If you are constantly looking for ways to save money, it’s time to stop. There’s a better way to get what you want.
A Quick Disclaimer
This isn’t about socking money away for a rainy day, filling an emergency fund, or saving 10 to 15% or more of everything you make. If you’re doing that, by all means, continue. If you’re not doing that, by all means, start!
This is about something different.
“Saving” Money
“It’s 40% off! If I get it, I’m saving money!”
We love bargains. We love saving money. We love getting something we want for less. But are we focused on the right things when we “save money”?
You may be saving $100 on a flight by leaving a day early, but if you have to pay for a hotel and food, you might end up spending more. You may be saving $500 to get a cheaper computer, but if it’s constantly running slowly, ruining your productivity and causing you frustration, are you truly better off? After all, a computer will typically last you three years. That means that you are saving only $14 a month and it could be costing you a lot more in lost productivity.
In business there is something called “TCO” or “total cost of ownership”. In other words, I might pay $1,000 for a computer, but between lost productivity, shortened lifecycle, support, repairs, and more, the total cost may be $2,500 whereas a more expensive computer might have a TCO of $2,000 and be a lot less frustrating.
A Better Approach
Instead of saving money, we need to focus on getting a better value. It comes down to TCO and our goals.
For instance if you’re buying a cup of coffee to have a cup of coffee, that 79 cent deal at the gas station may be just fine. However if you’re buying a cup of coffee for the experience – to take a few minutes to relax and enjoy ourselves – then that $5 macchiato might be a better value.
In fact even that brings up a question: are we wasting money on $5 in coffee every weekday or is this our one guilty pleasure in which case $100 a month for some mental health is a pretty good exchange.
Likewise if you’re buying a computer just to surf the web and do some writing, you don’t need anything fancy, just something stable. But if you want to use it to compose music, develop apps, edit videos, or run other taxing software, make sure you buy something that can handle the demand.
Stop “Saving Money”
It’s time to stop saving money. It’s time instead to increase value. Make your money more valuable by spending it more wisely.
Doing this takes only 3 simple steps:
- Determine your goal: Do you want coffee or an experience? Do you to surf the web or edit videos? Knowing what you’re trying to do is a huge part of getting value from your purchases.
- Search for value: Don’t buy something because it’s cheap. Buy something because it’s the right thing to buy. Cheap may cost more in the long run. You can end up spending a lot more trying to make cheap do what it was never meant to do.
- Live within Your Budget: Above all, live within your means. Steps 1 and 2 are meaningless if you buy everything on credit. Paying 12-25% interest makes all your expenses way, way, way more expensive because interest itself becomes debt that acquires interest. If you need help here’s a quick start method from Dave Ramsey.
If you want to make the most of your money, forget about finding deals. Instead, look for value. It’s a better way to make the most of the money you have.
