Student Debt and Credit Education Blog

My girlfriend loves fancy expensive handbags. We walk by them in a department store and I’ll hear “ooh, isn’t that absolutely gorgeous?” I’ll look at the $1,200 price tag and reply, “no”. If she had the extra $1,200 I’m sure she’d buy it although she isn’t going to spend $1,200 on a handbag when she needs the money to pay back her student loans and save up for a class she wants to take instead. Those things are slightly more valuable to her right now. The concept of value is what I want to discuss.

How can the same handbag represent no value to me and high value to her? The price tag certainly conveys price but it apparently doesn’t convey value. Would the same hand bag be as attractive at $10 in a bin at Target? That is up to you because an object’s value depends on you (or should) rather than the price tag. You assign value to things; the things don’t assign their own value. Keep in mind that the job of marketers is to try to do this for you which is why making things super expensive sometimes has the effect of inflating value to customers.

Thinking about and understanding the relative value of things in your life will help you to save money, to make good financial choices and to stress-out less about incurring debt. You are the master of value in your life and you need to learn to be a shrewd evaluator to stay out of debt and to get ahead in life.

Only you can answer questions concerning value. To illustrate this, here are some questions which I can’t answer for you due to reasons mentioned above. I want you to think about them and I bet you’ll find that you can argue both sides of the value discussion.

• Are 4 years at a private college more valuable than 2 at a community college and 2 at a private college given that the cost is vastly different?
• Is a more expensive new text book more valuable than a used text book?
• What is the value of an insurance policy?
• What is the value of an undergraduate degree? A graduate degree?
• What is the value of a new car vs. a less expensive used car?

If you decided that a graduate degree is valuable, can you point out how it will pay for itself at some point? If so how long will it take? Is there another investment you could make with that money which would be better? Let’s say you want to be a doctor and you feel your salary will be enough to pay back your loans and then live more comfortably than you otherwise would be able to. Fine, then don’t stress about the loans you take out. Now let’s say you want to be a software programmer. Can you calculate the value getting a graduate degree will have vs. getting extra time working in your field? That may not be so easy but as I say, it’s up to you but look at it through a financial investment lens.

A car is a bit more complex than spending money on college. You’ll find no shortage of people to tell you how purchasing a used car is smarter than buying a new car due to the fact that new cars depreciate. But if that used car breaks down a lot and you get fired from your job for being late, which was more valuable, the new car with the warranty and no mechanical problems or the cheaper car with the hidden defect?

What’s even more complicating is that the “personal” in “personal finance” means that emotions do play a part in our valuation of things. You’ll find no shortage of people who will tell you the sweetest smell in the world is “new car smell”. Are you going to graduate from college work hard and live your entire life driving somebody else’s fishy-smelling cast-off? In your valuation of things you also should consider emotional value. In reality most of us lean towards that anyway which is why marketers exist. What I am trying to get you to do is to consider a financial valuation of things rather than just emotional because that will help you make better and less stressful decisions.

My girlfriend attached an emotional value to that handbag, I attached a financial value to it and that is why it had different values to us. I suppose my girlfriend will someday have the $1,200 handbag. I’ll have to give it a smell when she does and see if it smells like a new car.

PS. Free things that can make you money are really valuable, like this code for 15 points at www.ScholarshipPoints.com. Enter GOODVALUE to get your 15 points.

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