The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

How do you determine if something is expensive?

Remove ads while supporting the Unscripted philosophy...become an INSIDER.

Runum

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 8, 2007
6,010
4,558
1,919
DFW
OK guys and gals, I have a question. How do you determine if something is too expensive? My experience has been something(ex. a stereo) is too expensive only if I don't have the means to buy it. When I interview prospective tenants some will state that the rent rate is too expensive. The next prospective tenant thinks the rent is just right. Some may think it's too low. Is something too expensive only when you can't afford it or is "too expensive" is a relative term?

My question comes up due to wants. As I am making money with my investments it gives me a comfortable feeling and suddenly things aren't so expensive anymore. I could wind up spending all of my profits and more. So, second question, how do you control it?

Thanks to all.:cheers:

Greg
 

Don't like ads? Remove them while supporting the forum. Subscribe.

Rawr

Gold Contributor
Speedway Pass
Aug 12, 2007
1,819
1,694
454
south florida
An interesting take from this guy:

The concept of Value vs. Price is one that I am inexplicably fascinated by. Maybe it’s the fact that most people ignore it entirely, or maybe it’s because following its principles virtually guarantees success in any area.

Most people do not understand the difference between value and price or, at the very least, greatly underestimate it.

So, what is the difference between value and price? Value is the benefit derived from an action, and price is the benefit lost by performing an action. What makes this such a profound concept is that every action has a value and a cost associated with it, and it is usually fairly easy to measure. Our unconscious minds are constantly evaluating the price and value of every possible choice, which ends up governing many of our actions.

Example #1 - Wealth

Take the purchase of a computer as an example. If you buy a computer for $1000, the price is simply $1000. But what’s the value? Let’s assume that you’re a writer, and you are replacing an old computer which has suddenly broken. You have a book due the next day, and will be penalized by $10,000 if you do not turn it in on that day (yes, I know this isn’t a realistic penalty). In this case, the value is about $10,000.

For me to buy that computer, however, the value is far less. I have several computers. I don’t use the computer that much anymore. The value isn’t $0, because I could potentially sell the computer (probably for less than $1000), with an additional price of my time. So the value may be $700 to me.

In this example, the decision of whether or not to buy a computer is obvious for both me and the writer. The writer should buy it, and I should not. The cost of an item is the net effect it has on us, after considering the price and value. For the writer the cost of the computer is -$9000, meaning that he is essentially gaining $9000 by completing the transaction. To me the cost is $300, meaning I am losing $300 by buying the computer.

An interesting phenomenon to note is that sales often don’t REALLY affect the cost of an item. For example, if there was a $200 off coupon for that computer, it wouldn’t change my decision to buy the computer or not. It obviously wouldn’t affect the writer either. The only possible effect it would have is to make us more likely to purchase that product AT THAT STORE, rather than at all. I see many people (I used to be very guilty of this) buying things with low price, but significant cost. Doing this is a sure path to financial scarcity.

Of course, price isn’t simply the number on the pricetag. What if the computer was for sale at $800 100 miles away, and $1000 2 miles away? A round trip drive to get the cheaper computer would take me 4 hours rather than a couple minutes. If four hours of my time (plus wear and tear on the car and gas) is worth less than the $200 difference in price, the writer should drive and get that cheaper computer.

This seems like a simple concept, but I can’t tell you how many times I’ve seen people (myself included) spend hours searching for a lower price on something which only ends up saving $20 or so. Often times dealhunting isn’t worth the cost.

Example #2 - Relationships

More interesting is this concept applied to non financial matters, because most people don’t even begin to consider it. Let’s take, for example, the choice of going out to clubsor staying in.

If I go out to a club, the intention is to meet women. I don’t drink, I don’t dance, and I don’t particularly relish the club atmosphere. Sometimes I’ll go downtown to hang out with friends, but that’s a different decision.

In any given night I might talk to 9 different women. Three groups of three. For me to be significantly interested in a girl, it takes time for me to get to know her (mainly because I’m picky and have a list of things which will disqualify her). I would estimate that I am seriously interested in one out of three hundred girls that I meet downtown.

If I’m interested in a girl and have a good opportunity to get to know her, I believe that she will be attracted to me almost 100% of the time. However, I’d say that getting a good opportunity to get to know a girl only happens around 40% of the time. The club atmosphere makes it difficult to get a good opportunity, but it is possible to increase that percentage to 100% with skill. In LA it was probably more like 70-80% for me when I was well practiced.

So let’s boil these numbers down. If I’m only able to attract 40% of the 300 girls necessary to find one I’m interested in, that’s 750 girls I must meet before finding one who I will be compatible with and will develop a relationship of sorts with. If I am meeting 9 girls per night, that means that it will take 84 nights out to “meet someone”.

On an average night, including driving and getting ready, I probably spend 5 hours to meet those 9 girls. That means that the price of meeting a girl is 420 hours of my time. That’s significant.

Of course, I do have fun when I go out and meet all those people. Some might become friends. I’m also going out with my friends and we joke around and have a good time. However, I would probably be doing something fun if I wasn’t going out as well, so those two effects can cancel each other.

What’s the value of beginning a relationship with a girl? It’s tough to say. If I had no other means of meeting a girl, I would probably go out religiously. The cost of NEVER having a girl is monumental, so I would be willing to spend the 420 hours of my time to meet that girl.

The reality, however, is that I do meet girls in other situations. Whole foods, friends of friends, and even through my blog. This is why I rarely go out anymore - the price I pay is simply not worth the value I receive.

Example #3 - Health

One last example is eating healthy. Eating raw food is expensive. I went to the grocery store last night and spent $150 buying 4-5 days worth of food. That’s probably about $7000 more per year than regular food would cost me. It’s also a pain. I can’t eat anything more than a plain salad at most restaurants. Some of the foods aren’t as tasty as conventional foods. That represents a significant price to pay for eating raw food.

What is the value of eating raw? For one, longevity. I believe that I will not only live for 10-20 years longer than the average person, but will be active and healthy for at least 10-20 additional years. I also need less sleep (to be determined by my break from Polyphasic sleep), which gives me more usable time. Let’s say that I go from 8 hours to 5.5 hours, which I feel is conservative. That’s 912.5 hours per year, or around 50 extra days. I also feel a lot better on a daily basis and look better thanks to lower bodyfat percentages and better skin.

For the sake of convenience (and because we don’t have years to make every decision), let’s cancel a few things out. Let’s say that the value of feeling and looking better is roughly equal to the cost of not being able to eat out, and not being able to eat tasty things like egg rolls.

The average lifespan is 75 in America, so let’s assume I will live to 90. I believe that’s very conservative. Since I am about 25 now, that means that I will be alive for another 65 years. At 50 extra days per year thanks to decreased sleep, that gives me an extra 3250 days of life, or almost 9 years.

The additional $7000 price of eating raw multiplied by my remaining 65 calendar years adds up to $455,000. That’s not insignificant.

So, when it all boils down to it, I am paying $455,000 for an extra 24 years of life, or $19,000 per year. To me that’s obviously worth it. To others it’s not. How about you?
Living Your Life

Living your life by the concept of Value vs. Price is essential. By constantly increasing the value of your habits, relationships, and posessions, you are constantly moving forward, and increasing your pool from which you are able to pay the price of new value. For example, with all my extra time, I can SPEND more time to gain more value.

Being a lawyer, to me anyway, would be the opposite. The value I would receive would be high (a high salary, power, prestige, etc.), but the price would be far too dear. Giving up my waking life for the majority of my productive years is not worth $100k, $200k, or even $1mil per year.
I too tend to look at value when I buy something. Are those shoes at $150 much more comfortable than those at $40? Do they not wear out? By looking at things as they are not as you want them to be you can be more practical in your decisions. Ex. - I need new shoes, these look good but I want to wear them to the gym anyway, and they are 4x the price of the other ones that are just as good.

Now when it comes to things you REALLY want to buy - this is where I can get confused. For example - I will eventually buy a lambo, and there is very little common sense as to why that car is better than a car that is only 1/3 the price yet just as fast or loud. Now the value for me may be pumped up because of the feelings I experience from driving that particular car, the bling factor and the exclusivity, plus resale value.

So how do you determine if something is expensive? You look if value derived is less than the price you pay. And don't mix in feelings - look a month or two down the road and try to think of how you will feel about the item then.

Hope that helps
 

nomadjanet

Contributor
Aug 28, 2007
310
54
26
TX
Less stuff = more freedom. You can pick up and go if you have less stuff to worry about. Now if I can only convice my DH of this. :)
Janet
 

yveskleinsky

Bronze Contributor
Speedway Pass
Jul 26, 2007
2,233
498
192
42
Now if I can only convice my DH of this. :)
Janet
:confused:I give up. I cannot figure out for the life of me what DH stands for! Domestic husband? Darling husband? Daring hairdresser? Dancing hamster? Clue me in if you would!

...Totally right on about price, value and the defenition of expensive. I think that all 3 concepts are relative and can shrink or expand in proportion to one's financial intelligence, financial creativity and mental horizons. ...If someone thinks something is unobtainable it is. If someone thinks something has value, it does. If someone thinks the price is reasonable, it is. However, if a shift in thinking can occur to where a person looks at something they want and they think, "How can I" instead of shutting down mentally and thinking it's too expensive- well, then their whole world expands...and can never shrink back to original size. Mind blowing really.
 

nomadjanet

Contributor
Aug 28, 2007
310
54
26
TX
DH is Dear Husband trying to appreciate him and his differences. I don't know why but half my post was left off. I also agree with the fact that what is expensive is relative to the income & the appearance of value. When I was younger, I thought how can I afford stuff & continued to find ways. As I get older I am not looking for stuff, I am looking for time & experiences. Taking off a few weeks in Kauai is worth more to me than a fancy car, now that might be heresy to the Lambo guys but that is me.
Janet
 

kimberland

Bronze Contributor
Jul 25, 2007
825
120
38
DH is Dear Husband
Or D*** Husband. LOL. Pending on the post.

Expensive is subjective.
It is based on the perception of value
and everyone has a different value system.
What is important to me
may not be important to you.

What is key is considering all the factors,
not simply price,
when discussing expensive vs inexpensive.

BTW...
when selling, never, ever mention the price until the very end
(or not at all).
Lay out the other key factors first.
Most people buy on emotion, not analytics.

: )
 
OP
OP
Runum

Runum

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 8, 2007
6,010
4,558
1,919
DFW
bump for new members with new perspectives.:cheers:
 

madison

New Contributor
Read Millionaire Fastlane
Apr 8, 2009
37
5
16
Something is expensive if you can buy that item with the same or similar quality for a lower price.

Paying a lower price can be more expensive than paying a higher price for an item. e.g. if you buy a $50 pair of shoes that wears out within a year (i.e. lower quality), you would have been better off paying $100 for a pair of shoes that lasts 3 years (higher quality).

If the item you are purchasing is not a necessity, then it could also be classed as expensive - it is costing you the amount than your investments would have returned if you had invested the money instead of spending it.
 

rocksolid

Bronze Contributor
Nov 17, 2008
716
182
94
New York
How do you know if you payed too much?? What is a good price for something. My rule of thumb is simple. If you are happy paying the amount you payed for an item then it was a good price.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
29,846
105,584
3,751
Fountain Hills, AZ
How many hours will it take to pay?

If you make $20/hour and buy something for $100 -- the cost is 5 hours of your life.

If you make $200/hour and buy something for $100 -- the cost is 30 minutes.

If you make $200/hour and buy a $100,000 car, your cost is 500 hours.

If you make $20/hour and buy a $50,000 car, your cost is 2,500 hours.

Expensive is valued at how much time your life loses to pay for it.
 
OP
OP
Runum

Runum

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 8, 2007
6,010
4,558
1,919
DFW
How many hours will it take to pay?

If you make $20/hour and buy something for $100 -- the cost is 5 hours of your life.

If you make $200/hour and buy something for $100 -- the cost is 30 minutes.

If you make $200/hour and buy a $100,000 car, your cost is 500 hours.

If you make $20/hour and buy a $50,000 car, your cost is 2,500 hours.

Expensive is valued at how much time your life loses to pay for it.
That's exactly how I changed my spending habits. This little $500 doohicky will make me have to work 25 more hours(over 3 more days) at a job I really don't like. Do I really want that doohicky that much?
 

mtnman

Bronze Contributor
FASTLANE INSIDER
Speedway Pass
Oct 3, 2007
1,761
493
182
That's a very interesting way of looking at it... really cuts through the bologna.
 

Russ H

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Jul 25, 2007
6,556
1,295
381
58
Napa Valley, CA
PhxMJ said:
How many hours will it take to pay?

If you make $20/hour and buy something for $100 -- the cost is 5 hours of your life.

If you make $200/hour and buy something for $100 -- the cost is 30 minutes.

If you make $200/hour and buy a $100,000 car, your cost is 500 hours.

If you make $20/hour and buy a $50,000 car, your cost is 2,500 hours.

Expensive is valued at how much time your life loses to pay for it.
I totally agree-- looking at things this way totally changed my consumption habits.

No more buying $5-10 magazines, when I spend only 10 minutes looking at them. Or $20-40 books.

I'd go to the library and read mags to my heart's content when I felt the urge (even bought a house half a block from the library, at one point).

How about eating? Spending less than $10 on lunch or dinner when you make $150 an hour is almost too small to measure.

Yes, multiply $10 x 2 x 365 days and you get $7,300.

But multiply 365 x 10 x 150, and you get $525,000 (which is pretty close to my avg income for the past 12+ years, before expenses, of course!).

Ummmm . . . dare I point out this is a core point in the book Your Money or Your Life? :smx3:

-Russ H.
 

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
29,846
105,584
3,751
Fountain Hills, AZ
What really cuts through the bologna is that your time is fixed and finite. Your pool of time from birth to death is fixed. It never goes up. Money, however, is virtually infinite. You can always make more. So if something costs $xxx, it really steals life from your fixed pool of time.... that is, unless, you have a system that makes you money as opposed to you making money.:smxB:
 

RealOG

Bronze Contributor
Speedway Pass
Aug 20, 2007
451
336
129
Austin, Texas, United States
The dollar/hour method is a consumer way of looking at things. What really matters is value.

Case in point, the Slap-Chop:
Two people who both make $10/hour are looking at the Slap-Chop to help make coleslaw in 1/10th the time it normally takes. One really likes coleslaw and makes it twice a week, the other makes coleslaw every day at her job (she's a chef).

Who is likely to buy the product for $10? $50? $500?

Value is relative and can be derived in two forms:
1. Value gained in having something
2. Value lost in not having something

If you are selling something, figuring out how your customer values your product is key. Want to sell for more? Educate them on how to value it through marketing.
 
OP
OP
Runum

Runum

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Aug 8, 2007
6,010
4,558
1,919
DFW
What really cuts through the bologna is that your time is fixed and finite. Your pool of time from birth to death is fixed. It never goes up. Money, however, is virtually infinite. You can always make more. So if something costs , it really steals life from your fixed pool of time.... that is, unless, you have a system that makes you money as opposed to you making money.:smxB:
I just came to the realization that my value of something is only based on being an employee at a job or self employed as an S. I would assume a different value system would be in place for an I or a B. Interesting, I'm going to have to adjust my value system measurement. Thanks for the wake up.:cheers:

I am also seeing how relative the value of something is and also how difficult it is to see the value of something through someone else's eyes.
 

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
29,846
105,584
3,751
Fountain Hills, AZ
Ummmm . . . dare I point out this is a core point in the book Your Money or Your Life? :smx3:

-Russ H.
It's a core point in mine as well except I don't devote 10 Chapters to it .... I have time as 1 of the 4 Fastlane "cardinal virtues". Time is more valuable than money based on simple supply/demand -- time is finite. Money is not. (Of course, this is all defined within the limits of mortality ... if we lived forever, it would be opposite: Time is infinite and money is finite.)

Philosophical! :chatter:
 

Russ H

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Jul 25, 2007
6,556
1,295
381
58
Napa Valley, CA
MJ-

As a big bonus, I'm sure your book will be more interesting (and less preachy) than YMOYL! :banana:

(looking forward to reading it when it's ready) :)

-Russ H.
 

EasyMoney_in_NC

Contributor
Sep 9, 2007
399
31
31
Wilmington NC
I always value "expensive" in the way that I perceive the item's value to me. Just because it costs a lot of money, doesn't necessarily mean its "expensive". If the intrinsic value to you is high, then the value warrants the expense. Having said that, I've always tried to be one who only bought what I could pay for and in that it causes a somewhat realistic sense of value vs. the expense. Cheapest isn't always best nor is the most expensive.....but that starts getting into a question of quality and thats another issue for another thread :)
 

Don't like ads? Remove them while supporting the forum. Subscribe.

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Sponsored Offers

  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
Thanks for sharing. I want a course to optimize for other than Google engines.
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Welcome to 2020, I wanted to add in a quick note about gratitude for the new year...


Don't like ads? Remove them while supporting the forum. Subscribe to become an INSIDER.

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom
AdBlock Detected - Please Disable

Yes, ads can be annoying. But please...

...to support the Unscripted/Fastlane mission (and to respect the immense amount of time needed to manage this forum) please DISABLE your ad-block. Thank you.

I've Disabled AdBlock