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Learning how to calculate true costs of items is important and can lead to saving you tons of money. There are two methods of determining the true cost of items. The first is the cost of the item when compared to your wages. The second method is based upon how valuable the item is to you. Understanding the true cost of items is important in order to comprehend how each purchase affects your financial situation. For example if a person earns around $20 per hour they may have a different insight into buy a $60 pair of jeans if the terms are in hours worked. Is a pair of jeans worth 3 hours of your work time? Perhaps it is better to spend only 1 hour of your work time ($20) in purchasing an item you will be wearing on your days off. By calculating the hours for each and every item you will find yourself instinctively avoiding emotional purchases. You will look at that movie size television that costs $3,000 dollars and say to yourself, “Is it worth nearly 4 weeks of work?” Probably not! Perhaps that new television is worth only half a weeks worth of work and then you can put the left over $2,750 dollars into your investment account. Despite what the price tag says at the local department store you can determine the true cost of an item by looking at its alternative. Recently I went looking for a new sports jacket. I felt as though a change in clothing would be nice and I would really look sharp with the change in wardrobe. Finding the jacket that appealed to me I looked down and saw the $300 price tag. Then I said, “Is this jacket really worth it?” I thought about the 5 other jackets I already had and determined that if I changed my shirts a little I will get a new look. The total cost of looking good was $0 dollars and a little constructive matching. The goal in looking at true cost is to reduce emotional purchases and increase savings. By looking at products true cost you can put your financial resources into places that will earn you more money. Even though you may save only a little money each time you use the process it adds up over months and years. It may end up being enough to fund your retirement plan, a needed vacation, or something important you desire. Murad Ali is a two time published author on business, economics and reform. He is a doctoral student and the editor of the Muslim Times. For more articles writeen by Murad Ali please visit http://www.muradenterprises.org
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