Have you ever found yourself dismissing a purchase based on cost? A typical situation might go like this: you refuse to pay $30 per month to join a gym simply because you don’t want to spend $30 every month. While it is good to be conscious of expenses, you also have to look at the other side of the coin as well and what are the benefits from spending $30 per month on a gym membership. This post will show you the benefits of looking at the cost/benefit analysis.
The Benefits of The Gym
Using the gym example from above, what are the benefits of joining a gym? The first and most obvious reason is getting in better shape and being healthier. While the benefits of this might not be realized immediately, they will be in the future when you have to see the doctor less frequently and can possibly avoid major health issues. These two things would cost you a lot of money, much more than $30 per month.
Don’t Only Focus On Benefits
I’ve seen some people do a complete 180 degree shift on this concept. At first they were only focused on the $30 monthly outlay. Now they are only focused on the potential benefits. But, you might not use the gym, preferring instead to workout at home. In this case, there is no benefit from spending the $30 per month on a gym membership since you are getting healthier outside of the gym.
The point is, you cannot focus on one or the other. You have to be aware of both the costs and the benefits associated with all of your spending decisions. To do this, you need to be honest with yourself. Yes, working out will improve your health, but only if you actually go.
The same idea applies to buying a hybrid car to save on gas. Yes, your monthly fuel bill will be less, but if you don’t drive enough, the initial outlay for buying the car won’t make sense. Once you begin to look at all of the costs and benefits of a situation, you can then begin to take more control over your finances and become better at managing them.
How To Weigh Both Sides
The easiest way to perform the analysis that I have found and personally use is to simply take out a sheet of paper and draw a line down the middle. On one side you will list all of the advantages and on the other side list all of the disadvantages. I usually take a few days break from this after making my initial list and then coming back once more to see if there is anything else that I might have overlooked the first time.
After this, I simply run through them all and mentally weigh them to determine if the cost is worth the benefit in the end. Sometimes it is, sometimes it isn’t. Your goal isn’t to prove one side or the other, but to just make the best financial decision for you.
It’s extremely important to look at both the cost and the benefit when making decisions. Don’t get too caught up in the initial cost of things. Learn to look at the benefit as well. If we just took the cost of college without looking at the benefit (a potentially higher salary) then no one would go to college. With that said, don’t just focus on the benefit either. Look at both sides objectively and make the best financial decision for you.