How Budgeting Your Gadget Purchases Could Blow Your Budget

We all know what it's like: you decide you finally need to get a new computer, TV or camera. The first thing you do is work out how much you can spend, then start looking for the best products in your price range. Big mistake, because budgeting like that will likely cause you to spend more. Here's how to wise up.

Admittedly, common wisdom suggests that setting a budget is a good idea. It means you won't overspend, right? Well, a team of researchers from Brigham Young University wanted to question that reasoning, so they set about testing out how budgeting affects spending. What they found was interesting.

They took groups of participants and asked some of them to set a spending cap and others to be more open-minded when buying different objects, from pens to TVs. Amazingly, those participants that set spending caps consistently spent more than shoppers who did not.

Big spenders

For instance, in one experiment the participants were asked to buy pens. Almost 60 per cent of the consumers who set a budget spent 99 cents or more on a pen. Conversely, only 39 per cent of those who didn't have a budget in mind spend 99 cents or more. The same was true of other products, including TVs. The results are published in the Journal of Marketing Research.

But why does this happen? The researchers suggest that when consumers set a budget, they focus on a narrow range of products all of which are closely clustered around their target price. That means that small differences between the products look larger to the consumers, in turn pushing them to look for products with tiny incremental benefits over others. That means the shopper usually ends up buying more expensive items.

On the other hand, when consumers look at products with no fixed budget in mind, they examine the quality of a wider range of products, allowing them to better judge what they are willing to spend. Often, that can result in spending less.

So what does that mean you should do next time you're facing a big purchase? Well, let's say you're buying a new laptop. First, choose a way to narrow the field that isn't based on price: you might want a 13-inch screen, say. Then, look at as many laptops narrowed by that field as possible to get a feel for what else you want, and weigh up which features you're willing to pay for and which you aren't across the entire subset. It might take you a while, but getting a better idea of what's out there could just save you money. [Journal of Marketing Research via Live Science]

Image from Artist In Doing Nothing under Creative Commons license


Comments

    With technology I have a list of wants and needs. Things that it needs to do and things that I want it to do.
    Then look at the things that meet my requirements, then look at the price.
    If its too expensive I remove things from my want list until it is affordable, or if one of my wants is a huge jump in price for little gain.

      Needs?

      I Lol'd.

        This comment has been deemed inappropriate and has been deleted.

        There are many legitimate tech "needs". You might need a computer for your work, it needs to have enough ram to handle the complex work you need to do on it etc... it's pretty self evident.

    I'm on a very strict budget but I've been shopping around for a new TV.. I went by features. I didn't even look at prices. (I didn't want to spend more than $1k.)

    Price of TV? $300.. 32" 1080P TV.. It has EVERYTHING I need and want. It's not the prettiest shaped TV with very large shell and borders, but I don't look at the TV for the borders etc. It has 1 x HDMI, 1080P, Vesa mount and as a "want" it had RS232. My media PC controls it. The end. What else would I want on the TV? All that "Smart stuff" is handled by media PC. Just don't ask about the cost of the media PC. On the plus side I can play Diablo 3 on it. :P

    So just learn to shop and you won't spend as much.

    Having a target budget doesn't work since price is based on whatever the vendor thinks you'll pay for something, no matter what it is.
    Having a list of requirements in mind with a ceiling budget works best:
    eg: The product must have certain features, some features are negotiable, a good brand and product reputation might be important (reviews?), obvious build quality, and pleasing external appearance.
    The only place budget is important is not exceeding more than you can afford.

    I generally look at reviews to find the best value item and the best performance item. Then I will look at items in that range that best suits my needs and budget.

    The thing I notice is this. When people budget for an item, say, something worth $1000 once the target amount has been reached the money is no longer a concern and they then begin looking for add value and or quality in their purchasing - therefore the chance of going slightly 'over' budget once all comparisons have been met. In most cases, the over budget amount can be pulled from another budget category where some surplus cash may be lurking - so it's no big deal, just get the very best item available.
    Whereas people who do not budget, really don't have a clue how much dough they have and their main concern is not going over a set amount, irrespective of differences in quality, size, warranties that sort of thing.
    In short.
    Budgeters know how much they have to spend and can afford to worry about getting the best available. Even if it pushes you slightly over budget.
    None-budgeters haven't got a clue how much they have, so their main focus is on getting it a cheap as possible - basically shopping in the dark.

      I totally agree.
      Alternatively, non budgeters don't really care how much they spend because they can and/or are in a hurry.

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