Price vs. Value

Understanding the difference between price vs. value will probably save you a lot of headaches, improve your finances, and even your life.

To simplify, price is the dollar cost, while value represents the benefits or worth received.

Price is very easily measured, and is an okay measure to use when purchasing goods and services of relatively low significance. Goods are easier to compare because there are usually less variables to consider. As the purchase becomes more significant then so should the role of value.

Value is much harder to compare because some of the benefits are intangible. An example of a product purchase is a personal vehicle. You may have found two similarly priced vehicles that have many similar features, but the less apparent differences are the resale values, operating costs, and repair costs.

An example of determining the value of services can be made with an investment advisor. A good investment advisor will help you to not only achieve investment returns that are in line with comparative benchmarks, but also minimize the tax impact, allocate resources properly, and make sure that you do not make rash decisions, such as selling when the market bottoms out.

Take a step back and think of decisions that you make only on price. Now, factor in value and compare your experience and results. I am sure that you will be surprised.