Every dollar is equal, but the value you get from each can be wildly different. How can you figure out whether you’re truly getting the most bang for your buck, and when the value is low enough that it’s not worth purchasing?
Let’s think of three categories: needs, highly desirable things, and things that would be nice-to-have. This is, of course, excluding things that you’d really rather not have, like dolls that give you the creeps and your least favorite type of vegetable.
“Needs” is a category that can encompass more than just food, clothing, and shelter. For the modern person, a stable internet connection, health insurance, the ability to see friends and family, some form of recreation and a way to relax, etc., all can qualify as “needs” if without them you would be miserable. The mistake some people make here is assuming that just because something of this sort is a need, they should get the best one they can “afford”. This is very obviously false in the extremes – just because you need food, clothing, and shelter, does not mean you need Kobe beef, designer clothing, and a McMansion. But where is the most basic level that your need would be satisfied?
Honestly, you may not know the true level until you experience it. Elon Musk found out he could live on a dollar a day for food. “You get really tired of hot dogs and oranges after awhile”, he says, but $1 a day afforded him his absolute basic level of food need. Your level may be different (I personally can’t go below a ~$4/day diet of in-season fruits, veggies, eggs, and rice without experiencing negative health effects) but anything beyond this falls into the “highly desirable” category, and is no longer a need. For some items, you may not even feel deprived if you only satisfy your most basic level of “need” (Obviously Elon Musk has lower standards of food than I do, but similarly I probably have a lower standard of technology/internet access. If I have enough internet access to check my email and google things, I’m good.)
Don’t be tempted to upgrade the level of a need just because “It’s a good deal”. If the super fast cell phone plan is only $5 more per month than the basic plan, that’s still MORE (and, honestly, with a bit of research, you could probably find a cheaper cell phone plan – prepaid plans and wifi calling can be used for super cheap). We’re looking for your absolute minimum of a happy, healthy life here. The exact sum of all this is a bit irrelevant, but it can be fun to know just how little you actually need. My boyfriend, currently a bit unemployed and pursuing artistic goals, takes comfort from his calculations that he could happily live on $20/day all-inclusive.
The “highly desirable” level is where you *might* consider that cell phone plan upgrade. This is where the occasional meal out fits. The nice gym membership instead of just using water bottles as weights. Taking classes in your favorite hobby instead of just trying to figure it out from the internet. Things that make your life noticeably easier and happier. These are fine to spend money on, as long as you are aware of the trade off that’s happening (because now you have to *earn* that extra money, too.)
The “nice-to-haves”? The “it-was-on-sale” or the “I-might-need-it-someday”? Pretty pointless. I guarantee you most things that you purchase because they’d be nice to have will go unused or unappreciated. At worst, they’ll be a hassle if you ever have to move, and you may even feel guilty every time you look at them and note that you haven’t used them in ages. If you actually do end up needing it, buy it then. Not now. You’ll save more money in the long run by not buying most things than it costs to buy that one item full price.
Now, I’ll leave you with a TEDx talk by the architect of my favorite Tiny House, hOMe.