When you are looking to buying decisions for a product or service you often have several choices with it comes to different price levels, this goes for both personal as well as business expenses. I have talked before about the things that I think that you should spend money on when starting an online business, but what about all other fields.
In this post, I want to share my personal view when it comes to making buying decisions, how I approach them and how I pick the product or service that I am looking to purchase. This method is for both personal and business expenses, and I hope that this helps you to make better decisions in the future.
Do you need it?
This question might seem like an obvious question but don’t misjudge its importance. Now it is also important to assess this issue objectively and honest towards yourself. Of course, we could argue that we don’t ‘need’ a lot of the things we buy. Nobody needs an expensive iPhone, a tablet or designer clothes. However, there could situations where such purchases are justified.
Let me give some examples: say you are a small business, owner. As a business owner you are always on the road, you stay in contact with your customers using your phone. You might also need your phone to find directions, handle your email, take pictures to send to suppliers and much more. Well, in this case, it can be argued that you do need a good phone, most of your livelihood depends on it.
Personally I like a nice suit; however, I do not need one often, one of the perks you have when you are working from home. If no particular occasion arose where I could justify towards myself that I need an expensive suit, I would not just buy a nice suit just because I like it. However, that is not to say that this is for everyone, for others this might be different. I have friends who work in consultancy; you can’t show up at a big client’s firm in $150 suits. They ‘need’ a nice suit to do their work. Personally I feel hat such requirements or expectations like in the last example are ridiculous, but that’s me.
Now of course you can also apply all above examples for personal situations. The need or dependency for your livelihood might be less significant, but you could still assess which aspects are most important in your life.
Do you have the money to buy it?
Why do we ask this questions after the issue if you need it? Well, the answer is simple, you need to assess if you need it without thinking too much about money. If you need it, and you don’t have the money for it, it makes an excellent personal saving goal. Yes, you read that right, a saving goal, don’t spend money you don’t have.
With this question, you will have to take an honest look at your personal situation. So you thought you needed a certain product or service, but could you also justify this when taking your finances in consideration account. One of the biggest problems in the current society and consumerism oriented lifestyle is that we want it all. We think we need everything, and we want to buy anything, even if we don’t have the money to buy it.
Now I am not saying that you should convert yourself to a frugal lifestyle; you can still enjoy the simple pleasures in life without buying everything you want. The key is always to look at the first question, do you need it.
If you have a lot of money at your disposal, sure things might be different for you. Although I would strongly recommend first setting up your finances in such matter that you will also have enough in the future, sure you could splurge now and then on excessive purchases. But for the rest of us, don’t even think of buying things we don’t need with money we don’t have.
How to decide between different pricing options?
Now after you have established that you need a product, and you have the money to buy it, you can move on to the next step. Now there a lot of different options available when it comes to buying something, and they all have different prices.
When I was younger I would often reject the idea of buying the cheapest option, the cheapest option is most likely not the highest quality. If you are on a budget, it is also likely that you won’t opt for the highest price option.
Exactly this point is where I made a lot of mistakes before. When I was still in university, I needed a new laptop. At the time, I didn’t have enough room in my business to buy something high-end, and I didn’t want to buy a the cheapest. I settled for a higher mid-end laptop, which proved to be a wrong choice. I could do the same things with this laptop as a cheaper laptop, but it still lacked the quality of a high-end laptop. After two years, I had to replace my unit, most likely spending more money at the end than I would have if I bought the more expensive version.
If you need something, and you have the budget, buy a quality product for a higher price. If you need something and what you need is imperative, decide if you wait and save money until you can afford it. If you need something but it is not vital to you or your business, buy the cheapest option and save the money for something that you might need in the future.
Important questions to ask yourself
- What is the reason that I need it?
- How big is the impact after purchase on my life or my business?
- How much money do I have available?
- Can I make a purchase without jeopardizing my financial situation?
- Do I need the high-end quality or can I also settle for the cheaper option?
The questions above should give you a good idea of your motivation and personal situation to make a certain purchase. Personally I think that it is entirely justifiable to make expensive purchases when they have a big impact on you and your business. The key is to assess honestly your personal situation and to proceed with your purchase rationally.