Category: Money

Know when to skimp and when to splurge

Have you ever noticed that people skimp on the strangest things?

For example, I moved into a new office complex at Blue Sky Factory and the new place had neither a coffeemaker nor a filtered water system. However, the new place has plenty of other expensive amenities like a giant office printer.

I’ve noticed this when people purchase electronics. They’ll spend thousands on a new laptop and then skimp on memory or drive space, two items that will make a giant difference in their experience with the laptop. They’ll commit to buying an iPhone or an Android and then will get the smallest, lowest cost amount of memory possible.

I’ve noticed this at hotels, especially. Hotels will have 300 thread count sheets on the bed but will have sandpaper in the bathroom, making your stay there a literal pain in the ass.

Why do we skimp on some items and splurge on others?

I suspect it’s largely what gets our attention and what mindset we’re in when we’re making purchases. Toilet paper and coffee seem like commodities to us, while laptops and sheets may not be, at least not mentally. The more we buy of something, the less we may be inclined to pay attention to the quality of what we’re buying. The more mundane and unsexy something is – like toilet paper or laptop memory – the less we are inclined to pay attention to it.

The paradox is that some of these commodities make a bigger difference in the richness of our experiences than the highly focused items. I’d gladly take last year’s laptop stuffed full of memory and disk space over the latest and greatest machine that’s starved for operating resources. I’d gladly trade down a model of office printer for a coffeemaker or water filter on site – and I’d bet a company would generate far more productivity via the coffee machine than the copy machine. I’m more likely to stay at a hotel where the quality of experience is more even – nicer toilet paper, slightly rougher sheets (I can’t tell the difference between 200 thread count and 300 thread count, honestly) – rather than luxury sheets and a roughed up bottom.

Want to make a difference in your own life? Look at the nearly unconscious choices you make while spending and evaluate whether or not a slight upgrade could have a major but quiet impact on your quality of life. Some things won’t matter – generic , white label sugar at the grocery store is no different than Brand Name sugar. Some things will matter a great deal – a slightly better kind of coffee may taste MUCH better to you.

Here’s a relatively simple rule of thumb: the more you use it, the more you should invest in quality. If you’re buying a stereo, for example, and you plan to use it once a year, it probably won’t matter what you buy. If you plan to use it every day for 8 hours a day, buy a very nice stereo because crappy sound will make you feel worse rather than better. If you drink coffee once in a blue moon, buy any quality of coffee and coffeemaker. If you drink coffee several times daily, buy decent coffee and a good quality machine.

Look for opportunities to trade expenses as well. For example, at this office space, the employees (lacking access to a filtered water system) bring tons of bottled water and buy Starbucks every day. Rather than chew up money doing that, it makes much more sense to get a countertop pitcher that will filter water to a better quality than even bottled can deliver (you do know that 30% or more of bottled water is someone else’s municipal tap water, yes?) and brew your own higher quality coffee rather than drop $5 a cup to the coffee shop. No one loses out except the bottled water company and the corporate coffee shop.

Are you skimping and splurging in the right places for maximum quality of life on the same fixed budget?

Get this and other great articles from the source at www.ChristopherSPenn.com! Want to take your conference or event to the next level? Book me to speak and get the same quality information on stage as you do on this blog.

How real is money?

From one perspective, it’s the most real thing in the world. Without it, you don’t eat, you don’t have a place to live, no clothes to wear, etc. unless you’re living out in the wilderness, foraging off the land. Money can be a tremendous amplifier of personal power. With an inexhaustible supply of money, you could solve world hunger, cure disease, and end conflict.

On the other hand, money is entirely fictional. It’s a construct, an artificial intermediary between things we value, because we may not value them equally or at the same time. I may sell email marketing and you may sell search engine optimization. If I don’t need SEO, no matter how valuable your skills are, I won’t trade with you no matter how much you need email marketing. With money, if someone else needs SEO, you can take their money and then give me that money for email marketing.

How fictional is money? The recent stock market mini-crash (due to a trading software error) caused several indexes to lurch as much as 10% below their value in mere seconds. At one point, the Dow Jones Industrial Average was down 998 points. This erased as much as $1.25 trillion dollars of theoretical wealth in mere minutes. Think about that for a second. Think about how much money that would be if you had it in your bank account.

• You could send 5 million students to college for 4 years.
• You could spend a million dollars a day and not run out of money for 3,424 years.
• You could own 1,667 super-giant luxury houses.
• You could pay cash for the entire Iraq/Afghanistan war and still have a couple hundred billion left over in change.

Think about the fact that $1.25 trillion was erased, vaporized, in just minutes. Imagine every student in college right now quitting all at once, or an entire city block vanishing in just minutes. That’s staggering, when you think about it. It’s hard to wrap your brain around.

Now think about the fact that the NASDAQ ordered a nullification of trades between 2:40 PM and 3:00 PM (when the mini-crash happened) for trades exceeding 60% of market value in either direction. Poof! Suddenly a big chunk of that imaginary money that was lost is back again.

You couldn’t build 1,600+ houses in minutes. You couldn’t enroll 5 million students in minutes. You couldn’t wage a 9 year war in minutes. But because of money’s fictional nature, you can make trillions of dollars appear with just a few clicks of a mouse.

What does this all mean for you? Think about your attitudes towards money, towards what you’re chasing. It’s a completely fictional construct that in our society is anchored to faith alone, making it the one true faith-based initiative our government has successfully created. Money is worth only what society believes it to be worth, because we can create or destroy vast quantities of it in minutes. It has no intrinsic value.

More important, if it’s entirely fictional, if it’s anchored only in belief of value, then instead of chasing money, think about how to create the perception of value. Think about how to inspire in someone else the desire to give you anything you want in exchange for that perceived value. What do people value about you, about your products or services? How can you provide more of that value perception? How can you boost the perception of the value that’s already there?

What do you value? I know that as a businessman, I tend to value three big things – things that will save me time, things that will save me money, and things that will make me money. If I perceive that your product or service can do any of those things well, I perceive that it has value and will buy from you.

Change your focus from trying to take other people’s money to creating the perception of value and see if other people start handing you a lot more money.

Get this and other great articles from the source at www.ChristopherSPenn.com! Want to take your conference or event to the next level? Book me to speak and get the same quality information on stage as you do on this blog.