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الثلاثاء، 8 سبتمبر 2015

This Smart Spending Trick Will Help You Make Better Buying Decisions

Imagine you’re standing in the middle of Target, staring at a row of vacuum cleaners. You could get one for $50, or you could spend $500. All you know is, you want one that won’t break and leave a pile of dust on your carpet.

When you think about buying something, your budget can guide you toward the price tag that works for your personal means. But it’s hard to budget for something when you’re not sure of the value of the investment you’re about to make.

How are you supposed to know which product presents the best investment for what you can afford?

Consider Cost Per Use Before Buying Big-Ticket Items

In these uncomfortable moments wandering the aisles, I turn to the “cost-per-use” concept. I like the way Trent Hamm of The Simple Dollar explains it:

How much do I have to pay for each use I’m going to get out of that item (before it spoils or breaks)?

I don’t apply this method to things like groceries or perishable food — the math would drive me crazy. But when I’m buying a product that I want to serve me well over the course of weeks, months, or even years, I pull out the calculator.

With cost per use, “The value of an item is directly related to how much use you get out of it,” Hamm says in a guest post at Christian Science Monitor.

“The more use you get from an item, the more you should expect to pay for it. The “sweet spot” of a purchase, then, is one that has the most uses for the cost.”

How does the cost-per-use concept work in practice? Here are three instances where determining cost per use helped me make smart purchases.

The Winter Coat

A few years ago, I ventured to the department store to buy a new winter coat. I knew what I wanted: a sturdy, wool pea coat that would defy the biting cold of damp Mid-Atlantic winters.

A quick survey of brands and styles I liked resulted in prices in the $200 to $250 range. Before you tell me that’s too high, think about it: You can’t just throw a wool coat together in six minutes like you can with a T-shirt. While I wasn’t expecting the finest of luxury craftsmanship, I did expect to spend more for a coat that looked and felt like it would last a few years.

If you’re headed to a department store, don’t leave the house without checking for the store’s latest coupon or deal. Sometimes entire departments get marked down, no coupons required; sometimes, kind cashiers give you a coupon discount even if you didn’t bring the newspaper circular with you.

In my case, a store discount knocked a nice $225 coat down to $175. Consider my estimate that I’d wear the coat almost daily for three months each year (December, January and February), about 90 days. My cost per use for that $175 coat: just $1.94.

Would you fork over two bucks every time you walked out the door if you knew you had a warm coat ready to wear? I would.

In my mind, that coat was worth the money by the end of its first winter. It’s still kicking, and I plan to wear it for years to come — a worthy investment to calm all my cold-weather worries.

The Ladder

My new apartment has tall windows. We’re talking sky-high. As I signed the lease, I squinted up at them, wondering how I’d ever install curtains. More importantly, how was I going to change the batteries in the smoke detectors posted high on the loft-style walls?

Buying a ladder for $80 to $150 didn’t make sense — I didn’t have anywhere to store it beyond the four times a year I’d probably actually need to use it.

Renting a ladder didn’t seem to make financial sense either, but at least solved my space issue: I could rent one from Home Depot for $21 per day — plus a $50 refundable deposit.

I figured my best option was to pay about $85 per year to do all my odd jobs on those four days (cost per use: $21, so long as I didn’t lose the ladder on the way back to the store). It still didn’t feel financially savvy.

Then I got lucky: I discovered a few ladders in my building’s storage room. Management only uses them to paint apartments and do routine maintenance. So instead of buddying up to the hardware store rental counter, I just have to buddy up to my landlord and use the building’s ladders for free.

Even luckier: The previous tenant left his curtains up for me. They look pretty good considering they were free and required zero installation effort. When I discovered the curtains in place on move-in day, I was so glad I hadn’t impulsively plunked down $100 to buy a ladder.

The Wedding-Guest Dress

I recently received an invitation to the wedding of a dear friend. It included a surprising dress code note: black tie optional.

As I stared at the invitation, I took a mental trip through my closet. My minimalistic efforts meant I owned just a few dresses — none of them fit for a fancy wedding.

I first considered taking a fashion risk and buying a “lady tux.” I’d channel Janelle Monae’s style in a finely tailored suit I could wear again and again. Comfort, meet style, meet dance floor.

But would I really wear it again? If I didn’t have formalwear in my closet to begin with, how many times would I wear a suit that would cost at least $500? I couldn’t justify the cost for wedding attire when I’ll also be paying for airfare and hotel to attend the celebration.

My solution: consignment. I set a budget of $50 and have started to drop by my favorite consignment and secondhand stores to scope out their formalwear. Finding a swanky lady tux is probably not in the cards. But a flattering dress that fits well? No problem.

I may not end up with the most current and fashionable dress at the wedding, but I’m confident I’ll be able to find something I’m comfortable with — both when I pay for it, and when I hit the dance floor.

The cost-per-use concept isn’t one that follows me around all day. As mentioned above, I don’t sweat the small stuff, like groceries.

But when I’m weighing the options for a purchase I’m hoping to use or appreciate for years to come, I pull out the calculator. No shame in my cost-comparison game.

Your Turn: Do you use the cost-per-use method to guide your purchasing decisions? Do you consider it for all buys, or just certain categories?

Lisa Rowan is a writer, editor, and podcaster living in Baltimore.

The post This Smart Spending Trick Will Help You Make Better Buying Decisions appeared first on The Penny Hoarder.



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