How to Decide Whether to Buy Something

Anytime my wife and I go shopping, the difference in our purchase decision-making processes becomes very clear. Hers goes something like this: “Ooh! That’s cool. Can I have it?” Mine tends to be a bit more convoluted.

Whenever I am contemplating making a purchase, a lot of different things go through my head. Admittedly, I am a finance nerd. It is my hobby and my passion, so this comes into play. I’m not saying my mental decision tree is the best one, either, but it does seem to work for me, in that I rarely regret purchase decisions.

How To Decide Whether to Buy Something: My Perspective

First, I ask myself if it fits in my budget. If the answer is yes, it could if I want it to, then it goes to, “how many hours of work will it take me to pay for it?” I value my time and effort, and so I like to know in real work terms how much something costs me. I work 36 hours per week. At least half of those hours are already accounted for in necessities, like the mortgage, food, gas, etc. Obviously, if it is a need, then my decision tree is shorter. That leaves 18 hours a week for me to spend on other categories, unless I want to put in overtime (which I do not). I think of it like a financial pie. There is only so much of it. I have to decide if I want lots of little slices, or one big one. If something costs a significant portion of those hours, If it costs even more, the decision would never be made on the fly. I really have to think about whether it is worth it or not. I think of what I have to give up in order to have this, and if I feel it is a fair trade. I am not rich enough to have everything I want.

Next, I ask myself if this is the best price I can get. Have I shopped around? Usually, the first place I see something isn’t the only place I could find it, and may not be the best value.

A strong factor for me is also how long I am going to have and use this item, if it is a physical thing. Is it well-made? Is it made to be used more than once or a few times? Will I just have to buy another one in a short period of time, or is it something I can use over and over for an extended period?

Last, how much enjoyment will it actually provide? How fulfilling of a purchase will it be? Will my interest wane, or will I use it every day? Is this something I have always wanted, or something I just saw and thought would be fun? Will I just want the next version of it, and the next after that? Will it make a lifelong memory that I can cherish, even if it doesn’t physically last? If what I am purchasing is something that creates an experience, I put a lot more weight on how much enjoyment it will provide, because a memory can last forever, unlike physical items. Things that bring me and my family together are always worth more to me than another piece of clutter, no matter how pretty or high tech it may be.

The One Week Rule

A good rule of thumb advocated by many financial professionals is to hold yourself to the one week rule for optional purchases. Anytime you find yourself wanting to buy something that you don’t really need, make yourself wait a week before buying it. If you still really want it at that point, and you still have the money in your budget, then you can buy it. This gives you time to really think about why you want it, and how it can add value to your life. Many times, you may realize that you didn’t really want it that bad afterall.

Take Aways:

Deciding whether to buy something or not should rarely be a split-second decision, unless whatever it is is small and/or necessary. The larger a purchase is, the more of your financial pie it is going to consume. Thinking of the money you make each paycheck in this way can help you realize that it is a finite amount, and you only have so many slices. Make sure that each slice is used in a way that it can be enjoyed as long as possible. Just taking the extra time to think about your purchases can help you avoid costly mistakes.

How do you decide whether to buy something? Do you tend to be an impulse buyer, or do you have other criteria that you use to decide? Have you ever regretted buying something, and wish you had evaluated the purchase more beforehand? I would love to hear your stories.

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