One the most valuable lessons in personal financial management I’ve learned so far is that of always seeking to determine intrinsic value of pretty much everything I might want to buy or sell, or use as an instrument through which to invest some of my money. To get the obvious reasons of why working on intrinsic value is important out of the way, it’s simply a matter of being able to save more of your money or get lots more out of it.
To make a real-life example that most people can easily relate to, say you’re a frequent traveller and you have a good measure of when certain flights tend to be full and when they fly with so few passengers that the airline uses a smaller aircraft. What you’ll also be aware of in this case is that those plane tickets which are available for the emptier flights are usually considerably cheaper than tickets for the exact same flights sold on the busier days. This means that the actual price of a trip by air is much lower than what you’re made to pay, obviously since there are service provision costs involved such as overheads, taxes and even the profits which the airlines are after. I mean there is no other reason to go into business than to make profits, so nobody should ever feel bad about paying more for something which is naturally cheaper to produce than what they’re paying for it. That’s just how business works — you’re paying for convenience and in the case of flying, there’s no other way to do it than to pay for a ticket that has all the service fees added to it.
What I’m getting at though with the airfare example is that if the price of the exact same ticket can fluctuate based on demand, then the real value of the ticket is somewhere in between the highest and the lowest price you’ll ever pay for that ticket. The intrinsic value with regards to your own situation though would come into play on the level of considering just how much value you’re getting out of your purchase of that ticket. Are you going to get more business wherever it is you’re flying to? Sometimes something like a refreshing vacation really does count as value because you need to recharge your batteries, refresh your mind and then get back to work with more energy to be more productive, for instance.
So the measurement of intrinsic value is not an exact science, but its mere consideration can have you in for some major value to be gained through simple processes such as betting online with promotions instead of going the usual route funding your account with the exact amount you’ve set aside to bet with.
This principle applies to all areas of one’s financial life. Usually convenience is priced into whatever we pay for whatever we’re buying, so if you can do without that added convenience and perhaps source the product or service directly or cheaper somewhere else, that demonstrates an understanding of intrinsic value.