I hear it all the time. People (and often myself) saying “Well that was a lot of money but it was worth it.”
It doesn’t matter if it was concert tickets, a night out, an Apple Watch, Netflix, Amazon Prime, Spotify Premium, a meal plan, a cleaning service, or a subscription box (what’s up with the subscription box trend??)
We can justify almost any purchase by saying it is Worth It.
It got me to thinking what does Worth It really mean? When are we fooling ourselves and when is something really Worth It?
Economists talk a lot about opportunity costs.
What is the real value of an item?
It’s not just the price you paid.
It’s the time you saved by buying it.
It’s the price you did or didn’t get from selling it to someone else.
It’s the other things you could have purchased with that money but didn’t.
My brother-in-law is an economics major and he recently told me a story about a man who aged his own wine. The man would age his wines until they were worth $100 a bottle, and then he would drink them. But he could never bring himself to buy a $100 bottle of wine from someone else – he couldn’t justify that.
It doesn’t make sense economically because the opportunity cost is the same.
If he isn’t selling his wines for $100 a bottle, then it doesn’t matter if he’s buying it outright or drinking one he aged himself.
It’s costing him $100 a bottle.
If it isn’t Worth It to buy it, then it isn’t Worth It to use it.
We pay more than just money for an item. The book Your Money Or Your Life reminds us that we actually pay for things with “life energy.” It may sound kind of mystical at first, but we use our energy to make money.
Our energy is a resource that can get used up, so it’s important to count the opportunity cost not just in dollars but in hours and energy spent earning the money.
Are those shoes really worth 6 hours of my life energy?
In the end, if I’m saving more than I’m spending in opportunity costs, including time and energy, then the item is Worth It economically-speaking.
Paying for Convenience
I have a theory that many of the services people are paying for nowadays are because people feel they are too busy.
Notice that I said “feel” they are too busy. I don’t necessarily know if people are busier now than they used to be. (They were all pretty busy in the 1800s building houses and barns and cooking food from scratch but they made it work without all the “necessary” modern conveniences we pay for…just saying.)
Regardless, many Westerners feel they are too busy to do things themselves. That’s why drive-thru windows, drive-thru groceries, Amazon 2-day shipping, and subscription boxes are such big moneymakers.
People don’t think they have time to even shop anymore. As a mother, I can attest that shopping with kids in tow isn’t the greatest. I know I save money by simply going to the store less often than I used to.
But this busy-ness mentality doesn’t mean people aren’t spending money. They’re simply shifting toward paying for convenience above anything else.
One shop may be fun to browse but another offers online orders and fast pickup. More and more, we’re opting for convenience.
But what’s the cost? And is convenience Worth It?
There’s no way of really knowing if we’re spending more because it’s easy or if it’s easy because we’re spending more….
I know sometimes I pay for convenience. But I do try to keep myself aligned with my frugal / simple lifestyle goals. Simplicity is beautiful but we’ve decided as a family that when simplicity and frugal don’t line up, we will go with the more frugal option.
This means I spend more time on some things.
I make some foods from scratch.
We use the library rather than buying books and movies.
We don’t do fast food or restaurants.
We shop on Craigslist rather than Amazon for some items, even though it can take longer.
Losses vs. Gains
Another thing my bro-in-law brought to my attention was the crazy way our brains feel losses more than gains. This leads to all kinds of Not Worth It things.
Part of frugality, I’ve found is that I sometimes focus too much on the losses I can’t control.
For instance, Josh and I aren’t perfect. We’ve made some Not Worth It mistakes in the past. But my brain can hold onto those mistakes for weeks – even if it’s just a small amount like $10.
On the other hand, gains are hardly noticed. The same week we accidentally wasted $10 by buying a non-returnable thing we didn’t need, Josh got a bonus at work. I was more bent out of shape by the silly $10 than I was excited about the bonus.
It doesn’t make economical sense, but we feel losses more than we feel gains. When deciding if something is Worth It or not it’s important to be aware of this phenomenon and split the difference if possible.
We can let go of our petty financial mistakes (as long as we’ve learned our lesson) and move on. In the same way, we can move forward and make the most of our gains by not letting them slip through our fingers, unnoticed.
A Penny Saved is a Penny Earned
One last little example of a habit that doesn’t make economical sense. We’re more likely to go out of our way to save $20 on a small item than we are to save the same $20 on a large item.
For example, if I’m buying a toaster at Target and the cashier tells me that Walmart has it for $20 less I’ll thank the cashier profusely, then drive across town and get the cheaper toaster.
If, on the other hand, I’m buying a big-screen TV at Target and the cashier tells me Walmart has it for $20 cheaper, I’ll look at them like they’re crazy and ask them to ring it up anyway.
I would have saved the same $20. Why is it Worth It to drive across town in the first scenario but not the second?
The question isn’t “How much of a percentage am I saving?”
The question is “Is it Worth It to drive across town for $20?”
We could at least try to be consistent when deciding if saving $20 is Worth It.
Here’s how I personally break down if something is Worth It or not. I don’t play by what other people deem Worth It, and I don’t always think like an economist.
Instead, I look at my values. This is a real term called Value-Based Spending. (Check out this NY Times article on it.)
If what I’m spending my money on aligns with my personal values and goals, then it is Worth It to me.
This is what drives some people to spend more for Fair Trade certified coffee and cage-free eggs (because they value human rights and animal rights.)
It’s what makes it okay that I drink a beer every now and then (because I value my beer!)
It’s what drives some people to support local retail shops rather than large chains (they value small businesses.)
The cool thing is that no one can tell you what is Worth It or not according to Value-Based spending. It’s for you to decide what causes and products and services are most important to you.
Obviously you can’t (and shouldn’t) say yes to everything. This isn’t an excuse to support everyone and everything. But it does give you freedom.
There is freedom in Value-Based spending to decide what is important to you – and be generous with it, and not have to explain yourself to anyone.
Maybe you value date night with your spouse because you’d rather pay to go on a nice date every week or two than spend the same amount on counseling later on.
Maybe you value travel and make it a priority to cut back on other areas so you can see more of the world.
Maybe you give generously to causes that align with your values, but spend less on your own little treats and conveniences in order to make it possible.
Maybe you value time with your family more than anything else, so you cut every corner possible so one spouse can stay home with the kids while living on just one income.
Whatever your values, I can guarantee that if you look at your spending, you will see what you value. We vote with our dollars. We spend money on what we value most. Whatever it is, if your spending and your values align, then yes, it is Worth It.