There is a huge difference between those who “know how to buy” and those who don’t, people who approach the right mentality when it comes to purchase an asset or a service and people who get cought up in the wrong details such as price so, very often, they end up to spend more in the long term.
THREE MISTAKES TO AVOID
- If you focus too much on the price you give less importance to the benefits and the final result of the product. Obviously nobody of us wants to spend more then what is worth and not all of us can afford everything they would like to buy. I might want a Ferrari but I don’t have money for it. The point is: if you don’t understand the right mentality you will never have money for a Ferrari. Focusing on the price rather then benefits is the biggest mistakes in financial planning.
For example: a workshop can cost $500, $700 or even $1000. An avarege person would say: “A thousand bucks?! Are you kidding me?! IT’S TOO EXPENSIVE”. Whereas a financially literate person would have a different approach: “Wow what can I learn if I attend this workshop?”. What really matters is the return you have from spending $1000, and not spending $1000 itself. If Warren Buffett, the most successful investor, offers you to spend a day with him for $100.000, considering what Buffett can teach you and how much you can earn by applying his strategies in your investments, a hundred grand are peanuts. Let’s be more realistic, in case of a $1000 workshop you should consider if you will be able to earn those money back by using what you will have learned (break-even).
- Thinking that what you consider expensive is expensive for everybody and so the price is unfair.
For example people who don’t understand Snapchat and say: “that thing will never work”, meanwhile the rest of the world keep using it everyday and wise investors are making good money on it. There is plenty of products somebody might consider expensive but milions of people buy them. If something is not good enough for you it doesn’t mean it’s not good enough for the market. Don’t judge in base of your limits especially if you need to give a price to something you are going to sell.
- An other huge mistake is “Price First” or “Price Only” mentality.
For example. If you run 10km three times a week and you need to purchase a new pair of sneakers. You can try to save $20 and buy a low quality product. After one month you get knee problems. Are you sure you saved money?! Or maybe it was better to spend something more and wear appropriate sneakers for running. I think the last one would be a good investment.
As Benjamin Franklin said: “The bitterness of poor quality remains long after the sweetness of low price is forgotten”.