Posted by Mike Smith :: July 16, 2008 @ 9:30 am

To make each and every purchase as cost effective as possible, we need to minimize our cost but also maximize our use. As we have mentioned previously here on the Lending Club blog, getting a little more use out of a product can make a big difference in the value we receive from it.

One popular method is to try to squeeze an extra 20% out of what we have before replacing it. This can work on both the small scale and the large. You probably wouldn’t notice any difference by using 20% less shampoo each day and could probably keep your cramped living accommodations 20% longer before upgrading to a larger home. Following this philosophy across the board could reduce your expenses by 20%. Of course, the use of some items simply cannot be extended or may cause more damage than the potential savings. Using your judgment to exclude such items will maximize the effectiveness of the practice.

One of the things the 20% method helps us to do is reduce spending money to replace items that are still fulfilling our needs. I have often been tempted to replace my surround sound system that I bought over a decade ago. As technology has improved and prices have come down, superior systems have become affordable. But my current receiver still works just fine and I doubt I’d value any improvement in sound quality as much as a new system would cost. Until my current system stops working, I’m going to keep using it. Every extra day I get out of it saves me the cost of a new system and makes the price I paid in 1997 seem even cheaper. The hours of use per dollar spent continues to rise.

So often we focus on minimizing price to maximize value. While that is certainly important, maximizing use can have the same effect. Using both strategies together is ideal in maximizing the most important measure of how we spend our money: value.