Oct 292007

I’ve spent a bunch of time lately thinking about how to attract wealth into my life. I’ve got the mental virus that is keeping me broke (great site, btw, the best resource on attracting wealth I’ve found and he thinks/talks a little like me). I highly suggest reading that article because the rest of my post will make more sense. Another great one is Steve Pavlina‘s “Is Becoming Wealthy Inherently Evil?”

1. Money is just a form of holding value. It is neither good nor bad. We make judgements about the people who has a lot wealth.

2. Examine your critiques of other people’s monetary habits and think about it. For example, I think spending over, say, $50 for a pair of jeans is ridiculous, unless they’re going to last a really long time. I found this out because I caught myself thinking that in a store once. I have a very functional sort of understanding of value.

3. Another important way to determine value (other than the FUNCTION, not necessarily the form of something) is by its costs. This is what Paul’s alluding to in his mental virus above. How much did it cost to make this thing?

4. The most important thing about this cost-valuation thing is that that’s how I determine how much I’m willing to get paid—what’s my cost to rendering this service. The hours don’t really matter much to me, because I don’t really get paid to spend time with friends or go to class, so I don’t really tend to think in terms of time anyway. The cost I look at is how hard is it for me to do it. For example, I’d feel weird about taking more than 20 dollars an hour for doing tech-support, but companies like Geek Squad or Nerds on Site regularly charge hundreds of dollars for the same stuff I can do. The reason I believe I feel weird is because its not particularly hard for me to fix computers and do tech support. I feel that I have to sacrifice something more (other than time, although I think I might start charging more for that now), either emotionally or physically to get more money.

This is the same reason that Paul wrote that article and at the end he wrote that when your cost is pretty close to zero (ie, you’d do what you love even if you weren’t getting paid for it), what do you charge?

5. Paul’s suggestion is to charge what the market is willing to pay. That doesn’t really sit right with me, off the bat. Probing into why it doesn’t feel right to me, I come up with two possible reasons why. The first is that I’m afraid of being called a price gouger (sorta like how I’d react if someone charged me every last penny I would be willing to pay) and being greedy. The solution to this is not to go after every last penny, but do charge a fair price (how to determine “fair” value is the tough part here).

I also feel weird accepting more money if I know that they can get it cheaper somewhere else.

6. Also part of my valuation heuristic, if I found out that something cost a lot less to make than I paid for it, I think I’d be pissed. BTW, another that determines your behaviour is how you feel in one part of the relationship. If as a customer I’d be pissed if I was charged a lot more than it cost to make something, I’m likely to think that other customers would be pissed too if I charged them much more than my costs.

7. I’ve started to think to myself that things have value other than their cost or their functional cost. A good looking pair of jeans that costs a hundred dollars has value, just not particularly to me. Same with a BMW, it has other forms of value, if only as a status symbol.

8. The real question does seem how you determine the value of things. So far, I’ve found holes in the way I currently value things, but I’m still thinking about what valuation model I can use to replace it with.

  5 Responses to “Musings about Intending Money”

  1. […] be a little rambly, but if you cna understand it, I think it might help you, especially point 4: Mind-Manual » Musings about Intending Money While not directly about what you’re talking about, but it seems like a version of what I call […]

  2. […] part of applying IM successfully, ie, how you value things in life. I talked about it a bit here: Mind-Manual » Musings about Intending Money Essentially, I think the way that most of us find the value of "things" in our lives is […]

  3. Hi,
    Surely the price also reflects what your competition is charging. I make picture frames, but I´ve heard a competitor charges less than I do, so do I lower my prices to compete or carry on charging what I do?

  4. Hi Nigel,

    It depends. Obviously you’re in the business so you probably know it better. Perhaps you are in control of certain key distribution channels that prevent competitors from coming in and thus can charge the higher prices? You also seem to be suggesting that picture frames are simple commodities and the customer only cares about the price and if you keep your price as is, people will just buy from the other people. I’m not sure if this is entirely true, so I would suggest looking at that assumption.

    The problem with commodities is that it is a race to the lowest margins and lowest price, and does not usually leave room for any sort of premium profits, and if you’re in direct competition with the likes of Wal-mart, watch out.

    My suggestion? Either make some sort of picture frame that can be marketed and sold at a premium price by adding perceived value to it, package some other product with the picture frame or get out of the picture frame business.

  5. […] Nigel, I just answered your question on my blog here: Mind-Manual » Musings about Intending Money And thought of something else. You see, that’s where perceived value comes in and that’s where […]

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