Monday, April 23, 2012

How Much is Enough? Pt. II


In How Much is Enough? part one we talked about the Fulfillment Curve. It is a great visual representation of the concept of enough. When we ask the question “how much is enough?” we find that the answer is unique for each person. The objective is to fund survival, some comforts and only the luxuries you consider most important.

  Determining what is enough can be a little mysterious and elusive. Developing awareness is key. Think of enjoying a fabulous meal, appreciating each and every bite. It is tempting to ignore feeling full and just keep eating. Before you know it, you’ve over-indulged and spend the next couple of hours feeling like a stuffed animal. Clearly, you’ve gone beyond enough.

How do you arrive at a definition of enough when it comes to money? Begin by tracking your expenses. You can't recognize enough until you know how much you are spending and on what. Make a list of the major categories of your expenses and note how much you are spending on each category every month. You may want to use the sample spreadsheet attached to this article as a basis for beginning this exercise.

Once you have developed a list, look at each item and ask yourself the following questions: 1. Is this expense consistent with my values? 2. Am I receiving satisfaction commensurate with the amount I spend on this category? Create two columns to the right of each line item. Fill in your answers to the two questions for every amount, using a “+” to indicate a “yes” (does that expenditure align with your values; does it give you joy;) a “-” if the answer to a question is “no,” and a “0” if your response is “neutral” – neither positive nor negative.

For example, consider how you might answer the second question when you compare spending $20 for a book and $75 for a nice dinner. You might conclude the book is a purchase more in line with your values and something that is very high on the scale of satisfaction relative to the money spent. The dinner, while enjoyable, is soon over. Was it “worth it?” Or is the satisfaction to cost comparison a “-?”

Now you have some facts. This is not a time for feeling badly about past decisions. It is just an opportunity to take an honest look at your spending patterns. You will be able to identify expenditures that aren’t in line with your values. That is part of the beauty of this exercise.

The exercise enables you to look at where your money is going relative to two very important criteria: your values, and satisfaction from your purchases. Ultimately you want to fund your plusses, and de-emphasize the negatives.

Finally, you will begin to develop an intuitive sense for how much is enough. I recommend you continue to repeat the exercise for a number of months. An actual amount for a desirable level of spending for you will begin to emerge. Anything above this amount begins to decrease the satisfaction derived from spending and creates clutter (I should include a picture of my garage here, but it is too embarrassing! You get the idea.)

As you fine-tune your expenditures, you end up with a monthly number that begins to approximate your ideal overall level of spending. Multiply by 12 months and the resulting figure represents enough money for you to live on, and live fairly well. By this I mean you will fund your basic needs, along with some comforts and the luxuries you value most.

This idea of enough is an important concept. It empowers us to make more conscious choices and aligns our values with our actions. It provides us with greater confidence in how we handle money and reduces worries about having enough. Enough said!

P.S. I have some spreadsheets that will help with this. Just ask!


 

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