When was the last time you told yourself, “No, it’s too expensive”?

Some of us have banished this phrase from our vocabulary or say it in a voice so tiny, it cannot be heard over the loud beckon of something that we want.  We don’t like telling ourselves “no,” with the result that the mental chatter in our head consists mostly of justifications for the “yes.”

For others of us,  “too expensive” is an automatic barrier we erect to keep us from engaging fully with what the world has to offer.  We don’t take the trip, go out for a nice dinner, buy the premium brand, or sit in the best seats, nor do we even let ourselves be tantalized by these luxuries.  No mental small talk here.  The price is too high – discussion over.

There is, of course, a vast middle range between the automatic self-indulgers and the knee-jerk self-deniers.  It’s here where questions of value reside – where we have to do a bit of thinking as to whether a given expenditure is really worth it.

Actually, it can involve a lot of thinking.  Value is an elusive and highly subjective concept, not to be confused with price.  One woman’s trash can be another woman’s treasure, as any inveterate prowler of Saturday yard sales will attest.  Taste, too, may play a part – if you don’t like caviar – you’re unlikely to appreciate, let alone pay the going rate for those exquisite, slimy eggs.

There may be as many different registers of value as there are individuals.  Generally speaking, however, these registers fall in one of the following categories:

• Affordability.  In this case, we make our determination as to what we will pay based on what we CAN pay.  While this approach has the merit of keeping us out of cash flow trouble, it discounts the importance of quality in our purchase decisions.  The warning “you get what you pay for,” can be relevant here.
• Cost/benefit analysis:  MBAs and economists favor this approach to value, particularly when evaluating alternatives.  The most valuable option will be the one with the most benefits per unit of cost.  Sounds sophisticated and scientific, but benefits (as well as costs) can be highly subjective and emotional.  Name brands use this subjectivity to their advantage.  Branded products or services almost always cost more than generics, while offering virtually the same features.  But when it comes to choosing a bottle of ketchup or aspirin, the thought that Heinz or Bayer was what “Mom always used” trumps the just-as-good generic every time.
• External reference: Sometimes we decide what is valuable based on what others think, do, and spend.   When we are teenagers, this shows up as “peer pressure” and is, unfortunately, very powerful.   The problem is, however, not all of us grow out of this way of thinking. In its adult form, this is referred to as “keeping up with the Joneses.”  Either way we are looking outside ourselves for our measures of value.
• Internal reference or self-esteem:  When we truly appreciate ourselves, in the sense of knowing ourselves and how we choose to live our lives, the question of monetary value becomes simple.  We don’t need accounting or economics courses to know if the price is right, and we certainly don’t need advertisers or trend-setters to tell us what to buy, and for how much.  We define value as whatever best honors us and sustains us.  Our use of money – what we buy, save, or give – is not a source of shame or indecision, but a form of personal expression.

At Directions, we believe self-knowledge is the first, and perhaps most powerful, lesson of personal finance.  This knowledge will not, of course, eliminate those occasions when we must tell ourselves “it’s too expensive” or “I can’t afford it.”   But this self-talk is no longer about denial, but affirmation that we are making a choice that honors what is most important to us.