Rational Purchasing Decisions: Right Decisions

Are you a rational or emotional decision maker? Ask yourself now if you are really interested in saving money for future needs like a house, car or a wedding. All of us want to have a house of our own when we are in our middle age or at least in old age, where we can live without any tension. The economic crisis has made it more difficult to achieve this goal but who is responsible for this crisis! We all are part of this world and only we can change the situation. Put it this way, say it that I will not spend money on useless things and will help to achieve my own goals and others too.

I used to be a very emotional decision maker so when you will read this Hub you will get my own personal experiences from which I have learned a lot.


Types of Purchasing Decisions

  1. Rational Decision Making It involves logical thought processes in making purchasing decisions. Our buying behavior is influenced from many factors but in rational decision making utility is the first criteria and the last one too. Rationality seeks minds advice which excludes every emotional appeals. Suppose your children insist you to change the car as the model of your present car is too old but your mind suggests that your car is still in good working condition so you do not need to change it as changing may require additional costs.You quit the idea of changing car because it is just a want aroused in your children from peer-group influence and not an actual need. This type of decision making in making purchases is rational.
  2. Emotional Decision Making It involves largely use of emotions in deciding about making any decision. Emotional decisions are usually taken very fast as the use of logic is primarily absent. You saw a necklace in a window display and you stuck there because it is looking so fine and bright. You think that it goes with your personality may be if you do not purchase it now it will not be available in future so regardless of the fact that you do not need it now you go and purchase it. This decision is based on your emotional wants not logical needs.

How to be Rational in Purchases

  1. Decide Whether you are a Rational or Emotional Buyer Not every decision should be based on emotions, on the other hand not all should be based on logic. Socio-psychologists believe that most of our decisions are based on emotions and even if we decide to act rationally our final choices are still emotional. So they say that start planning rationally, when you have to make any purchase, but at the end make choices according to what your heart says. In most of the cases with emotional decision making you spend money on useless things -impulse buying- so I think its not worth being emotional in making purchases. Rather its good if you use both logic and emotions.
  2. Decide Which Decisions Should be Logical Its needless to say that make plan before making any purchase this will help you decide which purchases should be based on emotions and which should be on logics. Decide whether you are acting on needs or on wants. We might need to have kids-bedroom furniture for our new house as we go to the shop we buy furniture along with it we also buy a poster of Harry Potter as our kid insists on buying it, stuff toys which your kid may already have in large amount (as he got them on his birthdays) and many small but money consuming things like candle stands, lamps and racks. What the hell! you went to buy one thing but ended up buying the whole shop. We do this often while buying at departmental stores because they contain A-Z of our requirements. We go to one department and then other and other and during window shopping we buy so much that was not required. So better decide which decisions should be logical and should not be compromised. If you will start thinking you will get to know that most of our decisions should have to be logical. Think about it!
  3. How Companies Trigger Emotions This is very common in today's world as marketers know enough of people's psyche they trigger the emotional needs and wants of people. They know that they can convert a want into a need if they trigger the right nerve. That is the reason why impulse buying has become so common, when people go to shopping they often have no plan and they buy whatever is colorful, bright, aggressively advertised or promoted by different other methods.
  4. How much you can Save from Right Decisions Right decisions can make you save as much as you want to save. Actually we spend so much on not-so-required things that if you start making list of needless things, you purchased previous month, you could not sum up all of them in few pages. These needless things can then be erased from next months shopping list and if you decide to make a plan and act on it you will find out that in the end you have saved some money for your long-term plans. Its up to you how do you cut down extra costs from your budget or plan and you will save money accordingly.
  5. Which Needs to Fulfill A need is something that is not yet fulfilled. We all need food, clothing, shelter, education and sense of belongingness but still some people need $1,000 and other need $ 1 billion to satisfy these needs. The reason behind this difference is that some people try to fulfill only basic needs and other consider their wants as s and wants can be infinite. All of us need to have 2 suits to wear: one to wear while the other is dirty but our wants tell us that we need a cupboard which contains day-suits in every possible color, couple of night-suits, dresses for evening parties and formal occasions too. So wants can be innumerable but reducing unneeded wants can make you save some money for buying more important things. 
  6. What you can Buy from your Savings If you start saving now you can make up enough money in a couple of years that will help you fulfill your dreams like buying a house, a car or a wedding arrangements can be completed without any frustration.


The Difference in Saving per Month for Purchasing a House or a Car before and after Rational Decision Making

(click column header to sort results)
Expenses/categories  
Percentage Allocation of Income before any Plan  
Percentage Allocation of Income with a Plan  
Food
10%
10%
Grocery
6
8
Eating out
4
2
Personal Grooming
10%
10%
Clothing/apparel
4
4
Services
2
2
Personality products
4
4
Housing
30%
30%
Shelter
10
6
Taxes
2
2
Gas bills
4
2
Electricity bills
5
2
Telephone bills
4
-
Housekeeping
5
-
Saving for a house
-
18
Transportation
20%
20%
Car/other vehicle fuel
5
-
Vehicle maintenance
5
-
Public transport
5
10
Vehicle purchase/saving for purchase
5
10
Education
20%
20%
Tuition fees/other fees
5
5
Books purchases
2
2
Education saving
5
8
Miscellaneous expenses
8
5
Entertainment
10%
10%

With rational decisions like one showing in the above table you can reduce extra costs and can plan to achieve long-term goals in short time. Having a house can be very difficult with meager resources but if you continue to cut down unneeded costs you can make it easily.

Which Emotional Needs this Table has Minimized

  1. Eating out has been reduced by eating at home. The money you spend on eating from your favorite restaurant can be used on more healthy and logical needs. 
  2. Rather than living in a multi-bedroomed house find one that has less rent and hence you can save more money to build or buy your own house as soon as possible. 
  3. When you will live in a house that has less rooms you will have to pay less electricity and gas bills again some money will be saved for your house.
  4. Telephone is not necessary today rather keep mobile but, still if you want to have cable on TV and telephone look for companies who offer three-in-one service at cheap rates: telephone, TV cable and internet connection, check for these services in your area. 
  5. House keeping can be done by yourself and now-a-days housekeeping is very expensive. Better do it yourself, by-the-way it is a good exercise. 
  6. If you do not have a car use public transport but do keep important cards like student cards which enable you to travel on half fare. This will also help in saving money for buying a vehicle.
  7. Do not compromise on education and allocate proper percentage of your income for it but do save some money for future education needs too. 
  8. Once you are able to purchase your own house your 20-30% of these costs will reduce and you can have better education, recreation and better transportation. 
  9. Start minimizing impulse buying or unnecessary purchases today and save for a house

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