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How to Make Better Purchase Decisions

Should you buy that? Ask yourself these questions from Get-It-Done Guy Stever Robbins, and the answer will be clear.

By
Stever Robbins
4-minute read
Episode #379

Compare Total Price with the Market

I'm looking at a mattress that costs $1,000. It's a technological wonder that claims that even sleeping on my side won't cut off circulation.

When I look at other mattresses on the market, prices range from $300 to $3,000 and above. By looking at the aggregate price, it seems clear the price is mid-range. A price of $10,000 might be cause to reconsider, as might a price of $100.

Compare with Similar-Size Purchases

What else costs $1,000 that you've been willing to spend money on? A custom five-foot-tall Oreo ice cream cake. A Macbook. Two Burning Man tickets. A negotiation course at Harvard Law School.

While comparing these to a mattress is comparing apples and oranges, sometimes apples do look enough like oranges to make the comparison. Thank you, Monsanto. A mattress seems like a comparable purchase, and if anything, it will have a bigger effect on my life.

Consider Money Over Time

Next divide the purchase price into smaller time units, based on the lifetime of the purchase. Think of it as a yearly amount, a monthly amount, a weekly amount, or a daily amount. Choose the time period that makes the most sense.

This mattress comes with a ten-year warranty. Kim Kardashian, would have to divide that by two, because, well, Kim's pretty hard on a mattress. But not me. Ten years is probably about how long a mattress will last. I am sad.

I sleep every night. At $1,000, that's $100 per year, $8.30 per month, or 27 cents a day. A soda at lunch costs seven times that, and a soda isn't seven times as enjoyable as a wonderful mattress. (If it is, you're either buying some excellent soda or you have a lousy mattress.) The mattress purchase makes sense on the micro-level, too.

Ask If Saving the Money Makes Sense

Finally, ask what else you'd do with that money if you didn't spend it. If you save it in a bank account or brokerage account that gives a decent rate of return, it could compound into quite a tidy nest-egg someday. It could also be siphoned away in management fees, financial scandals, and the quote-unquote innovation of high frequency trading. So while saving sounds sensible, in my book, it isn't a slam-dunk. The mattress may be a better choice. Plus, you can put your cash in it and save on bank fees.

When you're making a big purchase decision, make it wisely. Consider your motives and make sure they are pure as a Knight of the Round Table (other than Lancelot, of course). Evaluate the total amount you'll be paying against the other alternatives to make sure you're getting a good market price. Compare the total with similar-sized purchases and make sure it still makes sense. Also compare the daily, weekly, or monthly amounts with similar-sized purchases. If all those check out, then you may well have a good decision on your hands.

I'm Stever Robbins. I run webinars and other programs to help people be extremely productive and build extraordinary careers. If you want to know more, visit SteverRobbins.com

Work Less, Do More, and Have a Great Life!

Image courtesy of Shutterstock.

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About the Author

Stever Robbins

Stever Robbins is a graduate of W. Edward Deming’s Total Quality Management training program and a Certified Master Trainer Elite of NLP. He holds an MBA from the Harvard Business School and a BS in Computer Sciences from MIT.