I read this article Why a Budget Could Cause You to Spend More, and while I didn’t like how it was written I did think there was a good idea point buried in it. The premise of the article is that a new study suggests that when consumers have a budget they focus purchases on the top end of their budget limit not looking for better values. From the comments a lot of readers hated this article assuming it was bashing budgeting. The more insightful comments suggested two important points:
· Budgets are to keep your spending within your means not to minimize spending
· You may get more value by buying a more expensive item you can afford.
I think that the study is probably correct- when you have a pre-budgeted amount you are likely to look at items near that amount and buy one. If you don’t look at lower cost alternatives you certainly won’t buy one.
I think a better tactic is to have a budget range rather than a single number. Then when you shop start by looking at the low end of your budget range. Once you know what the lower price range has to offer compare it with the higher range within your budget. Knowing the differences in features and prices- ask how much more are the extra features worth? If the additional features are worth it then buy the more expensive item, if they aren’t buy the lower priced item. I’ve applied this method to a car, dishwasher, and refrigerator purchases and I found that I was happiest with the basic models from reliable manufacturers because I didn’t really value the extra features in their higher end models even though I could have afforded them. At the same token I didn’t want to buy the absolute cheapest items as I was willing to pay more for a model that I expect will be more reliable.