False Economy – Budgeting For Premium Products
Have you ever considered the cost per use of every item you purchase? Your car, your computer, your clothes and even your food? Have you ever considered what your cost per use is? For example, a clothing item of $100, if only worn once is a $100 item, however, if this item is worn 100 times the cost per use becomes $1.
Everything that we purchase as consumers has a cost per use!
But what does “false economy” have to do with budgeting and cashflow? Well, if you consider bed sheets as an example… how often do you purchase these? Do you tend to purchase cheaper offerings, cheaper sheets because they are more affordable or do you tend to wait for sales and purchase sheets at a more expensive price that are heavily discounted?
“Premium Product” – Bed Sheets:
Scenario 1 – Say you purchase $100 “cheap and cheerful” sheets once a year and they last you one year. The cost per use is $100 for the year.
Scenario 2 – Say you purchase $300 “premium” sheets and they last you for 5 years. The cost per use for the premium sheets is $60 per year.
Premium sheets are better for the budget, they aren’t scratchy, and they don’t thin out so you can’t rip them with your toenails!
My point is, that when you focus on the short-term, and buying “cheap” you are paying far more for your products in the long run. If you aren’t paying the higher price for premium, you are certainly paying for it tomorrow or the day after. When setting your budget for necessary items such as sheets and clothes, consider putting more away so you can afford a premium product which will offer you far better value than a “cheap and cheerful” product that will only support you short term.
The same can be said with technology, fridges, freezers, mobile phones, televisions, furniture etc. Everything has a price point and sometimes a more “affordable product” will become a “replacement product” more often and on a much more regular basis due to the cost of manufacture of the product, and producers keeping to a lower budget to make the item viable.
False economy is evident also with the purchase and quality of our cars. My father (love him dearly) has always driven a car which was regularly at the mechanics, and the type of car people would refer to as a “hack car,” a total rubbish car. It would breakdown, things would just fall off… driving down the road you would hear weird clunks in the engine and one day the car cabin filled up with gas because the gas converter in the motor froze and LPG was leaking into the air conditioning, and even his side mirror fell off once! You get the picture…
I said to my father, “Dad, why don’t you just buy a new car…?” He said “I don’t have any money for a new car.” Really? How much was the last repair bill? How much have you spent on the car in the last month, the last quarter? The amounts were staggering, yet due to “not being able to see the forest through the trees,” his mindset was, the car is cheap and if it breaks down ill just buy another one. If he took a step back, pulled his money together and stopped throwing money at a dead horse he would have been able to drive a more modern car, much safer, and he would have paid far LESS in the long run. Unfortunately, he, and many others, have never learnt the lesson and become victims of a false economy.
When you do purchase “cheap” product… consider it a Russian Roulette. Yes, you might get lucky “occasionally,” but the majority of the time you will have the bullet chamber. If you “cannot afford” to purchase a premium product in your life and you want to, then you must work towards getting yourself into that position by working with your budget and improving your financial life.
Are you able to budget for high ticket items for your household? How are you avoiding the ongoing “merry go round” of buying cheap, throwing out and buying again? Maybe its time to sit down, iron out your budget and make sure that a false economy is not ruling your household… By not “buying in” on false economy, you will have more money in your pocket, to do more of the things that you care about and to live life your way! How much is false economy costing you?
For more information or to arrange an appointment please contact us:
Andrew and Alyssa Mates on 0420 846 454
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“An effective budget is knowing which numbers belong where; and what the values of these numbers are to make the magic in your life happen…”