Too Cheap Is A Risk

What is your approach to things with a lower price? Something cheaper always looks like a good deal, but one must be cautious. In the words of my late friend Moe, “Cheap is expensive.”

The tendency to assume that price and value are tightly related is both common and wrong. Value is what you seek and cost is what you give up to get it.  Price is part of cost but sometimes not the significant part. If a factory second parachute worked half the time would it be fair to pay half of the regular retail price or would your discount need to be more than that. Perhaps a 100% discount would not be enough to make it worth your trouble and risk to buy and use.

Price is a weak indicator of value.

People have trouble with low price when they do not have an objective idea about what they are trying to do with the product they bought. All low prices mean something has been taken out of the good product to make its price lower. Sometimes it is innocuous, like last year’s sweater color.  Or maybe a misprint on a hockey stick.  Sometimes there is something missing that you care about. How will price tell you that? If you don’t know your purpose, you cannot know the value of the parts that are missing.

A wiser buyer, knows what they want, why they need it and looks for a close match between the product they buy and their needs. They often avoid the high end, gadget laden product and the low end one that is missing some things they value. They know what they need and will pay a fair price for it.

I have liked and used the factory second parachute and the laser eye surgery on sale examples before, but just recently I came on another. A disturbing one.

Discount sushi.

How much of that would you like? Would saving fees by avoiding financial advisors make more sense?

Only if you don’t care about the outcome.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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