Setting your own price for items. It sounds simple enough. However, nearly everything that you see in stores, both physical and online, is aimed at changing your mind about the “value” you are getting when you buy something.
“It was $350.00, but it was on sale from $800.00, so I had to buy it.”
“I wasn’t going to get one today, but they were buy one, get one free.”
“It was 60% off, so it’s basically a good investment.”
“I got it for $75, but the other brand was over $200 and it’s basically the same thing.”
How may times have you heard (or said) one of these statements? How many times do people end up exceeding their budget because they feel like they are getting a deal on something? It’s time to STOP this madness. A dollar is still a dollar and for most of us, the amount of dollars that we have is pretty finite. Here is a little secret when it comes to shopping…YOU are the one who determines how much something is worth.
You determine the value
Let’s use jeans as our example. I wear jeans pretty much every single day of the week. I would consider jeans the most valuable piece of my personal wardrobe. I have one pair of jeans (Levis 514) that I bought for $45 when I was in college. I still have them and they are my favorite jeans. By my back of the napkin math, I have worn these jeans roughly 500-600 times, which comes out to about $.08 each time that I wear them. For me, that is a good value. I would pay 8 cents each morning to put on a pair of jeans before I start my day. By this math, I’ll spend about $1,000 to wear jeans for the next 30 years. This is an expense that I am comfortable with and is probably one of the better ways that I can spend my discretionary income.
Today, I ran a few quick online searches for jeans and stumbled across Gucci.com. Gucci is offering a pair of “denim pants with embroidery” (I guess you don’t call them jeans when you are cool) for $1,650.00. In case you are wondering, the embroidery is a stitched cartoon of what appears to be Donald Duck. If you are a denim enthusiast with a fashion-forward style than what I am currently sporting, this may be a justifiable purchase for you. Spending roughly $70,000 (assuming a five year lifespan on jeans and wearing each pair once per week) on jeans over the next 30 years may bring you enjoyment as a hobby or give you a certain confidence that makes your life $70,000 better.
Here is where people get into trouble. You walk into a department store looking for jeans. You know that $45 jeans can make you happy for the next 5-10 years. You see a $1,650.00 pair of jeans is being offered. Then you see a pair of $475.00 jeans on a mannequin. Then you see a “clearance rack” with $300 jeans marked down to $75.00. “Wow…I can save $225.00,” you think. However, that $225.00 savings really equates to a loss of $30.00, when you consider that you have exceeded your budget for jeans.
Before walking into any store, adding any item to your shopping cart, or even getting in your car to drive to Costco, you should think about what you are going to buy and what that item is worth to you. Just because the world says that jeans should cost $225.00 doesn’t make $75.00 jeans a good deal for you. They may be a great deal for someone else, but you are not that someone else.
Three questions to ask yourself before buying anything
You can save yourself from a lot of these retail-induced mind games by preparing for shopping with these three simple questions before buying anything:
- Do I absolutely need this?
- How much do I want to pay for this item?
- How much additional happiness will I get out of paying more?
I am currently moving from a house without a lawn to a house with a lawn. I will need to buy a lawnmower soon. I have no idea how much a lawnmower costs, but I know that I absolutely need one. If I set my budget at $200 for a lawnmower, then learn that there is a self-propelled, comfort grip, bluetooth equipped lawnmower that is 30% off and retails for $699, that doesn’t change the fact that I need a $200.00 lawnmower. In the two hours per month that I mow my lawn, I will not get the time savings or the additional enjoyment in life out of the extra $499.00 that I spend on that lawnmower, so I’m sticking to my budget.
Setting your own price for common items
I went through a new exercise a few months ago. I thought about the thirty most expensive things that I anticipated purchasing in the coming year. I pulled out a notepad. No Google. No Amazon. No asking Siri or Alexa how much something costs. I wrote out thirty lines and a price tag next to each of them. This is what these items are worth to me.
I would encourage that you do the same for items that you plan to purchase soon. It doesn’t need to be an exact science or perfectly accurate. Think about what each of those purchases is worth to you. Think about where you want to splurge and where you don’t necessarily care as much. Think about how long each item will last. Then, go about setting your own price. A few good categories to start with:
- Household appliances
- Experiences (sporting events, concerts, spa days, etc.)
- Gym memberships and/or Fitness Equipment
You have your own priorities and your own value for items. If a store prices an item at $35 and reduces it to $10, but it is worth $4.00 to you, then it is overpriced.Everything in life is a tradeoff. It is up to you to choose if you want to have the nicest jeans on the market, the nicest car on the market, great toys to play with on the weekends, or an early retirement. Regardless of what you decide, make your choice before you head to the store.
Have you tried setting your own price to save money when you are shopping? Tell us about it in the comments.