Plan Your Escape

As I look around my home at the items that I have accumulated over the years I have noticed the personal value I assign to each thing does not always relate to the amount I paid for them. Sometimes I value something much more than I paid for it but mostly I value things a lot less. Instead of lamenting my past purchasing decisions, I've decided to use this realization to help sway my future ones. Could you do the same?

Price is Not Value

The first thing to remember is that the price of an item does not always reflect its value. This is true in two ways:

1. Sometimes people charge a lot more for an item hoping to make a profit by selling it for more than they paid for it.
2. Sometimes the price of an item does match roughly what the owner paid for it but the item is of no use to us. So for us, the item has less value.

Of course, the other thing to remember is that this discrepancy between price and value can happen in both directions. Sometimes the price of something is less than its value. By being aware of this we can make better spending decisions.

In the first item listed above, we can usually get better value by 'shopping around' to find someone else who is selling the item at a fairer price. This is a concept that most of us are familiar with and we are reasonably used to dealing with this difference between price and value. This is mostly because it is often a lot easier to recognize: if we see an item for sale in two different stores at two different prices, we can easily see the better deal and act accordingly. With the second item listed above, it isn't always as straight forward.

What is This Worth to Me?

Have you ever signed up for a year long gym membership and only ended up going 2 or 3 times? How about getting a new computer game that you only play for about a week? An exercise DVD? A bread maker? You get the idea. There are plenty of things out there that have little or no value to us because we will never make use of them. There are also things that we do make a lot of use of and therefore they have a lot of value to us. For example, I found a shirt at a second hand clothing shop that I wear all the time. It is comfortable, it looks nice on me and I get lots of compliments on it. I have never regretted that purchase. The challenge is to try to determine the value of an item to us.

How Can I Know the Value?

This is the million dollar question and there is no easy answer. One thing is certain though. The more you will use a thing, the higher its value for you. In general, we get more value out of the things that we make use of frequently and less value from the things that sit in the box in the basement. So knowing this there are a few questions you can ask yourself to try to determine the value of a thing:

• Will I actually use this thing?
• Have I had an opportunity to use this thing in the past week? Month? Year? Decade?
• Do I already own something that performs the same function as this thing?
• Will using this thing actually be much better than not using it?
• Do I have any place to store this thing when I am not using it?

I'm sure you can come up with plenty of your own questions along the same lines to help you determine the value of a thing. Once you've thought things through, you will be in a much better position to make your purchasing decision.

Deal or No Deal?

So the final step is to figure out how the listed price lines up with your assigned value of the item. If you have assigned a higher value than the listed price you might want to make the purchase. If you have assigned a lower value you should leave it on the shelf. Now you've thought things through and you are now ready to decide whether you are going to buy the item. So either you buy it or you walk away.

How'd I Do?

Whatever you decide, remember your reasons for doing so and over the next week, month, year or decade you can re-evaluate your decision. If you did buy the item, were you correct in your estimations about how useful it would be? If you didn't, have you ever regretted that choice? Be honest. This personal feedback on your decision will help you make better judgments in the future. Over time you will improve your eye for spotting value and improve your spending habits.

One final point: don't dwell on the past too much. Just remember that no matter what you decided and no matter if you were right or wrong, you are learning and that makes everything worth it. It really does.

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