FRANK thoughts on money , lifestyle and career

Is Cheap Good?

Don’t get too fixated on the price tag. Or if its “on sale”. Make your money work harder for you by purchasing value for money items that are well-made, durable and actually meet your needs.

Making your money work harder for you is not a new concept. Simply put, you need to get more benefits out of the same dollar in order to really maximise what you get to enjoy over your whole lifetime.

Here’s an example. Let’s say I make about $500 a month. I can either buy 100 hawker center meals at $5 each, or eat 90 packets of instant noodles, 3 meals day at $1 each, then save the remaining $410. Since I can not only fill my stomach, but also save $410, the instant noodles are the better choice, right?

Wrong. That’s the “cheap is good” trap.

Eating instant noodles might be cheaper, but I also take in all sorts of chemical additives that are used to flavor them, even wax. On top of all that, instant noodles are not well known for their nutritional value, so over time, I might develop health problems that could cost even more to treat compared to just paying $5 for a hawker meal!

Now, I’m not saying that hawker meals are necessarily healthy, but they’re usually more nutritious (and quite possibly tastier) than instant noodles. So, I get more benefits out of eating hawker food. In other words, I’m buying better value.

Here’s another example. Which is a better buy: a $500 toy which is likely to increase in value by 20% over 5 years, or a $100 toy which will increase in value by 25% in 5 years?

"Gives more value, not because it’s cheaper"

The answer is the second. Assuming I can buy more than one toy at the same price, I get 5 toys at $500, but they will be worth $625 in total after 5 years, compared to $600 if I bought the $500 toy. So in this case, the cheaper option looks better. If you’ve been paying attention, though, you would know that it would be the better choice because it gives more value, not because it’s cheaper.

You can use the idea for whatever you might be interested in buying. Just remember these tips and you will find yourself being able to get more things you want- at the same or lower cost.

"Consider how long what you’re buying will last"

Consider how long what you’re buying will last. A $20 pair of shoes that last you about 6 months has less value than a $40 pair of shoes that will last you 2 years. Look out for what materials were used to produce it, where and how it was made, and if there is a warranty or brand that guarantees its quality.

"Think about what you’re actually
getting out of what you buy"

Think about what you’re actually getting out of what you buy. Let’s think about shoes again. Let’s say that there’s a $20 pair of shoes and a $30 pair of shoes. The quality of the shoes is the same, but the $20 pair of shoes doesn’t fit as comfortably as the $30 pair. In fact, it is tight enough where you get blisters every time you wear it. After a while, you might even stop wearing the $20 shoes, so you got less value out of it than you thought!

"Figure out when the sales periods are"

Figure out when the sales periods are. Don’t go shopping on a whim. You might be able to time your shopping around sales periods such as the Great Singapore Sale or Black Friday where you can get discounts on what you want. Why pay more for exactly the same item?

"Understand the benefits and see if they fit your needs"

Understand the benefits and see if they fit your needs. The other side of the coin. Don’t buy things because they’re on sale, or they are cheap. Before buying, think about what you’re going to use them for, and make sure they can meet that kind of need. There’s no point buying a cheap pair of sunglasses if what you really needed was an umbrella.

When in doubt, always remember that benefit divided by price = value. Applying this thinking will help you get more out of your money- and helps you live.

January 5, 2015

 Chi Hou

About Chi Hou
Loves writing, thinking, eating and drinking, sometimes all at once. Currently works as an Assistant Vice President at OCBC Bank, specialising in Personal Internet and Mobile Banking. Studied Economics at SMU and writes about general economic concepts and practical advice about money.