How to make decision to buy? - Buying Decision Guide

I started this topic because I met someone who may influence my buying decision process during my China’s trip. Well, read on and see if that will change your mind too. Here are the 3 steps generic buying decision guide that I come out with...

Almost everyday we come across to make decision whether we should buy or NOT to buy something. Should I buy this product? Should I buy this insurance? Should I buy this house? Should I buy this stock? Should I buy this unit trust? Wow, there’re just so many things we want to buy but how do we make decision? What is the guideline?


Step 1: Understand Your Buying Purpose

The first thing that you should all do before you start buying stuff is to understand the purpose of buying a stuff. That stuff serves certain purpose, what is that? Don’t ever fall into common trap that you do NOT even understand the purpose of buying a stuff. Of course in order of to understand the purpose, you must also need to understand and familiar yourself if the products. Keep in mind one thing very important is a same product may serves different purpose to different people. So you still need to identify your own purpose of buying the product and not to be influenced by the person who sell you the product.

No matter what, there MUST be a purpose. Even though if you buy a stuff for the fun of it, then the purpose is for “fun of it”. It is as simple as that. If you really have no idea of the purpose, then you shouldn’t buy that stuff at all!



Step 2: Does the purpose meet your needs?

Now, you understand the purpose of buying a stuff but is the purpose justifiable? Is the purpose really meet you needs? Is this what you’re really looking for? Do you really want to buy a stuff for the purpose of just for the fun of it? Well, it depends on much you value the “fun” then. In reality we have many needs and what is the most important thing is to prioritize our needs. Do you have needs that you haven’t met yet? Then, why don’t you buy stuff to meet those needs first?

For example, buying laptop or buying an iPad is more critical to you? Which one serves the purpose that really meet your needs the most? If I used $2K to buy an ipad, what are the things I can buy to even more to satisfy my needs with the same amount of $?


Step 3: Are you affordable to buy?

Once you understand the propose of the product that meets exactly your need, it is time for you to buy. However there is one question, is the product too expensive to you? Well, this probably the most subjective thing. What is considered as affordable and what is not? Well, this is my own rule of thumb for a very obvious reason that you are NOT affordable to buy a stuff when:

• You need to take loan to buy (except for housing)
  
• You need to take monthly instalment to buy (although is 0% interest)

So, what if for those NOT so obvious reasons? Does that mean you can buy? Yes, as long as it doesn’t affect the key purpose of your savings. Theoretically in personal finance, there are few purpose of your saving. You save for the purpose of:

• Emergency fund – E.g. 6 months of your salary fund for family or your personal emergency. Is this fund affected?
  
• Investment fund – Every month you invest part of your savings or earning. Do you still have $ to invest monthly?
  
• Insurance fund  - Every year, you need to reserve some money for your insurance premium. Is this affected?
  
• Other funds – You’re planning to buy something expensive with this fund that you have save for the past few years. Is this affected?

As long as buying this new stuff that doesn’t affect any of the saving purposes that I mentioned above, you can go ahead to buy. Why not? However being said so, if you still has loan or credits that you haven’t pay yet, you may need to seriously consider whether you should settle your debt first. I would pay up all the debt first before I start purchasing any new thing! Good luck!

[Updated on 12 Dec 2010]  You may want to revisit step 2 or perhaps step 1 as well if you find that you're not affordable to buy in Step 3. Is that something that you really need? Is there any cheaper alternatives? Good luck!


What do you think of these 3 steps buying decision process? Does that sound reasonable to you?


Wait a minute!

Speaking or writing is always easier than doing. What if you meet the following people who want you deadly to buy their product? What if your wife or girl friend wants you support her to buy things from her? What if your family member are selling stuff? Would you support them to buy stuff that you don’t need at all? or you make yourself that you need the product?

What about a very pretty girl that have ever met come and approach you to buy something from her? Have you ever approached by a sexy pretty salesgirl? What is your reaction usually? What if the sales girl goes beyond the line especially when your wife is not around? Wow!

Well, in reality we don’t buy stuff based on our logic – like the 3 steps process I mentioned above. We buy stuff based on our emotion and yes, it is love too. Either you fall in love with the product with no reasons, or the sales girl. You make decision by your emotion and you usually don’t think so much without considering much.

Do you agree? What are your experiences?