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Everything You Need To Know About: Value For Money

When you hear the phrase “value for money”, what is the first thought that pops to your mind? Most people would say that it involves cost-effectiveness. Its definition goes beyond that. Value for money is a utility derived from every purchase or every sum of money spent.

It is based on the minimum purchase price and the maximum effectiveness of the purchase. Simply put, value for money should have four different dimensions. These four dimensions are: economic, efficient, effective, and equitable.

The value of money should be economic in terms of its processing. Inputs must have been procureed at the least cost for the relevant level of quality.

The value of money should be efficient in terms of its outputs. The value of outputs should be considered in relation to the total cost of the inputs.

The value of money should be effective in terms of achieving program outcomes. Sometimes, equity considerations are put in here.

Lastly, the value of money should be equitale in terms of ensuring that the benefits are distributed fairly.

EVALUATION OF VALUE FOR MONEY

There are different ways to evaluate the value for money. Here are just three of the common ones:

1. Cost Utility Analysis

When the evaluator needs to consider individual preferences, this is usually the method that they turn to. This approach takes two or more alternatives and compares their costs to their values. However, it can result to a number of potential outcomes.

2. Cost Effectiveness Analysis

This approach can be employed when you need to compare the programs that aim to achieve the same goal. It involves evaluation of two or more alternatives based on the relative costs and outcomes.

3. Cost Benefit Analysis

If you want to know whether the costs outweigh the benefits then, you must use this method. This approach is the evaluation of alternatives by determining the costs and benefits of each one. It highlights whether a course of action is worthwhile or not.

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It is essential for an evaluator to consider a variety of methods for determining whether an activity is value for money or not.

Sources: 1, 2, & 3

Should You Buy Things Based On Their Values Or Prices?

In this day and age, how much are you willing to pay for a Smartphone?

Are you willing to spare a couple of hundreds or thousands of dollars? Would you rather purchase the Samsung J1 for S$168 or the Samsung Galaxy S6 Edge for S$1168?

For most of us, price by itself is not only the crucial factor that determines our purchase because we compare all the products that the market has to offer. In this case, Samsung Galaxy S6 Edge has been raved with good reviews and superior capabilities which makes it a strong contender against its counterparts. Beyond its price, we analyze several valuables and come up with a mental assessment of the product’s overall value.

This goes to show that price and value are two different things!

In economics, price and value are influenced by supply and demand.

A product’s price is determined by the intersection of supply and demand while, the value determines the demand. For example, if you are willing to pay S$10 for designer coffee then, you would be willing to pay S$6 or anything less. And, if the intersection of supply and demand prices the designer coffee at S$5, you are more likely to buy it. It does not mean that you place a S$5 value on the product but, it means that getting it at that price is worth it (for you).

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Just because people are not willing to pay a lot of money for something does not necessarily mean that we do not “value” it. Take the “free” air you are breathing right now as an example. Need I say more?

In the marketer’s viewpoint…

Price is their monetary reward for providing us with the product or service while value is equal to our perceived product’s or service’s worth.

For example, the total cost for a repairman to fix a dripping air conditioner including the materials, travel, and labor is S$45. However, the value of the service to the customer, who has been tolerating the water leakage all over the room, is far greater than S$45! So, the repairman may charge you a total of S$60. Aside from observing the competitor’s prices, pricing is in lined with the perceived benefits that a business provides.

With all these in mind, ask yourself: “Should you buy it based on its Value or its Price?”

For what it is worth, I think it is best if you purchase products for their value, assuming you have the means to do so.

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Frugal people buy products or services for their value using several techniques such as couponing. They value quality more than the price tag because premium products last longer. Thus, they get the most out of their money.

Sources: 1 , 2 , & 3

4 Brilliant Ways To Worry Less About Money

They say nothing lasts forever but, our relationship with money is so pervasive that it feels like forever. The mechanisms that keep our lives in tact are almost always surrounding money.

In his book entitled: “How To Worry Less About Money”, British writer and philosopher John Armstrong shared many ideas on how to look at money in a different light in order to lead a better life. He understands how deep our relationship with money is which is why he wants to examine how we relate to it and how we attach meaning to it.

First we have to understand that money problems and money worries are two different things. According to oxforddictionaries.com, a problem is a situation or a matter regarded as harmful or unwelcome and needed to be dealt with and overcome. While, worry is a the state of being troubled and anxious and real or potential problems.

Therefore, problems ask for urgent and direct actions while worries as created by oneself due to disturbing thoughts. Fortunately, disturbing thoughts or unhealthy patterns of thinking can always be changed! Here is how:

1. MONEY CANNOT BUY HAPPINESS

It is no surprise that Armstrong believes that happiness cannot be quantified by money. Money can only buy the symbols that produce happiness and serenity but it does not purchase the positive emotions itself. In fact, studies show that you will get more satisfaction if you spend your cash towards memorable experiences such as family vacations than towards material things such as a new designer bag.

2. KNOW THE DIFFERENCE OF PRICE AND VALUE

What differentiates value from price is its nature. Value is a personal matter while, price is a public one. Value is personal because the meaning of money and the object is assigned by the individuals themselves based on their perception, culture, wisdom, and character.

On the other hand, price depend on the majority because it negotiates between supply and demand. For instance, the price of the refrigerator depends on how ready is the manufacturer, how much people want it, and how much they are willing to pay. People who are frugal give importance to the value while people who are cheap primarily follows the price. Know which side you want to be on.

3. IT IS GOOD TO GIVE BACK

There is a deep and innate fear that one’s life will be lived in vain without making a contribution or a difference in the lives of others. This is why you may generate happiness and kill those worries by doing good things for other people through the money you have. Lending out possessions can help you enjoy the material things that your money bought while, volunteering or donating can always trigger positive emotions.

4. CULTIVATE YOUR RELATIONSHIP WITH MONEY

For your relationship with money to flourish, you must understand that it involves the two of you. When things go badly, it is partly because of what you brought to the situation and partly because of what the money (i.e., power of spending) brought. Do not let the power of spending govern you.

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Temperance, moderation, and frugality are essential to alleviate your worries about your money. You achieve this by distinguishing your needs from wants. So, if your bike works perfectly fine then there is no need to buy a new one. Be wise in purchasing and resisting impulse by getting what you really need.

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