The One Dollar Rule

When making purchasing decisions, we have to come to some determination about how much something is worth to us. We have to put a value on a product and then make decisions based on the difference between how much it costs and how much it’s worth.

I don’t go overboard with my purchases, and to avoid making impulse decisions, I use a tactic that has served me well: The $1 rule. With each potential purchase, I ask myself if I would pay $1 per hour or per day for that item, depending on what it is.

The $1 Rule in Practice

When my brother went abroad last year to take some time off before college, I inherited his xbox 360. I grew up without a video game system, but as the youngest child, he was entitled to the gaming system of his choice. I guess I shouldn’t complain because now I get 10 months of enjoyment out of his being spoiled.

I’m not a huge fan of shooter games, racing games, or role-playing games. What I am into is Tiger Woods PGA Tour ’09. I was obsessed. I played about 4 hours a week, sometimes to earn points and get myself the nicest clubs, hat, and cool shades, and other times online with friends. I REALLY enjoy playing. For $15 plus $35 for a one year subscription to Xbox Live Gold (which allows me to play live online), this may be the best purchase I’ve ever made.

For the video game, paying a dollar per play is an easy decision. Would I pay a dollar to play for an hour? You bet! And when I play more 50 hours, I “come out ahead.” I believe I’ve already passed that mark and I’ve enjoyed every minute. Plus, I can now watch Netflix movies instantly on my tv instead of just on my computer, which is just another added bonus.

When I buy a $40 shirt, will I wear it 40 times? If it’s a shirt I would wear either to work or out with friends once every two weeks, I’d need to keep it for over a year to get my money’s worth.

Each person has his own limits and can decide what they’re willing to pay for fun. This system has kept me from making unnecessary purchases and figuring out what is valuable to me.

Readers, what is your ‘$1 Rule?’

9 Responses to The One Dollar Rule

  1. What an awesome concept! I’ve never heard of it before. To keep me from overspending, I compare how many hours I have to work in order to earn enough money to purchase a product or service. That is, of course, after I’ve gone thru the “whole do I need it, do I want it, can I can it for free” thought process.

  2. Hi Daniel, I really liked this approach. I have a similar take on this topic. I think about whether the money spent is worth the time I will put into using it. Since I love watching TV with my hubby, we have a top of the line cable package that is so worth it to us, because we get so much use out of it. I’ll have to check out the $1 conversion.

  3. I never thought of looking at it that way! The value of a product or service can go beyond the price we pay for it. My approach is to find what I like and get the lowest price using a variety of ways.

  4. I have never thought about stuff that way before. I really like your concept. I have often thought about how many times I would use the item and what kind of satisfaction I would get but not the money per hour factor. I usually try to find the lowest price on what I want but that comes at a price too; my time.

  5. This is a really good idea/thought process!! As a recently returned Washingtonian, I’ve had to cut more corners than when I lived in a super cheap city in the south. So I’m glad to have found some smart money blogs like yours. Cheers, T.

  6. I wouldn’t pay for an xbox, when I can play games on my laptop, the same laptop that’s earning me a living. Still, it’s a pretty good idea to think in the 1 dollar terms. It’s a new concept to me, but it does make sense.

  7. I like this idea! I am huge believer in the ROI approach of determining costs. It really helps to eliminate the tendency to buy “bargains” (read, cheap crap you don’t need and will never use!). Hence, not a bargain. It also helps to think in terms of what you make per hour. Ie, if you make $20 per hour, is that Target shirt you’re carrying around worth an hour at work. Maybe, maybe not….