Earlier this week a friend asked me out for dinner at a pretty pricey restaurant. Having been there once before for a special occasion I knew that the food and service wasn’t that great and definitely not worth the price tag (at least to me). I declined my friend’s invitation. When she asked why, I told her the truth. “It’s at least forty dollars for dinner for one person, and the food’s not that great. I’d rather save the money, but if you’d like to go somewhere else. I’m open to that.”
Well, my friend wasn’t open to changing the plans (rightfully so, as she’d invited other people) so I didn’t go out to dinner that night. But before she gave up on me entirely, my friend tried one last plea: “Come on, it’s only $40. You can afford it. It won’t make a big difference in your budget.” I politely declined again and that was the end of it. But the conversation got me thinking about value.
The cost of the meal wasn’t my major objection. My major objection was that the $40 held little value for me, since I didn’t care for the food or the service at the restaurant. The only value in this equation was spending time with my friend. While I can argue that spending time with her is “priceless,” it isn’t really. If an outing involves money, there is always the question of value. For example, next week we’re scheduled to see an exhibit at the museum and have lunch. That will be a high value transaction for me because I genuinely want to see the exhibit, the restaurant we’re going to is excellent, and I get to spend time with my friend.
Had I cared for the restaurant that she invited me to, I would have gone with my friend because the value (good food, good service, plus time with friends) would have been high enough to justify the cost. Similarly, if my friend lived a hundred miles away, was only in town for the day, and really wanted to go to this restaurant and nowhere else, I would have gone to the restaurant because I would place a high value on the very limited time we would have together. However, the circumstances being what they were, I declined and decided to save the money for something of more value to me.
Every time we use money we are (or should be) using it in ways that give us the most value for the dollar. (There are times when you have to do things that have no value for you, such as when your family wants to do something you don’t want to do but you go along to keep the peace, but outside of these circumstances we should be looking for high value when using our money.) When my friend says, “It’s only forty dollars,” she’s both right and wrong. Sure, it’s only $40 and it’s not likely to break me. But if I spend that $40 on something that has low value for me (dinner at an overpriced restaurant with bad food), I don’t have that $40 to use on something that does have high value for me. Since I am careful with my money, I want the most value that I can get for each monetary transaction.
I started thinking about all the things I could do with that $40 that would have high value for me and I came up with a lot of things. I could save it and let it earn interest. I could spend it on my next outing with my friend. I could buy a new game for my Wii that my family can play together. I could use it on a medical copay at the doctor next week. I could buy the cookware I’ve had my eye on. I could send flowers to my mom. I could take my husband to a nice dinner. I could buy a couple of new books that I’m dying to read. I can buy gas and go to the beach for the day. I could throw a little get together and invite people over to play with the Wii, watch football, and eat some snacks and pizza. These things all have high value for me. They are things that will bring me joy, enable me to spend quality time with my friends and family, keep me healthy, or improve my life in some way. To me, they are a much better use of $40 than dining at a pricey restaurant with bad food.
Everyone’s value system is different. Perhaps you could have overlooked the bad restaurant and gone with your friend and still considered the $40 well spent. That’s fine. The point is that, whether it’s $10, $20, $40 or more, the way you use your money should bring you value. Sure, you can use money a few times in low-value transactions and not be hurt. But when money is limited or you are spending a lot on low value items, you have very little money left to use for things that bring you high value. Once you get used to thinking in terms of value, it becomes easy to identify whether your spending is going to make you happy or not. Asking yourself before laying down money, “What value am I getting out of this?” will save you a lot of disappointment and wasted money down the road.