To clarify hasenj's point about the more expensive thing being "worth 10x more", imagine that an expensive couch will last you 10 times longer than the cheap one (in addition to being more comfortable), but it will cost you twice as much. If owning a couch is an essential part of your desired lifestyle, then buying the more expensive couch is just the logical choice.
Of course, the real question is whether or not you really need couch? This is obviously a matter personal preference, but your present decision-making should incorporate your future preferences as well. There is often a lot of uncertainty in gauging your future level of need/want for a given product, which makes this a tricky game.
It's not a mistake to spend a little extra for something you need. This idiom is designed as a counter-argument to people who buy cheap stuff and boast about how they "saved" money by buying cheap crap that doesn't work well and causes you headaches.