There are several factors to consider when thinking about purchases.
Obviously, the price of the purchase is pretty important. How much money you have available for the purchase determines whether you will make the purchase at all. But (especially in our modern internet age) you can spend some time (which is considered a cost) and often find the item/service that you want to purchase at a low enough price.
Things like time are costs too though. You could spend your time doing any number of other activities, including activities that earn you money. So, how much time you spend researching your purchase can be directly related to the cost of the thing. For example, let’s say that you could earn $20 an hour doing some freelance writing. You’re purchasing something. You spend 4 hours looking for a deal on-line. Hopefully, your deal will save you more than $80. If not, then you would have been better off to spend the time making more money and not looking for a better deal.
Of course, we can’t know which is the better plan in advance. So you take your chances either way.
This concept of time equals money is pretty important in economics. And it can help you out a lot, in some pretty interesting ways. You always have choices when spending money.
Should buy those shoes, go to a dinner and a movie, buy that video game, donate to others, etc? I tend to look at it like this. Let’s say that I think my time is worth $20 an hour. That helps me determine if a purchase is worth it. Is the enjoyment or usefulness of a purchase going to be worth $20 an hour to replace the money I spent? Or, especially for more ‘frivolous’ purchases, will I get more than one hour of enjoyment for every $20 of the cost.
For example, I play a particular game on my X-box. According to the stat counter, I’ve played it for 640 hours since purchase. At $20 per hour, as long as the game cost less than $12,000 I made a pretty good buy. On the other hand, I purchased another game for $15 and played it for about 10 minutes. So far, that wasn’t a very good purchase.
It’s getting harder and harder for me to justify going to the movies. Going on a date to an evening show is getting to be more than $40-$60. Unless the movie is absolutely amazing, it’s just not worth the cost. Especially considering that, if I wait a few months, then the movie will be out on Amazon, where I can purchase it for less than $15 and own it forever. No, I don’t have a giant movie screen, but I can also pause the movie whenever I want and go pee or get a snack.
There’s something else to consider as well though. The importance and/or lifetime of the purchase. No matter what you do, food is a very short time purchase. You buy it, eat it, and it’s gone. Of course, food is vitally important to living. In spite of claims, I’ve never been able to verify that anyone can live for years on the dew from a single ginkgo leaf and the energy of the universe.
Something like a book is a low cost purchase and will last for a long time. Sure you want a good one, so spending a few minutes reading reviews on Amazon is worth it. But a car is an important, expensive, long term purchase and considerable effort doing research is well justified.
Any large, long term item, is worth spending some time researching. If only to make sure you get a decent value, which is related to purchase price, lifespan, usefulness, time spent researching and time saved in your life for other things.
We’re building a house and are about to close. We have a huge list of things to purchase afterwards. I know more about sod, water softeners, and electrical systems than I’d ever wanted to.
Like the car, if I’m going to buy something that is expected to last 15-20 years and costs several thousand dollars, I’m going to take the time to research it. For example, a water softener is something that we will use, literally, every time we use water in the house. Any cost has to include that. A poor choice, even if it’s much, much cheaper, can result in damage to appliances, fixtures, and health problems. So, yes, there’s a big difference between a $600 system and a $35oo system. But it’s not as good a choice if you’ll be replacing it (and a dishwasher and water heater and clothes washer) in just a year or two.
I’ll be moving sometime in the next two-three weeks, so if you don’t hear from me in a bit… that’s what’s going on.
