- I pay for quality. There are two types of purchases - commodity-type purchases where you truly are looking at price as the distinguishing feature and value-driven purchases where you are looking for "bang for your buck." If I'm buying baking soda, I will generally buy it for the lowest price possible. It's not like some companies dilute their baking soda - I'm getting the same end product regardless of the price I pay. On the other hand, if I am in the market for a durable item, such as furniture or a car, I will pay for something that I expect will last me a while.
- I look for opportunities where price and value are not equal to one another. This is more important than #1 because your cost basis of an investment determines the return you achieve. Buying shares of stock in a company for 75% of their intrinsic value is the kind of opportunity I'm talking about here. Or another example, buying a foreclosed condo for $18,500 when others are selling for $65,000. I actually did this, and it feels great!
Wednesday, September 1
Success = Not Overpaying
Yesterday I talked about passive recurring income being the single best method for gaining financial independence. Complementary to that is always obtaining goods and services at a fair price. This means two things: