We End Up Paying More When Better Options are Available

by David@MoneyNing.com · 6 comments

choices are expensive

I remember when we were looking at a house about 18 months ago, the real estate agent would show us a house that is $500k, then one at $550k and another at $600k. On the seller’s perspective, this is called up-sell (which I’ve covered before here).

This time around, let’s talk about the consumer’s (our) perspective.

Choices Are Not Always Good

Example #1 – It’s All About Safety
As part of my wife’s new job, she was given three options for health coverage:

  • Cigna Network Open Access w/ Dental – $55.47
  • Kaiser HMO w/ Dental – $59.97
  • Cigna Network POS Open Access w/ Dental – $62.08

It’s easy to pick the more expensive choice. “Oh it’s only $7 more and it allows us to be covered for out of network doctors.” In the effort to be as safe as possible, we will probably choose the more expensive option. But would we be fine if we were only given the least expensive choice? Probably.

Example #2 – Evil Technological Advances
Our router broke a few days ago and while I was looking for a new one, I noticed that they have this cool thing now called 802.11n (for nontechnical readers, think of faster, better and cooler). Although it’s twice as much money, I instantly wanted it. I still have no idea whether I will buy those new versions or not but would I be just as happy if I never knew they existed and bought the old ones? Yes.

Example #3 – It’s Only Three Bucks
Recently, I noticed that they opened a new coffee shop along the route that I take to work. When I wanted coffee in the morning before, I would tell myself that Starbucks wasn’t on the way to work. Nowadays…. well… maybe I will just get that coffee tomorrow. It’s only $3 bucks and it’s not a big deal right?

The coffees are priced perfectly too. $2.20 for a small, $2.60 for a medium and $3.00 for a large. Only $0.40 more and you get twice the coffee so give me a large.

We Just Want The Better Choices

When we are presented with choices, we will naturally pick the the more expensive one. We tend to focus on the cost difference (often small) and try to convince ourselves that the incremental cost is worth the extras. It’s only a few bucks here and there but they add up you know.

Do You Have a Better Idea?

If saving money is one of your priorities, focus on what you are comfortable getting instead of the the cost difference of each choice. For every purchase from now on, focus on the minimal you are comfortable with and pick that choice.

A Simple Example – Picture Perfect
Never mind that the Sony flat screen TV looks clearer than the Vizio when comparing them side by side. Focus on whether you would be happy with the Vizio flat screen in the living room. If the answer is yes, why are you complaining that you didn’t take the Sony home?

See what I am getting at? Focus on what’s really important, and you will save more money. Focus on the benefits, and be prepared to pay for it.

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  • polym says:

    You’ve gone wrong on the insurance example. While you’re absolutely right that we often confuse quantity with value (if we didn’t Costco & the like would cease to exist) insurance is a poor place to ‘save’ money.

    All insurance is a gamble – you pray that you are wasting the money you spend on it because having it pay for itself is catastrophic. After years of having good doctors leave HMO’s (at one point the HMO you cite was paying dr’s only $9 per patient per month no matter what the dr needed to do to care for the patient) I started to insist on the most comprehensive plan open to me.

    Then I got cancer.

    Instead of facing financial collapse as so many patient around me are, or making choices about what I can pay vs what care I need or tests would be helpful, I can just work on being well. Because I lost the insurance bet, and I needed it.

  • avantika banerjee says:

    Its really an interesting post. Its a common scene that people do cost people generally forgo the savings motive as they get inclined towards cost effectiveness derived from incremental piece of item. And then, they just howl that they have saved hardly any penny. It is advisable to stick to the minimal in which one is comfortable in and then pick the choice.

  • Elizabeth says:

    I have to respectfully disagree with most of your conclusions. I prefer the quality over quantity choice.

    I replaced my router about a year ago. At the time I figured why spend all that extra money on fancy technology I can’t even put to use. Well, here it is a year later and unexpected circumstances have brought two computers into my house that could, if available, make use of the faster “n” technology. Instead they’re stuck on my “g” network.

    Another example: insurance. My son needs an expensive “team” evaluation for a possible (read: probable) Asperger’s Syndrome diagnosis. I recently discovered that the only qualified organization in my entire state (not just my local area, the whole state.) is out-of-network. This diagnostic process will cost, at minimum, $3,300.

    Our family is lucky to have insurance at all. If we’d been given the option of out-of-network providers for a paltry $7/mo I would have jumped at it without a second thought — even before finding out about our latest insurance predicament. I’ve had to change doctors for myself and my children because our preferred provider didn’t renew their contract with our insurance company. And I’ve had to pass over too many recommended doctors because they weren’t in network.

    I’ve never been one to choose the top option just for the sake of having the biggest or the bestest. I’m not a bells-and-whistles-just-for-the-sake-of-bling kind of person. But I’ve learned too many times that buying the least expensive option is rarely a good idea if you’re buying a product you expect to own for an extended period of time.

  • Penelope @ Our Fourpence Worth says:

    We decided to treat ourselves to McDonald’s last week after a particularly hot (our A/C is broken) and productive day. My sister wanted a strawberry milkshake. We usually share milkshakes and I planned to get a large, because as you mention above, it’s cheaper when you get the largest size.

    But when I got to McD’s and was about to order, I remembered that in the past when we’ve ordered large milkshakes, we were never able to finish them and that extra $0.50 just ended up being wasted. So I got a medium and my sister was just able to finish it with a little help from me. Waste averted. 🙂

  • Praveen says:

    I think that it is good advice to go for the smallest, simplest, and cheapest option that satisfies your needs.

    You can splurge on a bigger coffee once in a while, but buying the smallest can really save money, time, and aggravation when it comes to purchases like cars, electronics, computers and, software.

    I think a big mistake people make is choosing more than they currently need because they “will grow into it”.

    90% of the time, you will end up not using the extra capacity or features. Either you will never have the need or else the technology will leap frog so much that you have to replace the whole thing.

    Instead, you will end up paying the support costs of having all this complexity around which you will never use.

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