30 Nov The Wow Factor: Getting the most bang for your buck
Kim Hall writes about the different aspects of life that impact family relationships and how you can make those bonds stronger and more satisfying. She writes at Too Darn Happy, where you can find useful resources and information, along with plenty of encouragement and optimism.
When you think about making a purchase, have you ever thought about rating it on a scale of 1 to 10, with 1 barely moving the needle and 10 being a big, exciting WOW?
Back in the 1990’s I came across The Tightwad Gazette by Amy Dacyczn and the revolutionary idea-to me-of actually planning your spending, living a frugal life, and the proposal noted above of a Wow Factor scale. She recommended testing all spending with this simple rule. Basically, you just need to determine how much wow you are getting for the money you are spending. If you are letting go of your entire month’s entertainment budget on one event, hopefully it’s pegging a 10 on the scale. If you are dribbling it out a few dollars at a time on fast food, are you getting the same high level of satisfaction?
While this guideline provided a great measuring stick for our family and especially our girls when they went to spend their allowances, over the past couple of years we have found that adding the following questions really has helped to drill down and make better choices.
What is the opportunity cost?
This is helpful especially in terms of discretionary spending. If you choose to spend your budgeted entertainment dollars going out to a fancy restaurant once a month, or doing fast food several times, you won’t have the opportunity to spend it elsewhere, such as taking that day trip that is on your want to do list. The question then becomes: Which rates higher on the Wow scale-fast food, fancy dinner or a trip? At that point, the choice generally becomes much clearer, especially as you align it with the next question.
What do you value?
This one is tremendous for culling out the less important, especially if you visualize your choice as though it is in hindsight. Close your eyes and move forward mentally a month, a year, five years. Look back and view your choices. What will you wish you had done? Can you see the crumpled MickyD wrappers and bags doing a tango across your empty wallet? Do the fancy meals thicken your waist and hips while slimming your finances? It comes down to this: what choice makes your heart sing and what do you really value in terms of stuff and experiences when you part company with your dollars?
I am not against eating out. I’m not against spending money for fun trips or awesome gifts, for that matter. I am against spending money that doesn’t give you a real bang for your buck, whether it has already been budgeted or you are deciding if it should be part of the budget.
The simple beauty of these questions is that they fit you and your circumstances, regardless of where you are in your journey to debt freedom. You may not place a high value on a fancy restaurant experience, but I know folks who give it a 10. The same can be said of events, fashionable clothes, shoes, jewelry, books, games, movies, etc. It is about what fits you, your family and your lifestyle, and where you are and where you are going financially.
Learn to rank your choices on your own personal Wow Factor scale, and you will find that your satisfaction with your budgeting and spending choices will increase substantially.
How will this tool make your decisions easier to make? What choice did you make that rated higher than another? We look forward to your comments!