Making big financial decisions always involves a lot of variables. While translating a purchase price into hours worked is a fine metric, try asking what else you could buy with that money to get some perspective.
Picture: Australian money photo by Shutterstock
As personal finance blog Life and My Finances points out, every dollar you spend is a lost opportunity to spend that money somewhere else. For some things, that’s fine, but it’s easy to impulsively spend money and then wish you had it for something else. By quantifying that “something else”, you can put real value on the opportunity cost of your purchases:
In practice, if I spend $100 on a fancy dinner — that’s $100 that could have purchased 10 pairs of socks, one killer WordPress theme or 2 mid-level seats to a Charlotte Hornets basketball game. Before your next purchase, think about the other awesomeness that this purchase could buy elsewhere.
Of course, there’s always something else to buy. However, by having a specific example, you can weigh whether the choice before you is the better one, or if you should hold off for something better.
Before Your Next Purchase, Ask Yourself These 3 Questions [Life and My Finances via Rockstar Finance]
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