How to Make Better Purchase Decisions
Should you buy that? Ask yourself these questions from Get-It-Done Guy Stever Robbins, and the answer will be clear.
I just love buying new things! They say that if you buy enough new things, you win. The lady who lived upstairs liked to buy new things. She bought clothes, knick-knacks, computers, books, and linens. She bought so much that eventually her rooms filled up. The things made walls, like a maze, inside her apartment. She would go through the maze to her bed, where there was just enough room for her to sleep for the night. But she kept buying new things and the walls of the maze got narrower and narrower. One day she walked into the apartment and disappeared. She was never seen again.
The moral of this story is clear: always carry a ball of string so you can find your way out of any maze you happen to wander into. That, and think three times before buying stuff.
We all buy stuff. We buy computers, beautiful Moleskine notebooks, expensive software, air conditioners, and vacation timeshares. The first step to a wise decision is knowing what you hope the purchase will do for you.
Check Your Motives
Other than the fun of sheer consumerism, trading a potentially happy, joyful retirement for something you’ll play with for a few months and then discard, why do you want to buy this thing now? Surely it can’t just be that you are looking forward to a wretched old age of sickness and squalor. There must be some other reason.
Ask what else you’d do with that money if you didn’t spend it.
My next big purchase isn’t a computer, or a car, or something work-related. It’s a mattress. My current mattress was born around the same time as Justin Bieber. One of those those needs replacing, and since the Biebs isn’t going anywhere any time soon, it’s time for a new mattress.
Why do I want the mattress? To improve my sleep. My work takes thought. The right mattress can be the difference between waking well-rested and being a zombie in the morning. A mattress is one key to my mental productivity.
This seems sensible. Motive-wise, this purchase checks out.
Consider Your Full Purchase Price
Next figure out the total amount you’ll be paying. For one-time purchases, this is just the price. When using a credit card or other financing, add the amount of interest you’ll be paying. For a monthly purchase, like a subscription, choose a sensible time frame and total up all the payments you’ll make in that timeframe. For a $50/month Internet subscription, you might think of it as a one-year $600 purchase.
Compare Total Price with the Market
I’m looking at a mattress that costs $1,000. It’s a technological wonder that claims that even sleeping on my side won’t cut off circulation.
When I look at other mattresses on the market, prices range from $300 to $3,000 and above. By looking at the aggregate price, it seems clear the price is mid-range. A price of $10,000 might be cause to reconsider, as might a price of $100.
Compare with Similar-Size Purchases
What else costs $1,000 that you’ve been willing to spend money on? A custom five-foot-tall Oreo ice cream cake. A Macbook. Two Burning Man tickets. A negotiation course at Harvard Law School.
While comparing these to a mattress is comparing apples and oranges, sometimes apples do look enough like oranges to make the comparison. Thank you, Monsanto. A mattress seems like a comparable purchase, and if anything, it will have a bigger effect on my life.
Consider Money Over Time
Next divide the purchase price into smaller time units, based on the lifetime of the purchase. Think of it as a yearly amount, a monthly amount, a weekly amount, or a daily amount. Choose the time period that makes the most sense.
This mattress comes with a ten-year warranty. Kim Kardashian, would have to divide that by two, because, well, Kim’s pretty hard on a mattress. But not me. Ten years is probably about how long a mattress will last. I am sad.
I sleep every night. At $1,000, that’s $100 per year, $8.30 per month, or 27 cents a day. A soda at lunch costs seven times that, and a soda isn’t seven times as enjoyable as a wonderful mattress. (If it is, you’re either buying some excellent soda or you have a lousy mattress.) The mattress purchase makes sense on the micro-level, too.
Ask If Saving the Money Makes Sense
Finally, ask what else you’d do with that money if you didn’t spend it. If you save it in a bank account or brokerage account that gives a decent rate of return, it could compound into quite a tidy nest-egg someday. It could also be siphoned away in management fees, financial scandals, and the quote-unquote innovation of high frequency trading. So while saving sounds sensible, in my book, it isn’t a slam-dunk. The mattress may be a better choice. Plus, you can put your cash in it and save on bank fees.
When you’re making a big purchase decision, make it wisely. Consider your motives and make sure they are pure as a Knight of the Round Table (other than Lancelot, of course). Evaluate the total amount you’ll be paying against the other alternatives to make sure you’re getting a good market price. Compare the total with similar-sized purchases and make sure it still makes sense. Also compare the daily, weekly, or monthly amounts with similar-sized purchases. If all those check out, then you may well have a good decision on your hands.
I’m Stever Robbins. I run webinars and other programs to help people be extremely productive and build extraordinary careers. If you want to know more, visit SteverRobbins.com
Work Less, Do More, and Have a Great Life!
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