This past week I was talking with another blogger about a large website hosting company and the problems associated with it. This hosting company is one of the bigger ones in the market and they provide low-cost hosting for millions of sites. The conversation started because a different blogger was asking if others had seen issues with their website speed and such. Then came the recommendations of moving hosts. Now, since I do a lot of website work for many bloggers, I know a thing or two about hosts and migrations. It’s one of the services I provide for website owners. Anyway, the conversation went back and forth about why people purchase these hosting plans and what they really should be looking for. It was between price and value. It made me realize this topic is excellent for finance. It’s the topic of upfront costs, particularly price versus value.
It’s Not Always About the Upfront Costs
I’ve been working hard lately to focus more on the value I receive for the money I spend. For years, I used to buy these golf t-shirts that were awesome in the summer. Unfortunately, they were poorly made and didn’t last but one season. My main focus was on the price. They were $20 per shirt, which is awesome. The problem is I never focused on the overall value I was receiving. It was always the upfront cost. What was the hit to my wallet right then. I only looked at the money going out right during the transaction and nothing else. I was being short-sighted and it was affecting my finances. How?
Think about it. Summer comes around every year. I love these quick-dry golf shirts as they feel good in the heat and they are appropriate for work. It was two birds with one stone. Well, if my shirts didn’t last but one season, then I would have to go and buy new ones every year. Some of you may think that buying new clothes every year is a must. I don’t think that way. I buy things that look good on me and then wear them out. I don’t follow the latest fashion trends. I just want clothes that fit and look good. Simple.
In one summer, I could buy about 8 shirts. At $20 a piece, we are looking at $160. Not bad for some nice looking golf shirts. Since they only seem to last for one season, I would have to buy them again year after year. Now, we are looking at $160 each year until I want to find a different shirt. This is the price side of the equation. I’m not really getting a good value for these shirts. Yes, they last a season, but many of the other shirts I own have been in my wardrobe for a number of years, well beyond one season. These shirts cost me a little more.
If I would have looked at the value side, I would have realized that paying an extra $20 more would have resulted in a much higher quality shirt. They look relatively the same, but the more expensive ones can actually last through more than one season. They can last several. Here’s the value side of the equation. I pay more now, but I get a shirt that lasts over a longer period. The upfront cost is more, but the product stays with me for longer, thus lowering most costs over the long term.
Price Versus Value
I think many consumers are in a constant struggle with price versus value. For many of us, we only see price. It’s what’s coming out of the budget right now is what we’re worried about. It’s not about thinking how long the product will last. Many who live paycheck to paycheck can only focus on price and can’t take into account value. They might not be getting the best value for their dollar. They are purchasing what their budget will allow. It’s all about the upfront cost for so many people.
It seems retailers are taking note of this trend and trying to take full advantage. They are advertising their low pricing to get consumers in the store and spending money. It doesn’t matter if this product might not be the best value or quality. If it fits in the budget now, then that’s all that matters. We need to get away from this type of mentality. While money is hard to come by for many, we all still want a good value. We want our hard-earned money to go toward something that will give us the best overall value that we can get.
For example, my wife and I recently replaced our hot water heater. It was 28 years old and barely heating our water. It was time for a change. I called a number of plumbers for quotes to make sure I was not getting any crazier outlier prices. After looking at a few companies, I narrowed it down to two. One was about $200 less than the other and I was leaning toward it, I really was. In the end, I went with the more expensive company. The reason was they were providing a longer warranty for the water heater and it was one of the best rated heaters on the market. The other company was providing me with a run-of-the-mill heater that is just average. If I’m going to be paying that much money, then I would rather fork over the extra money now and not have to worry about it later. I focused on the overall value of my money, instead of the extra $200 in my pocket.
I think we might be undervaluing our money a bit. We are too focused on low prices, but forgetting about the overall value we receive. It’s never good for your wallet if you have to buy the same thing over and over again because it keeps breaking or doesn’t work as intended. While it might not hurt right this second, buying another will. In our quest to stretch our dollar, we are expecting to get the best service and quality for little money. Unfortunately, it costs money to get good service and quality. The upfront cost should only be one part of the equation. The other is the value we are getting for that upfront cost. If we just focus on price, then quality suffers and overall value along with it.
The main reason why I wanted to write this is to get everything thinking about what they’re doing with their money. Are you focusing too much on the price and upfront costs? Is the price now more important to you than the overall value you receive? For me, I want to get the most value out of every dollar I spend. While value is different for each person, we do have to understand that lower prices isn’t always great for our finances. It could end up costing us much more in the long run.
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