Throughout the years, I’ve read countless books about investing and seen the following terms mainly, “wall street”, “investing”, “bull and bear”, “market cycles” etc.. you get gist. I’ve learnt that the term investing does not apply just from a monetary perspective.
Investing has taught me to review the cost of my impulse when shopping for something, a simple flowchart which describes the old chain of thought when buying something usually portrays itself as something just like this:
Chain of thought old, version 1.0
- I notice a trendy or unique product via Social Media / Blogs etc..
- Do I really need it to survive? Most often the answer is a flat no
- Do I really want it? Most often the answer is because I’ve noticed some friends or someone cool promoting or using it
- Do I have enough “spare” cash to buy it? Most often the answer is YES, however this purchase would often cause me to exceed my allocated monthly budget for “cool & trendy products”
- Do I get my credit card details & buy it? Most often the answer is again YES.
- Chain of thought loop completed, yippee I’ve just spend a chunk of money which exceeded my monthly allocated budget for something I do not really need and which I found to be cool and in-trend (for the time being that is, remember trends often comes and go quickly!)
Now, here comes the different chain of thought, the main chain of thought stays generally the same but a couple of key additional questions emerges such as:
Chain of thought upgraded, version 1.1
- How long would I have to work to recover the cost of the product? An hour of work? A Day of Work? A Week of Work? etc.. (Think of it as the breakeven point that is required to cover back the cost of the product, in this case the currency would be represented in the time taken)
- How often would I use the product and how much would the product cost me per use? Ideally, if I am paying a good sum of money for a quality product, I would like to utilise it as many times as I can, however depending on the nature of the product and that every product has a shelf life, they can be put to use as often as Once every couple of hours? (For Example: The brand new Apple iPhone Xs Max) Once a day? (For Example: Apple AirPods) Once a week? (For Example: A Road Bike) Once a month? (For Example: Monthly Magazine Subscription?) and so on..
- Would the item be an asset of a liability to me? Would the item offer me a Return on investment (ROI), Would I be able to utilise the item to generate a passive source of income? Would the product cost me more time and money than the amount of effort needed to maintain or pay it off?
Nowadays, I’ve started incorporating the additional questions into my upgraded chain of thought and whenever I have the temptation to buy something, it’s simply more than just a question if I have the disposable amount needed to buy it, but rather the use. functionality and practicality of the item. This might not apply solely to objects or gadgets etc.. but for other purchases such as an airplane ticket to an exotic place!
What do you think? Would you try incorporating these questions into your personal chain of thought?
Or, what different chain of thoughts questions emerges in you whenever you are faced in a similar dilemma? I would love to hear them!