A common piece of personal financial advice you are likely to hear around spending is to look for bargains. The advice is coming from a good place. Every dollar you are able to save is another dollar that you can invest toward the future. But there’s a problem.
Often, when we shop for bargains, we ignore “value”. Value accounts both for an item’s cost as well as its function. For example, you can save money on clothes by purchasing lower quality brands. However, if you have to replace them more frequently than you would the more expensive items, they could end up costing you more in the long term.
The Boots Theory of Socioeconomic Unfairness deals with this problem. It states that wealthier people can afford higher-quality products, and in turn end up spending less on necessities over their lifetime than their less wealthy counterparts. Click here to learn more about how this impacts your finances.