What Is Money Worth To You?

Let’s suppose you are about to buy a brand new car. Fortunately for you, you have a $60k budget to play with and you have had your eye on a Mercedes Benz since way back when.

There are two dealerships in your local town, one is a couple of minutes down the road and the other is a 30 minute each way cross town drive. Both dealerships have the particular model you want in stock, but the prices are slightly different.

Your local dealer wants $60k on the nose for you to drive the car off his forecourt, whereas the other guy wants $59,750, a saving of $250.

What do you do?

Is a $250 saving really worth the hassle of driving across town for when you are spending 60 grand?

Let’s change the scenario somewhat and suppose you want to buy a new iPod. Your local Best Buy has the one you want available and it’s $250 and you pass the store more or less everyday.

However, you then get a letter in the mail telling you, that you have won an iPod in a competition you entered last week. Woo-hoo! How cool is that?

The only catch is you have to make  the 30 minute cross town drive to collect is as it cannot be shipped.

What do you do?

If you said you wouldn’t drive across town to save $250 on your new car, then logic suggests you wont want to drive there to fetch an iPod either. After all it’s the same amount of money and you either want to save it, or you don’t.

On the other hand, if you did drive across town to save money on your car, then you’ll do so again for the iPod without really thinking about it.

Tests similar to the above have been conducted many times by social psychologists and the results are always the same. People on the whole don’t care about the $250 when it is part of a much larger purchase, but want it when it sits in isolation.

That doesn’t make much sense, or maybe on occasions it does?

In this post on happiness I talked about gambling and the approach some people take in casinos when they’re winning. They have a much higher tendency to make rash or large bets using the rationale that they have nothing to lose.

It’s called playing with the houses money, but it’s a ridiculous way to look at it when you think about it. It’s not the houses money once you have won it, it’s yours. and is just as valuable as any other money you have.

Although we go to great pains to stress How To Be Rich and Happy isn’t about wealth creation per se, it is about understanding basic concepts regrading money. Concepts that Rich and Happy people adopt on a daily basis.

For instance, if you are a senior executive in a blue chip organization earning $250k per annum, then there would be a case to be made for buying the local Mercedes. Not because you can afford the extra $250, but because if you sat down and worked out your hourly rate, it would cost you more in time and fuel to fetch the car than you would save.

That may seem a somewhat extreme example, but there are other reasons why the trip may not be worthwhile.

Let’s suppose you have a well paid job and money isn’t a huge issue for you. The only time you can go and get the car would be the time you usually spend playing with your kids. Is that time with your kids worth $250 to you?

Or maybe you want to build up a relationship with the more local dealer for servicing and the money you’ll save on not driving so far each time your car needs a service will more than make up for the initial saving.

Rich and Happy people are experts at looking at such examples and quickly deciding which option is best for them. They understand the difference between cost and worth and they know how important their own time is to them.

I’ve always had a very laissez faire attitude toward money, which is probably why I never have any. But in working with John on How To Be Rich and Happy I can see I haven’t done myself any favors.

I’m not going to beat myself up over it as I reframe the last 47 years as a learning curve and start to implement changes!

However, from here on in I am going to really work hard at getting fluent on this and making sure I’m living as many Rich and Happy minutes as possible. Until very recently I’d never stopped to ask myself what money was worth to me. I’ve been too locked in on the cost of things rather than their value. The book has helped me see the fallacy of that and I hope it can help you think more deeply about the value of money to you.

I wrote a post some while ago called ‘How To Avoid Getting Ripped Off‘. It goes into some detail about the techniques marketers use to help people part with their cash. I’m not saying Rich and Happy people never get caught out with these methods, but it happens a lot less often.

One final thing. Somebody I have got to know recently and who’s read How To Be Rich and Happy has started a website documenting the experience. You can read about his exploits in moving toward a Rich and Happy life by checking out How To Find Happiness