How do you decide whether a thing is worth it or is it too expensive?
We do not really ask this when it comes to food or water or even transport. Nobody ever wondered ‘is it worth to eat’ or should I drink water, is it worth it?
However where to eat and what to eat or drink has not been an easy to answer. Should you have a food item at home (cost Rs. 10), at your club (Rs. 90), at a restaurant (Rs. 400) or at a 5 star hotel (Rs. 1200). This is surely easy to answer. So what do you do? Do you just choose on price or accept that the ambience cost has to be paid for?
When it comes to Term insurance how do you decide – what is the cost and what is the value?
Will my wife suffer if I were to die today leaving them without a bread earner?
Will my children go to school and college if I were to die today?
Will my wife’s family protect her or hassle her if she has no money?
Honestly can you answer these without batting an eyelid?
So somewhere between cost, utility, enjoyment, duty, peace of mind – you draw a conclusion. It is impossible to say which has a greater role. For example there is no duty or peace of mind in that dish you had in a 5 star hotel, but there is tremendous utility, duty and peace of mind in buying that Term insurance.
Makers of Garmin watches do not really care about the market in developing markets like India. I dare say that Garmin measuring tools would be sold more in India than in Europe -but the bias remains. These are expensive watches – they cost upwards of US$ 350- and have a very poor packaging. The strap breaks regularly and it is poor design for sure. However, if you are a runner, there is not too much of a choice – there is no alternative. Now what do you do?
Similarly if I suggested a Trek bicycle will you buy it? How much does it cost? Well about Rs. 40,000. Is it too much? Well what if you were to cycle say 20km a day? What if it meant you saved Rs. 1000 a month on petrol? What about the enjoyment and health benefits? Lets say we can add up all this and say it is worth Rs. 4000 a month. So this asset pays for itself in 10 months. Is it worth? Well I cannot decide that, but I can give you pointers.
Answer the following:
- Is it a necessity – then do not argue. Food, water, utilities, term insurance, health insurance – only decide acceptable cost.
- Is it your duty – looking after parents, children’s primary and secondary school education.
- Is it giving you peace of mind – burglary insurance for example. Take it.
- Is it giving you happiness – vacation – only decide on affordable pricing, not whether.
- Is it giving you Enjoyment?
- Is it something that you longed for and have now got it?
- Can you afford it?
So use this process and decide on all purchases – say above a particular cost..
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