On a scale of 1 to 10, how good are you at extracting maximum satisfaction from each dollar you spend? How well do you perform when you measure yourself? If you were to spend $100, what would give you the most joy? Take a few moments to brainstorm: What in your monthly spending gives you the most joy? The least? What spending is mindless and what is mindful?
Have you ever had a drink that was too sweet? In the book Sugar, Salt, Fat, researchers discuss the exact amount of sugar it takes to make people crave sodas. Too little sugar and the individuals prefer sweeter; however, too much sugar makes people sick. There is a point where the joy of consumption is maximized- the Bliss Point. It’s a Goldilocks’ dilemma. What about alcohol? There is a point where alcohol makes you feel a buzz, but if you consume too much you are guaranteed to feel terrible. Money works in the same way. Consuming too little leaves us feeling deprived, yet consuming too much leaves us feeling gluttonous and overindulgent. The quicker you can examine yourself and determine your personal bliss point, the greater satisfaction you will be able to experience.
Gaining Efficiency in Our Spending
The better we know ourselves, the greater the opportunity we have to eliminate waste and create maximum joy from the limited resources we have available. The end goal of Simple Economist is to have all of our readers live incredibly efficient lives. One of the primary ways we do that is spending our money on the things that actually make us happy in the long run. It often starts with identifying and eliminating the types of spending that certainly do not bring us satisfaction.
Late fees, bank fees, overdrafts, interest payments, and speeding tickets are a few examples of the expenses that provide the least satisfaction. Double dissatisfaction due to guilt, annoyance, and irritation further complicates these least useful expenses. Eliminating this type of spending is the low hanging fruit. The next step involves tackling transportation, communications, housing costs, food, and entertainment. It doesn’t happen overnight, but over time we can evaluate which activities actually make us happier.
One of the ways we have experimented with evaluating satisfaction is by taking a week or a month and keeping track of our outflow on various activities. Once the month ends, we examine all of the different purchases and think through which ones actually made us happier and which ones left no lasting joy. Did that extra large box of doughnuts or a fancy date night bring us more joy in the long run?
Sometime spending starts as a luxury but ends up a mindless habit that brings much less joy that it once did. Economist like use the term Diminishing Marginal Utility – but basically, we get less incremental satisfaction the more we have of something. That first cup of Starbucks each month is amazing but the 3rd Frappicho for the day makes us feel gross. When we turn luxuries into habits with become mindless spenders.
When we are In the moment, we rarely choose long-term satisfaction. We default to short-term gratification. That is why, to live efficiently, it is imperative to begin with a cash flow plan. Once the positive habits have been established it is a less necessary, but still enlightening about our current state of consumption. Successful businesses certainly meet annually or quarterly and identify the most useful areas to prioritize. With focused intensity, they funnel resources into areas that provide value. We need to do the same. We need to understand the items that give the greatest impact and focus our attention and spending there.
Expanding the Bliss
There are actually a group of professors and writers who spend their time studying how to spend money efficiently. In their book, Dunn and Norton explain the science of happier spending and suggest ways to enjoy our money more. One of the things we personally do is putting vacations, date nights, and special events on the calendar. I’ve found the build up is part of the joy in the process. We also tend to focus on experiences rather than accumulating more things. I’ve found that personally I prefer to save and buy larger things while Ms. SE tends to enjoy spending smaller amounts more often. We are both constantly evaluating how we can change and evolve to assure we are not wasting any of the resources we have. We still enjoy experimenting with short term changes to get out of our comfort zones and ensure we are not becoming mindless in our habits.
The end goal is to shift our consumption to things we actually value most- things that provide lasting satisfaction. The bliss point is the area where we get the most reward for the money we spend. We are all different. We need to spend the time to learn about ourselves. We need to spend the time to get to know our spouses and family members. Once we fully know ourselves, we can tailor our spending to achieve ultimate efficiency and get the most joy with the resources we manage. Take the time to find your bliss point.