What Is Money?
The wife and I went shopping at Costco today. One of the items we bought was a two pack of Skippy Peanut Butter. The two-jar pack was a little over $9.00.
I remember thinking to myself, “Is nine dollars a good price for two pretty good sized jars of peanut butter?”
What’s a Good Price For Something?
“Good Price” needs some kind of definitive definition. Because each one of us is different.
The price of a Gulfstream Jet might be a good price for Bill Gates but way out of my price range. Perhaps I could buy a plastic model and assemble it. But that’s probably the only way I’ll ever have one.
Perhaps “good price” really means “good value.” Maybe I saw the peanut butter as a value. But even that presents a problem.
Even if the Gulfstream Jet is a “good value” its still not going on my shopping list any time soon.
It Comes Down to Ratios
When you go into a bank to get a real estate loan, one of the things a banker will look at is your debt to income ratio. How much you make versus how much you owe.
If that ratio is too high then you’re not getting a loan.
So the peanut butter comes down to a-b=c. The ratio of the peanut butter price (a), to my income (b), is not only a good price, and a good value —it’s a favorable affordable ratio to my income (c).
What Makes Something Affordable
Two of my three books are self-published. Because of that I sometimes think, not in terms of money or dollars, but in terms of book sales.
For example, I look at an item that sells for $100 and I compute how many books do I have to sell before this item is affordable?
I may have already established in my mind that it’s a good price and a good value but is it worth x number of books?
Other people might think in terms of man-hours. How many hours will I have to work to pay for this item? And is that effort worth the end result of having the product?
Some Final Thoughts
Money is a record we carry with us of accomplishments we’ve achieved over a period of time. Forty hours of work equals so much money.
That’s the value we have to work with. The paper itself has zero value.
The effort we extended to earn it is where the true value lies. And how we disperse it give it personal value.
Some people use money as a measure of success. Others measure their success in outcomes.
Much like a nurse or teacher might not make a monster paycheck but is equally paid in the accomplishment of teaching students to read or write thus changing their lives forever.
Is money price, value, or affordability — Or some combination of all three? You make the call.
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