Price Cost and Value

Price and cost are not the same thing and anyone who equates them buys trouble in addition to whatever else they get.

Cost is what you give.  Value is what you get.  Price is just a part of cost.  Value is what you want; cost is how you get it.

You cannot get more value without giving up something to get it.  Be sure you know what parts of value will disappear when you reduce the inputs.  A cheap toaster may be missing something.  Like well grounded connections.

Sometimes do it yourself does not matter.  I could likely build a deck, but I would not believe that it would be as square, strong or durable as one built by a competent carpenter.  I might not enjoy it fully and I might need to replace it too soon, but likely there would be no real harm.  It is like cutting your own hair.  It will be okay eventually.

Other things might not turn out as well.  Would you try do it yourself root canal?  Not likely.  How about a natural gas hookup or a brake line replacement?  Not me, but some would.  All of these have serious problems attached if you do a bad job.  (That is what I mean by other cost factors.)  Recognizing serious potential problems, many people won’t try them.

There exist similar potentially catastrophic do it yourself projects that people will try:

  • Online wills.
  • Do it yourself powers of attorney and trust kits  are available too
  • Maybe a do it yourself financial plan, portfolio design, or tax plan.

Just because you cannot see the danger does not mean it has gone away.

Any of these can create huge problems.  They would be expensive or impossible to fix.  Prepare your will, your powers of attorney and your estate plan as if this might be the last time you do it.  Eventually one will be.  If it does not work, there is no mulligan.  How sure are you that the do it yourself version will work?

Financial and investment plans could be repairable but only after a loss of money and time.  You might get the money back, but you won’t get the time.

Preparing your own tax return is probably okay but then filling out a form is just putting numbers in boxes and doing some calculations.  Tax professionals add value.  You have an unseen cost if you don’t see the return the way they do.  They see what the return could look like with modifications to the way you receive income or in what you could deduct.

Do it yourself is okay for things that don’t matter much or are easy and cheap to repair.  You need to do something with your free time and you may not be able to do serious harm.  For things that matter, or for things that cannot be readily reversed, be sure you know the other cost elements before you decide to get something for a lower price.

Cheap is often expensive.  If you can afford to do it cheap and then fix it, you can probably afford to do it right the first time.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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