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The Worth-It Equation

While it may seem like a simple decision, deciding whether a purchase is worth the cost can actually get quite complicated. How do you value a new bike, a pair of shoes or a concert ticket? How can we be sure that every voluntary effort is really worth it?

If you've ever agonized over these questions, you may be interested in learning more about the "Worth It" equation. That's how it works.

Is it worth buying?

Before making a major purchase, consider whether the item is worth the time it will take to make that amount of money. For example, let's say you want to buy the new iPhone model that costs $800. Her hourly rate at work is $35, so it would take you about 23 hours – or just over half a work week – to earn enough to pay for this iPhone.

So in this case you would be considering whether or not the phone is worth 23 hours of work. The answer may depend on how long you've waited to buy a new phone and how much you love your job.

You can use this calculation for both large and small purchases. For example, if you buy an $80 pair of jeans and your hourly rate is $40, consider whether the jeans are worth two hours at your job. If you love how you look in jeans, then maybe two hours of work is nothing. But if you're on the fence, then two hours can seem like a bit much.

Other factors to consider before purchasing

Does this purchase save me time?

One of my favorite ways to spend money is to buy my time back. This includes paying someone else to mow the lawn, clean the house, and deliver groceries. Freeing up time is an underrated way of spending money, especially when I can use that time to do something I love like hanging out with friends, watching a movie, or just relaxing with my pets.

Since I'm self-employed, I can also work during this time and end up making more money than I have to spend outsourcing the task.

Does this purchase give me joy or peace of mind?

Not every item we buy has to have a utilitarian purpose. It's perfectly okay to buy things because we think they'll make us happier in some way.

I'm trying to use the Marie Kondo benchmark. When I think about an unnecessary purchase, I ask myself if the item will bring joy. If a dress makes me happy when I put it on, I buy it. But if I'm just tempted because it's 50% cheaper, I'll (usually) put it back on the pole.

If you set the bar high enough, you'll get items you really love. This also reduces clutter and buyer regret.

Will this purchase generate income?

The classic quote about spending money to make money is often true. As you invest in your career, you may need to attend a class or conference before you see real progress.

In 2014, I attended a financial media conference to support my new hobby of blogging about my student loan debt. I spent about $800 for the four day event hoping I would learn how to monetize my writing.

At the conference, I networked with other attendees and landed a few freelance writing assignments. After a few months, the conference had paid for itself. After a year, I was making as much money freelance writing as I was doing my day job.

Will this purchase improve my quality of life?

Growing up, my frugal mom loved clipping coupons and looking for the best deals. But she always told me to spend money on my health.

Now that I'm in my 30s, I'm taking her advice to heart by prioritizing my physical and mental health. My husband and I buy quality groceries, spend thousands on equipment for our home gym, and pay for therapy sessions out of pocket.

Even if these expenses take up a large part of our budget, they are worth their price. When you pay for therapy or a gym membership, you may not make money directly, but you are investing in something more valuable – a healthy future.

How often will I use it?

I hate blow drying my hair and am always looking for a way to speed up the process. When I heard about a Dyson hair dryer that could speed up the hair drying process, I immediately wanted one. I planned to use a birthday check from my parents to cover the cost.

But eventually I realized that I wasn't going to use the $400 blow dryer often enough to justify the expense. While I could afford it – and it would probably make my life easier – I couldn't justify paying that much for something I only use a few times a month.

Am I buying it to not feel my feelings?

The concept of retail therapy is well known. When you're feeling down, you go shopping to cheer yourself up.

But in my experience, retail therapy is a fleeting cure. When the shopping high wears off, something worse usually sets in: the shopper's remorse. Now you feel even worse for spending money on something you didn't really want or need.

Before you buy anything, ask yourself if you're spending money just to feel better or if you're avoiding your feelings. If you are, you should be doing something more meaningful instead. That might mean calling a friend, walking your dog, or watching an episode of your favorite TV show.

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Zina Kumok (157 posts)

Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth, and Time. Read how Conscious Coins paid off $28,000 in student loans in three years.

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