How to know if the price is worth it for you. The Object Usage Worth Formula.
Price is very tricky. Everyone has their own take on it, especially when it comes to determining if something is worth paying a certain amount for.
This post is about determining if the price given to something is reasonable, after you have decided that it is for you. Notice that I said "after" you have decided that it is for you. Many people fall into the trap of buying things because they see the price first and somehow calculate in their heads that it is a good deal and that they are actually saving money from the purchase. But as you know most of the time, the good deal ends up collecting dust and precious space in your home, forever neglected and never to be used and loved.
Don't worry, it's normal. I'm actually speaking from my experience of being an irrational human being. We all are from time to time. (See Fig.1)
Fig. 1. A microwavable egg poacher that I bought and used for only about 3 times. A moment of silence for all the items that have been neglected throughout the years. It doesn’t work for me.
So if you don't know yet how to determine if something is the right fit for you, or if you just forgot how, here is the post on the decision making process. (Sometimes my posts feel like a reminder to myself.)
And now that you have determined that something is the right fit for you, the next step is to know if the price is right.
There are different ways to go about this. But this two step formula has been most effective for me. And just in case you need it, there is a bonus step!
I call it the ”Object Usage Worth Formula”. It determines the worth of the object, every time it is used.
1st step
First step is to understand your MSA (money set aside). This means the money set aside to purchase things. You are not allowed to use your emergency funds, food funds, pet funds or other funds. Then determine the P (price) and multiply it by 1.5 just to have a buffer to see if you can really afford it or not. Then let the formula decide your next step!
If MSA > (P*1.5) then go to step number 2.
If MSA ≤ (P*1.5) then say bye-bye to the item and think about how to raise your MSA.
Step 2
Congratulations! We are responsible adults!
So here is the next step.
50 is just the rounded down number of weeks in a year.
TUW is times used in a week.
YBR is years before replacement (think about how long you will use it or can use it. Sometimes the warranty can be a good indicator.)
And that will be the cost of every time you will use it.
Is it worth it for you?
Here is an example of the formula in action!
I wanted to buy a rice paddle and decided that it was right for me. I am also clear of the first step.
The beautiful rice paddle.
So unto our formula!
P (Price) = 6000 won around 300 PhP at the time of writing.
TUW (Times used in a week) = 7, since I eat rice everyday. Yes, I am asian like that.
YBR (Years before replacement) = 5 years.
So that's 7 x 50 x 5 = 1750
And 300 PhP / 1750 = 0.17 PhP
So that means every time I use it, it will cost me around 0.17 PhP.
0.17 PhP for the happiness it will bring me every time I scoop rice? Sold! Worth it.
But sometimes I understand that even with the formula, it is still hard to decide specially when you do not really care about the price. So here is a formula for that.
Bonus Step
Everything is the same except for one aspect.
CGTP is care given to price
If you gave 0 cares about the price, and you used the formula, your calculator pretty much gave you the answer already. Error. No formula can save you. Your irrational side wins. You want the item, you don’t care what it takes to get it. As long as you don’t neglect your needs, go into debt, inconvenience others and suffer for the rest of your life, then go.
Have you made a purchase recently that was worth every penny? Or a purchase that was a complete disaster and should be in the "Stupid things I buy" hall of fame?
By the way, if you have another way to calculate if the price is right, please do share by leaving a comment below.
It's all about smart living every day.
Dae
