One of the most popular financial tips that people routinely dispense to others is, “You get what you pay for.” Perhaps that’s why many folks erroneously believe they can’t go wrong by paying more for something — whether it’s a fancy meal, designer jeans, bottled water, or a host of other products and services. But that’s not always true; sometimes you don’t get what you pay for. There are plenty of examples — education and gasoline are two of the biggest — where you can often spend less and still get your money’s worth.
The bottom line: Expensive doesn’t always equate with better — despite the marketers’ ubiquitous claims to the contrary.
Photo Credit: Jason Meredith
In both of those cases, you have control over what you ‘get’. More so in education where what you get out of it is directly tied to what you put into it. Are you taking classes that really teach you or just ones to get through the experience? Are you studying and really understanding the material, or just glossing over it enough to pass the test?
Even gas can have some wiggle room here. Do you put your gas into an economical car that fits your needs or do you have cars that waste gas for the sake of extra seating or a bigger engine that really aren’t necessary? Do you drive 85MPH or drive the speed limit? In this case, your gallon of gas is directly tied to decisions and behaviors that you make, so in a way, you do get what you pay for.
I disagree, especially when it comes to clothing. Sure, you don’t have to pay full price for expensive clothing and can wait for it to go on sale but some brands do hold up better than the 20.00 top I bought from Forever 21. I also believe if you try to take a shortcut and hire someone less experienced/expensive you can end up spending more on contractors for home repairs..in my experience.
Agree with you, Lauren. Quality endures and frequently can be purchased below market price. It takes some effort, but the duration, as well as the enjoyment of said items, are invaluable.
When I saw the title I thought you had buried deep into the Rolling Stones catalog and found an early draft of “You Can’t Always Get What You Want”.
And you’re right, of course. Quality has a long tail too. I may be able to pay an extra $20 for a 10% improvement, but a 5% improvement on top of that is a few $100. Got to optimize!
Hey, maybe I should write a song about this! 😉
As for the long tail … you’re spot on, as usual. It’s always good to do a little analysis so you can identify that “knee in the curve.”
I think that you can get decent things for cheaper, and I agree that you are spot on about the bottled water thing; also, more expensive foods tend to be the ones that are processed or bad for you (disproving the theory that the more expensive things are better). I think sometimes, especially with clothing, the more expensive the piece, the higher the quality, though.
Uh, you are familiar with “organic” foods and their ridiculous costs right? Kinda blows that notion of more expensive food being bad for you out of the water.
This is how people justify buying a $500 iPad. “Quality” item over a $100 knockoff. Sure, but what they fail to justify is that it’ll be outdated in 2 years and the person who has the $100 cheapo can upgrade 5 times over many years for what that one iPad cost. (And what if you drop it and it smashes? Which person is going to shed more tears?) Unless you use it for business every day, you’re not getting your money’s worth.
…But then again, these are the same people who will justify buying something with saying, “But I *will* use it every day!” (I see them tote it around for two weeks and then it mysteriously vanishes somewhere at their home to collect dust.)
I refuse to buy an iPad. Too expensive. Instead, I went with the Kindle Fire, waited to get one secondhand, utilized some giftcards and rebates, and ended up paying a whopping $85 shipped. That’s how I roll!
I agree! Another way to put a reverse spin on “You always get what you pay for is” is to consider that it is equivalent to saying, “There are no ripoffs or bargains.” Few people would be comfortable signing on to that statement, and for good reason: many items are inappropriately priced given their intrinsic worth.
I tend to think most things are overpriced because, after all, the merchant is trying to find every way to get away with overpricing (while, sure, bumping up against market realities like competition or broke customers). So one has to put a little extra diligence into buying to “keep the merchants honest”, so to speak.
This is especially true when you get into luxury items and you pay for status instead of utility!
Very true! Not all “expensive” products are better. I can attest to that!
Of course it’s PK who beats me to the comment about examining your crossover point of cost/benefit.
Oh well, you can’t always make the blog comment you want.
and i say that you do get exactly what you pay for. there is no relationship between price and quality.
the quality of an object is what it is. the price of it is negotiable.
the idea of a relationship is one of the fallacies introduced by Ford and his mass production line.
Then there are the surprises. My wife and I looked at some of the knives we bought at Kmart – 30 years ago! They’re still our favorite knives. The blades have been worn down from sharpening, but these little cheapo boogers just keep outlasting their newer and more expensive would-be replacement.
And a few bootleg Lakers T-shirts I bought when we lived in SoCal – $5 after the game on the dark streets of LA. They’re more than 10 years old and get worn regularly. They just won’t die.
Of course, when you buy them you have no idea they will last. And most cheap stuff doesn’t. But then there are always the sleepers – don’t you just love them!
You can get decent quality stuff for a good price these days. I think the premium price is way too high to pay for items. People’s argument is “it will last a lifetime.” I don’t think we need stuff to last a lifetime, we get bored of things pretty easily these days.
I agree wholeheartedly. Witness the rise of discounters like Walmart, Amazon, etc. On the other hand I didn’t shop price when looking for my doctor in fact his fees never entered into the decision process.
I think nowhere is the exception more glaring than in shopping mutual funds. Not that I think chasing past performance is the way to go, but aiming solely for the highest expense ratios is an even worse strategy I would say. I wonder how the ‘efficient market’ theorists can explain the persistence of mutual funds whose performance is dragged down by expenses?
For those who haven’t considered this factor, over the long term looking up this data is well worth the time and effort.
That is so true Len. And, I believe as consumers we should spend time picking the best product out there because it’s worth it as we can get what we pay for. There are really good products out there that are less expensive.