Price is What You Pay Value is What You Get | The Modest Millions Show

As a proud budgeteer, I’ll be the first to admit that I say “no” more often than I say “yes” when it comes to budget decisions. But sometimes, you need (or want) to flex your budget to make room for various purchases. So, how do you figure out the best option? It’s easy to look at the bottom line and make a decision from there, but it’s more important to make a decision based on what’s the best value, rather than the best price.


  • Why cheaper isn’t always better
  • How to determine the value of a possible purchase
  • How to calculate cost-per-use
  • My favorite budgeting tool
  • How we used cost-per-use on a lawnmower


Price is What You Pay, Value is What You Get

For those of you following along, you know I have a reputation as a cheapskate. I say “no” to spending more often than I say “yes.” I’m known to be a stickler when it comes to the budget, which means that discretionary spending gets extra scrutiny.

When you’ve got a budget laid out, and you’re looking to add new items in, the bottom dollar is what often gets the focus. It makes sense, right? If you have $5,000 coming in and have $4,900 budgeted out for savings and spending every month, it’s easy to see where a $100 per month purchase might slide in. But, if you’ve got your budget locked down, it can be hard to look past the bottom line when making purchase decisions, whether it’s a new monthly cost or a one-time purchase.

Going a bit further, when you’ve determined that you’re going to make the plunge and make that extra purchase, do you go with the cheapest option so that it fits neater in your budget? Or, do you make a bit of an investment so your purchase will last longer?

A couple years ago, I heard a quote that Warren Buffet popularized that has really stuck with me and helped us evaluate purchase decisions over the years. he said, “Price is what you pay, value is what you get.” Think about that for a minute. It’s more than just the price you pay. When you focus on the value, you can start breaking down your purchase/investment into looking at the longer term. Does it mean that you should just get ignore the cheapest option? No, definitely not, but also, maybe.

There was another quote that I want to attribute to Warren Buffet, but when I was searching the interwebs for the quote, I couldn’t find. If you have some insights here, please reach and let me know; I’d love to properly attribute the quote. (I think) he said that he makes purchase decisions based on his estimated cost-per-use.

Cost-per-Use Pricing Scenarios

Let’s look at some examples. Are you better off paying an annual subscription of $15 for a monthly magazine, or paying $100 per year for a daily newspaper. If you would read both religiously front to back, the magazine is only 15% the cost of the newspaper. But, when it you break it down on a cost-per-use basis, the magazine comes out to $1.25 per issue versus the newspaper which seems like a steal at $0.27 per issue. Now, there’s something else to consider, and that’s whether you need to pay for either rather than just getting your news, information and entertainment from the Internet and podcasts, but I digress.

How about another example. $500 winter jacket or $20 T-shirt? Well, if you wear the jacket for 125 days for five years, and you only wear the T-shirt 10 times, it cost you $.80 each time you wore the jacket and $2 each time you wore the T-shirt.

Let’s modify that last example for a more apples-to-apples comparison. What about a $500 winter jacket with removable fleece liner that can double as a light jacket that will last five years versus a $75 heavy winter jacket that might last two years. Because the more expensive (and better constructed) jacket is more versatile and will last longer, you’ll be able to wear it for 125 days each year versus the straight-up heavy winter jacket for $75, which you might only wear 60 days of the year. This would also imply that you’d need an additional lightweight jacket for the spring and fall, but let’s ignore that for now. On a cost-per-use basis, the more expensive jacket costs $.80 per use and the less expensive jacket costs $0.63 per use. In this case, the less expensive jacket costs less per use, but since you might still need to buy a lightweight jacket for the non-winter months, you might not come out so far ahead. But, for me, I would feel optimistic that I’d be able to both make the jacket last longer than two years and also wear the winter jacket on some of the warmer days to further maximize my cost-per-use.

This is fun. Let’s do another. This time, let’s evaluate whether it makes sense to spend the extra money for a four-bedroom versus a three-bedroom house so that you have a bedroom and bathroom for guests. For easy math’s sake, let’s say that all things being equal, including the price-per-square-foot of both houses, the extra 12×12 bedroom plus 6×9 bathroom would cost an additional $20,000. We’ll ignore any costs of heating, cooling, cleaning or otherwise maintaining these rooms, or the extra interest we’d pay on the mortgage in carrying costs, and conversely, we’ll ignore any resale considerations for now. If you plan on living in that house for 15 years, and figure that you have houseguests for 14 nights per year. That’s a total of 210 nights that the rooms would be occupied. That comes out to $95 per night. You can probably see where I’m going with this. Would we perhaps be better off putting up our guests in a hotel room while they’re in town. Where we live, that’d be about comparable for a hotel room. It’s something to consider.

When I thought about those assumptions, I had to pause for a second. Right now, we have an extra bedroom that will eventually be for our oldest, but over the past almost two years, I think the guest bedroom has been slept in twice. We are definitely not getting a good cost-per-use on that room. Dang it, that makes me kind of mad. The reason is that both of our families are within a 20-minute drive, so they’re really not going to be spending the night at our place, and our siblings either live nearby or when they come home they spend the night at our parents’ houses. We’ll use the bedroom eventually, but we might have been better off putting those dollars elsewhere.

Let’s take a quick break and come back to talk about a recent value-versus-price discussion we had around our lawn.


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How We Used Cost-per-Use for a Lawnmower

Alright, and we’re back.

We went through a similar sort of cost-per-use exercise this spring, and it’s absolutely applicable to today’s episode, so thanks for indulging me while I share. Maybe you’ve found yourself in a similar dilemma.

We live on about 2 1/4 acres, with about half of that being mow-able lawn. When we moved into the house, we moved in with a pretty reliable Craftsman self-propelled push mower. Because I geek out over a manicured lawn, I bag the clippings every time. And, because I fertilize and water religiously, the lawn is nice and full. With that push mower, it would take no less than 4 hours every week that I mowed. It was super tedious and take up half my Saturday. This spring we began looking at riding lawn mowers to see how much those would cost. Because we hadn’t necessarily budgeted for a riding lawn mower in our big-ticket purchase bucket, we were staring down the barrel of a pretty big ticket purchase, especially once we narrowed it down to a couple of potential mowers.

For assumption’s sake, we figured that we might mow the lawn 30 times per year, and a riding lawn mower (we were considering zero-turn mowers because we have a ton of trees in our yard) would probably let us mow the lawn in about an hour or less each time (including bagging).

As we saw it, there were three options:

  1. Old reliable. Keep using the push mower and pay nothing for a new mower (cost-per-use effectively $0), but it would take four hours to mow the lawn each week. The mower is in good shape, and would probably last another five years.
  2. Bright and mostly shiny. Buy a used, but virtually new riding mower that came with several extra attachments and great full-sized engine for $3,000. This mower was pretty much new, and could probably run for 10 years with just standard maintenance.
  3. Tired but true. Split the difference and give a hard look at a 20-year old, but still relatively well maintained riding mower for $950. The mower has a lot of hours on it, but it could probably last for three years or so, more if we don’t ride it into the ground.

So, there were a lot of factors to consider. First was whether or not it was worth the investment to buy a riding mower. The second decision, if we decided to buy a mower, was whether or not we go with the newer or older one.

The first part of the decision came down to time saved. Coming from experience working as a commissioned salesperson, working in marketing agencies and being a consultant, I had several run-ins with the concept that time is money. Your time is worth something. You might be salaried at work, but anything that’s consuming time at home is taking you away from other things you could be doing. It could be spending time with your kids or picking lint out of your bellybutton, or it could be time taken away from you working on your side hustle or other billable time, so it’s important to be mindful of what your time is worth.

I’ve got a trick for you. If you want to roughly figure out what your “hourly” rate is at your salaried job, take your salary, move the decimal point three places to the left and then divide by two. So, if you earn $50,000, your hourly rate is $25. $70,000 salary equals $35 per hour. $100,000 salary boils down to $50 per hour. You get the idea. So, if you’re time is worth $50 per hour, you can do the math as to what you’d “earn” by saving time.

Let’s just take $35 per hour for this example. If I shaved mowing time from four hours down to one hour, I’d save three hours each mow that I could redirect into more meaningful uses of my time, equaling $105 per mow. Multiply that by 30 mows per year, and that’s $3,150 “earned” over the course of one year. Hey, it just so happens that means the more expensive mower would virtually pay for itself in time saved in just the first year. Add in the fact that the riding lawn mower would last for more than one year, and the savings just compound.

Okay, that helped make that decision easier. We’re a go for a riding lawn mower. Now we just had to figure out which one was worth stretching the budget for. This is where we can look at cost-per-use.

The Cadillac version at $3,000 would cost $10 per use over its 10-year lifespan.

The Pinto version at $950 would cost $10.55 per use over its three-year lifespan.

They came out to about equal. Granted, there are a lot of variables. Either lawn mower could live past its projected lifespan or cut out early, so there’s really no way to tell. But, in this case, since we hadn’t necessarily budgeted for the riding lawn mower in the first place, we opted to go with the rusty, older and far less sexy option for now. Then, in three years (or hopefully longer), we can revisit and then make sure that a zero-turn mower is in fact the right decision and invest in a more expensive machine (or not!). The icing on the cake was that we ended up negotiating the price of the mower down to $850, which dropped the cost-per-use down to $9.44. Bonus!

It’s all relative when you’re trying to make these decisions, but when you start breaking things down, you can make more rational and objective decisions, which should help you make some informed decisions.


That’ll do it for this week’s episode.

I hoped this helped! How do you make decisions like this? Have you used cost-per-use decisioning before? What’s been your experience? How has it gone? I’d love to hear from you.

Also, make sure to reach out with your feedback for me or for the show, topic ideas,

personal anecdotes of your own journey or if you just want to say hi. You can always reach me at feedback[at]modestmillions[.]com.

For a recap of the strategies, tools and links that we talked about today, check out the show notes at

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Join me next week when we talk about the power of small dollars when it comes to personal finance.

Until then, remember to keep squirreling away now to earn millions later!

Thanks for listening; we’ll catch you next time!

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