Philosophy on value? Pay the Least Anyone has Paid.
I recently overheard a salesman tell a potential customer that for their budget they needed to lower their expectations. This kind of mentality drives me absolutely crazy. Obviously there are situations where people have champagne tastes on a beer budget. In these cases it’s absolutely reasonable to lower expectations to be more aligned with your budget. For instance, if I go to a car dealership and expect to get a brand new BMW for the same price as a used KIA, then I probably need to adjust my expectations with reality. Usually though, if you do your research, you will realize that there is always a better deal to be found.
The couple that I observed were looking for the biggest television that they could get for their money. From what I gathered they had about $1,000 to spend and did not want an off brand television, they also wanted an LED. The salesman basically told them that the biggest they could get was a 50 inch. They seemed to listen to him, but were disappointed. He presented, as fact, that they either needed to lower expectations or raise their budget. I knew from personal experience that this was just a blatant lie. I just purchased a 60 inch LED television for $847 after taxes and everything. I have seen cheaper televisions this size, but my goal was to maximize value. On that particular day the salesman was not lying to the couple as there were no great deals going on, but the point is that the better deal will come to those who wait.
It’s easy to just assume that you could sacrifice quality at the expense of value, but this is a false choice to make. If I go to the grocery store today and bananas are $1.90 a pound unless I cannot wait another moment to buy bananas I will forgo them because I know the price will fall. The grocer will not come over and say, have you thought about dry beans instead? I know what I want and I know what price I want to pay. I will buy bananas at 38 or 48 cents a pound, but even at 58 cents per pound they are not out of the question. I think the same holds true to many purchases. If I am looking for a vehicle and want to spend $8,000 and find a used Honda Pilot that books for $14,000 on sale for $9,000 I will still consider this car even though it is 25% over my budget because that extra $1,000 will get me an extra $5,000 in value. In this example I am making the assumption that the car is really worth 14k, but the seller is motivated. My point in this exercise though is that even with a budget number in mind it’s good to stay flexible.
When I research prices for an item, my goal is to find a good price and then buy the item for a great price. If I am looking at a TV I do not want to compromise, but I want the item I want cheaper. Basically, I want to buy any item at the cheapest price anyone else might have paid. It’s not that I think I am special, but I do think that if a company can sell a product to one customer at a certain price, and make a profit, then why shouldn’t I get it at the same price?
This is true of products where I use the MSRP and average price as a guide, but will research to find a better price. Then I try to adjust my expectations accordingly and take advantage of sales. This is especially true of hotel rooms and car rentals. My wife and I stayed in a hotwire low priced hotel one night for 40 bucks. We were not completely satisfied, but for the minimal price it was hard to complain too much. The next morning at breakfast I overheard another couple saying that they had paid $90 per night and to extend another day would be $105. This made me a bit angry. I was certainly glad I scored the hotel room for such a low rate, but if I had been the person paying $90 and a guy next to me paid $50 I would be livid. I actually let the guy know that if he booked on hotwire he could get the same hotel for $40 and he did just that. The point I am trying to make is that a better price may be available and it may not even be too difficult to find. It’s not that I am cheap, but I absolutely want to maximize value in every dollar I spend.
I look at it as a value ratio that would be measured by a simple formula of quality / dollar. I want to get the most quality, taste, or value per dollar that I spend. When I buy a car I want to get the best car that I can buy for the money. When I buy a house I want to get the best $ per square foot, without skimping too much on fixtures. If I can get a plane ticket for $150 roundtrip why would I pay $300 for the same trip? These are all adjustable expectations and some are clearer than others, but the point remains that I want to stretch every dollar that I spend. I’ll spend a little more for a little more quality and sacrifice a little quality if it can save me a lot of money. Overall, these are decisions that every individual makes, but if you are mindful of value maximization you are better off in the long run.