Posted by Lending Club :: March 14, 2009 @ 5:21 am

The current state of the economy is generating a massive group of consumers who are trying to live on a budget for the first time. This is certainly an encouraging development, but many frugal newcomers are likely to make a common rookie mistake.

Those looking to cut costs for the first time often shift to products with the lowest prices. Their logic is sound – paying less means more money in their pocket – but the criterion is flawed. Price is certainly important, but value – the balance of price and quality – is what really matters. There’s a fine line between buying inexpensive products and buying cheap ones.

At times, you might not notice any difference in using a lower cost item. Generic forms of many name brand products often fall into this category. These private label items are the best deals to find. In other cases, the difference in quality for lower priced items will merely reduce your enjoyment from the experience. You may find that your cheaper speaker system doesn’t sound quite as good, though it still works. These types of tradeoffs can be justified, depending on what is important to you. Finally, there is the case where a lower cost item wears out quickly, doesn’t satisfy your need, or is simply inferior to a higher quality alternative. You’ll end up spending more as you replace the item with the one you should have bought or continue to purchase the cheap product more frequently.

It would be nice to have a list of which products are worth paying more in exchange for better quality. Unfortunately, such a list is impractical to compile because everyone’s list would probably be different. The common denominator for everyone to remember is simply that paying less can end up costing more. As you gain experience in cutting costs, you’ll discover the places where cutting too much quality starts to outweigh the lower prices.

What products are worth the premium price of high quality for you?