How do you make your spending decisions?

Think back to the last time you thought about buying something beyond the usual – maybe a course, an article of clothing, or a cool offering online.

How long did it take you before you either a) asked the person offering the product how much it costs; or b) you went looking for the price?

My bet would be that it happened pretty quickly.

Here’s how it shakes out in my world

Whenever I’m preparing to release a course or when I get a referral for a private coaching engagement, here’s what often happens. The person contacts me and jumps straight into the dollars involved. It goes something like this:

Emailer 1: Hi, my name is XYZ. You were referred to me by ABC. I have the financial challenge GHI and my friend told me you can help. I’m looking for some private coaching. How much would that cost?

OR

Emailer 2: Hi, my friend QRS told me you have a course to help me get my finances in order. When will you offer it again and how much does it cost?

Our obsession with price

What’s the problem with the above?

Isn’t it reasonable to want to know how much a product or service costs?

Yes, of course it is.

But here’s my point: Until you know the value, to you, of the thing you’re considering spending money on, the price is irrelevant.

Someone could offer you a full course – hours of recorded lessons, tons of tools, and checklists to boot – for $50, which sounds like an amazing deal. Cool, right?

Not if the content doesn’t deliver the results you’re after and proves to be a waste of your time. In that case, $50 was an expensive price to pay.

See the problem?

When cost is your first criterion in your decision-making arsenal, you risk making poor spending choices or missing out on opportunities for significant growth.

Value first, then price

Regardless what you’re considering spending on – a take-out meal, a renovation, or a self-care subscription service – start by sorting out what value the purchase will provide for you.

Will it make you happier beyond the next hour?

Will it rejuvenate you?

Do the benefits outweigh the costs?

Will it help you make better or faster progress in a key area of your life?

Will it help you earn more, save more, get past blocks, be healthier, claim back more personal time, deepen your understanding, build your confidence?

After the purchase, will you be able to say, “Wow, that really was worth it!”?

When you lead with values-based questions, you get much more bang for your buck. And you avoid wasting a ton of money.

Values-based questions also speed up your financial decision-making. The “Is this valuable to me?” question makes it a lot easier to realize that a $50 purchase is a waste of money, while a $1,000 item might just be a great deal.

When to bring in price for spending decisions

There’s no question that the price matters, but I’m going to argue that it matters only from an affordability perspective.

If you’ve determined that a purchase fits within your core values and that it will definitely provide good value from a results perspective, then the only question that remains is, “Does this fit in my spending plan?”

In other words, do you have enough money to cover the expense without adversely affecting your spending plan?

If you do, then full steam ahead. Don’t get hung up on the dollar amount.

However, if the purchase prevents you from investing in your TFSA or RRSP that month, it might not be worth it, unless it helps you create even more income to invest in the coming year.

If the expense will cause you to take on debt, you really have to hit the pause button and consider the value of the offering. Do the benefits of the purchase outweigh the interest expense and stress from the added debt?

Perhaps a course will help you get out of debt and stay out of debt. In that case, it may be worth it.

You’ll only know once you’ve taken a good look at what the purchase will do for you.

It’s all about conscious, values-based decision-making.

Opportunity cost

Another important consideration when looking at the actual dollar cost is to consider the opportunity cost. In other words, what else could you do with this money?

Does the purchase represent the best use of your funds?

If you’ve determined that the item or service you’re thinking of buying would provide great value, then it’s probably a good use of your money.

Asking the “best use of funds” question should bring that to light pretty quickly.

If, as soon as you ask, “What else could I do with this money?” you immediately think, “You know, it probably would better to use the money for this other thing,” then that’s your answer – don’t buy.

The prices I’ve paid – and refused to pay

For fun, I wrote out a list of all the things I’ve bought which might trigger a “You paid how much for that?” reaction.

Here’s my “hell yes I paid that and would do it again in a heartbeat” list, in no particular order:

• One year engagement with a business coach – $10,000 US. One month into the gig, I have seen a huge shift in my business and gained valuable clarity. Totally worth it and I’m only 1/12th of the way through.
• Painting for a milestone birthday (*my* birthday, to be clear) – $3,300. I love original art. My painting, from a Quebec artist, brings me joy every time I see it. Given it is prominently displayed in my home, I walk by it several times a day. Best. Gift. Ever.
• Premium teas – $5 to $20 for a small bag (50g). I LOVE these teas. Makes my morning. I have them shipped in from TeaHaus, a small business in London, Ontario. Cool Covid-19 discovery when I couldn’t shop in the usual places. Will never go back to commercial tea.
• $320 for a pair of Fluevog shoes. I’ve had them for years, worn them heaps, and they still look new. Most comfy shoes ever. Lovelove. No more cheap, fall-apart-after-a-year, uncomfortable-after-an-hour shoes for me.
• $380 funky jacket. Anyone who has seen me at a speaking engagement or presenting live knows that I love nice jackets. If they’re funky and colourful, so much the better. I have worn this one more times than I can count. Every time I do, I feel awesome. Worth every penny.
• Three courses on how to create online courses – total of $5,000 US. I used these trainings to create three courses of my own and am in the process of creating a fourth. Great ROI.

Now for the list of things I’ve refused to pay for:

• Aluminum hubcaps. Years ago, when I was buying a one-year-old car, the dealer was resisting giving me the price I wanted to pay. “But Doris, I can’t go that low. This car has many upgrades, including aluminum hubcaps. Do you know what they’re worth? They’re premium!” To which I responded, “Then take them off and replace them with plastic hubcaps. I don’t give a damn about the hubcaps; I’m interested in getting the car for my price.” He kept going on and on about the hubcaps until he realized that I really didn’t care one bit about the hubcaps. He was negotiating on a point that holds no value to me. He gave me my price and I got the car. With the aluminum hubcaps (whatever).
• Fast food. At the risk of having my Canadian citizenship revoked, I do not understand why people love Tim Hortons and other fast food joints. I mean that. The food, imo, is barely adequate. Since “focus on quality” shows up on my list of core values, I don’t want to waste my money, even $20, on food that rates “meh” or “blech” on my scale.
• Expensive cars. When you’re the author of a blog post on the fact that cars are a liability, it’s hard to justify sinking huge amounts of cash into a vehicle. True story: Last year, my husband and I were on the market for a car since our Hyundai had just turned 10 years old. We drove that vehicle to our then new accountant’s office for a meet and greet. After discussing our financials, he actually said, “You’re too successful to drive a vehicle like that.” In my head I thought, “Dude, we’re successful because we focus on buying assets, not spending on liabilities.” We fired the accountant, replaced him with a more sensible one, and bought a Rav4.

Bottom line

Decide what matters to you by creating a list of core values and use those to guide your major spending decisions.

Start by ensuring that a purchase fits your values and, separately, that it will provide good value for you – the two concepts are not the same. Then consider the price to see if it fits within your spending plan.

Don’t be put off by a high price and don’t be lulled into a quick purchase by a low price.

It’s not the amount that matters; it’s the value.

One last thing: Don’t get caught up in worrying about what other people will think. They don’t get a say in your core values or what you find valuable.

It’s your money; your choice.

I’d love to hear from you: What did you spend a chunk of money on because it was important to or for you?

Or what’s one area where you refuse to spend any money? Share your lists and stories below!