Look At Value Or Price Of Product?
In today’s financial world, a lot of products are made to appear as if they are amazing. The advertisement and promos make you feel that if you don’t buy or invest in them, you will miss an opportunity of a life time. The reason why this happens is because buyers or investors concentrate a lot on the price of a product, rather than on understanding its value.
The Paradox of Value
The law of value simply says your true worth is determined by how much more you get in value than you give in payment. What we really need to understand is simply the difference between price and value. See, price is a rupee amount, it’s a rupees figure. Value, on the other hand, is the relative worth or desirability of a thing, to the end user. In other words, what is it about this thing, this product, this service, this concept, this idea that brings with it so much value, so much worth that someone will exchange their hard-earned money for it and be glad…be ecstatic that they did while you still make a very healthy profit?
Value is not the same thing as price or compensation. Your value is not necessarily equal to your salary. An accepted definition of value is, “The property or aggregate properties of a thing that renders it useful or desirable.” Your salary is simply the payment you take. Your value is the relative worth you add to the organization—both in the mind of the person who signs the checks and also in the experience of the people (both in the organization and outside it) with whom you interact.
We understand these in our daily Life, but we forget this simple rule when it comes to money and investing.
Let us now see some of the products which are of really High Value, Low price.
Term Insurance: Term Insurance is one of the best examples for this.
Millions of investors have discarded the possibility of buying term insurance as they don’t get any money back at maturity. You now realize what they all concerned on: The Price. They feel that they “lose” their money. They have concentrated only on what they don’t get and not on what they are getting. These investors do not think, for moment, about: The Value which term insurance provides to their family and dependents at the price they pay for it. They never look at it from the long term perspective and never question the value it provides in their financial life in the present or in the future. It cost way less than the expectations of people and what people are ready to pay for it. The value offered by Term Insurance is more than what it costs.
Paying Fees to Advisor
Almost everyone runs away from paid services. It’s because the focus is on fees and not the value. Why? We are simply programmed to try to acquire anything we pay for at a lower or may be even free of cost. Fees are not seen as an investment. They are considered as an “expense”. People look at fees as money that must be spent on something which is for immediate consumption rather an investment which can provide them with growth in the value of their wealth in the very near future.
Let me give you an example of the difference between price and value would be a financial advisor who charges you Rs500 to do your file tax returns but saves you Rs2,000 as compared to what you would have paid in taxes had you completed the return yourself. He also saves you twenty-five to thirty hours of time of doing it yourself. So we see in this case value in both concrete, with the two thousand rupees savings as four times that fee in cash terms and even may be the time because we can put time to money, and also conceptual with the good feeling that you have, the feeling of peace of mind of knowing it was done correctly. You can hardly put a price on that. At the same time, although his fee (price) was Rs500 for the work, it didn’t cost his nearly that much to do the work, so he made a significant profit, too—which he should, given the value he provided.
Similarly, financial planners ask for a fee of 15k and they can make a major change in your financial life by just sitting with you and counselling you on your financial life and the mistakes you should avoid. It might look expensive (if you look at price), but if you look at the value you get out of it, it would be a worthwhile product. In fact, if it delivers good results, it could even cover its cost and come to you free, because they can improve your financial life and enable you to reap benefits over the long term. Remember that free advice can turn out to be extremely expensive in the big picture.
The Value of Value
Every time you invest your money it’s important to understand the price of it and value of it. If you find that its cost is less than what you are ready to pay, consider it cheap and go for it and not in the other case. Price and Value depends on Situation, time, age and other factor, don’t forget it. The way this happens is through focus, focus on providing the value. You see, money is an echo of value. It’s the thunder to value’s lightening. Focus on the value and the money will come.