $100 and only use it twice, you pay $50 each time you use it.

Alternatively, something that costs the same price but can be used ten times will amount to $10 per use. You might even find something that costs $150 or $200 that can get you more uses out of that, bringing the cost per use to below $10.

For example, you may be able to find a relatively cheap product for $500 that will last you for two years. Yet you might be able to find something that costs twice as much, $1,000, which on the surface seems expensive, but when you see it last ten years, you’ll find that it’s cheaper per year: $250 per year rather than $500 per year.

Just because something lasts longer doesn’t mean it’s necessarily better for it. If you buy a product that can last for ten years but don’t actually use it for ten years, then you don’t get that benefit. If you think there’s a chance you only use that product for four years, then the cost per year for both products is still $250, and it might make sense to buy the cheaper one.

You can also use this method to compare buying something to renting something. Once you do the math to determine how much something costs per use, you can ask yourself whether you can rent it for the same price. If the cost per use is less than the cost of renting, then it probably makes more sense to buy, all else equal.

On the other hand, if you do the math and find out that it costs more to buy than it does to rent, then you are probably better off renting if you can. Of course, you have to account for whether or not rentals are available when and where you want to use this particular product.

You have to be careful with these calculations, though. You might do the math and find out that it is less expensive to buy. Yet, once you add in the fact that you have to store it and transport it to wherever you want to use it, those hidden costs might make it more expensive to buy, thereby making it less expensive to rent.

To be fair, sometimes it does make more sense to buy something even if you could rent it for less money. It’s helpful to understand why you are considering buying what you are buying. Sometimes, buying allows you to save time. Other times, it’s more convenient. Sometimes, there’s comfort in knowing you’re getting the same thing every time, and it’s yours instead of renting something other people use.

You might be thinking this is an oversimplification, and you would be right to be critical. After all, how can you possibly know how long you will use something? I once bought very expensive shoes, feeling confident that I would be wearing them more than a decade later. Five years later, they’re still going strong. The flip side is that I once bought cross-country skis, thinking I would become a cross-country skier. I planned on using them for many years, but a couple of years later, I realized I was not very good and didn’t use them that often.

The trick is to make some guesses. We make our best guess but remind ourselves that it is just a guess.

Give yourself permission to put your money into the features you need, but only by features you need, and let go of the thought that you need to buy “the best.” There is no “best.” There is only the best for you. And remember to keep future you in mind.

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