As central as money is to our lives, the way we use it can have drastically different effects on not just our financials but the overall quality of our lives. After all, debt and money troubles are commonly associated with negative emotions, as well as adverse life events such as divorce.
Circumstance certainly contributes to challenging financial situations, but for many of us, the root of our money woes can be found in our everyday behavior. It might sound contradictory on the surface, but if we really don’t want our lives to be controlled by money, we need to think more about how it serves us.
Here are five foolproof ways to evaluate the worthiness of every purchase you make:
Be Honest About Wants vs. Needs
Living in a country like the United States can blur the lines between the necessary and the unnecessary, particularly depending on whom we surround ourselves. When we muddy our standards between the essentials and the nice-to-haves, we leave the fate of our finances to chance. If everything could be a need, what determines when it’s not and when it is?
The answer will likely be a matter of how we feel at the moment. Whether you want to give yourself a 30, 50, or 80 percent failure rate, each outcome leads to excessive spending to some degree.
Assess How Much You’ll Use the Purchase
Many people have adopted the buy-it-for-life mantra as a way to save money over the long-term and get more satisfaction out of their possessions. To a large extent, this makes complete sense. Buying cheap shoes and replacing them every six months will be costlier than opting for a sturdy, handmade pair that will last years or even decades with maintenance.
The hang-up is that not every purchase needs to last for life. If you need something but only temporarily, there’s little use in choosing the most expensive option. If you’re purchasing something that interests you or benefits your life going forward, then that’s probably not something you want to obtain at low quality.
Be Aware of Outside Influences
As consumers, we’re bombarded with a non-stop barrage of advertisements in every facet of our lives. Unlike traditional advertising, however, today’s ads, on the whole, are more palatable. And because we get fed branded messaging every time we interact with technology or venture somewhere in society, we’re not always conscious of how advertising is affecting us.
It’s of course perfectly fine to be influenced by advertising. A brand may reflect your ideals. They might offer a service or good that you need. The important thing is to be aware of when you’re buying due to psychological factors or skewed perceptions.
This is particularly true in sales. People often see a sale and buy because they think they’re getting a good deal on something, even if they didn’t intend to buy it initially. Always ask yourself, is this something I was going to buy eventually or did the discount lure me?
Staying mindful of the outside entities trying to affect how we spend our money is pivotal to avoiding the consumerist trap, and as Andrew Housser recently wrote about, becoming an over-leveraged consumer.
Know Your Relative Purchase Value
In a world of endless options and price points, it pays to be a savvy consumer. Going off price alone is a sure-fire way to spend more money and incur frustration in the process. Opting for the most expensive price point might eliminate some of the annoyance, but you’ll always pay a premium.
To get the most out of every purchase, you need to evaluate what you’re getting along a sliding scale specific to your needs. In other words, each purchase must offer intrinsic value. When we don’t know our sweet spot, we’re less likely to make good decisions.
For instance, could you get the same exact thing for cheaper somewhere else? Does the buy aid your life in a significant way? Are you buying something brand-new and thus incurring a steep upcharge? Every transaction we make requires money, but they don’t all return the same level of value.
Leverage Your Network for Specific Expertise
Think about all the people you care about. Then jot down their specialties and hobbies. It’s likely you know people with expertise about all sorts of topics.
While I wouldn’t recommend asking someone’s opinion to make an insignificant purchase (e.g., asking a stay-at-home parent about the laundry detergent they use), you should absolutely seek advice for expensive items you don’t buy often.
If you need a new computer, then maybe you should lean on the IT professionals you know. If you’re looking to buy a used car, consult with your mechanic about the vehicle’s worthiness.
Exercising discipline with our finances requires continual effort. Thankfully, there are websites like iCredit that list some of the best personal finance apps available today.
The more we get into the habit of running through a pre-purchase checklist, however, the likelier we are to make sound decisions. Keep these five foolproof evaluation methods in mind and add to them as you see fit.