The fulfillment curve...

[obgyn65]

Hello everyone - I found this curve on the internet this morning (reference : Get Rich Slowly - Personal Finance That Makes Cents). Found it interesting, would like to share it. The overconsumption part of the curve seems to correlate with competition, stress and "other sorry outcomes"...

 

[rescueme]

One person's "overconsumption" is simply another person's perceived basic needs.

If one would look at Maslow's hierarchy of needs, you would see that the top of the pyramid does not reach beyond "infinity" (as your chart shows).

My own interpretation? We can never go beyond infinity (e.g. cross over to the downward slope). If we do, that's the view of others - not ourselves.

Your chart shows the view of others, not of self-actualization…

 

[rmark]

IIRC, it's originally from the 'Transforming Your Relationship with Money' tape set, later written up in book form 'Your Money or Your Life'. Interesting read, long on philosophy but short on personal finance. Same folks are at this website.

Financial Integrity | Free Practical Financial Planning Tools | Get Out of Debt - Become Financially Independent

 

[dex]

One person's "overconsumption" is simply another person's perceived basic needs.

If one would look at Maslow's hierarchy of needs, you would see that the top of the pyramid does not reach beyond "infinity" (as your chart shows).

My own interpretation? We can never go beyond infinity (e.g. cross over to the downward slope). If we do, that's the view of others - not ourselves.

Your chart shows the view of others, not of self-actualization…

Your chart shows the view of others, not of self-actualization…

Do you mean how one person observes another's behavior? If so, I agree.

 

[rescueme]

Do you mean how one person observes another's behavior? If so, I agree.

That's exactly what I'm trying to say (even if my words did not )...

 

[Khan]

"First you get everything you need, then you get everything you want, then you might as well give it away."
---Kenny Rogers

 

[haha]

"First you get everything you need, then you get everything you want, then you might as well give it away."
---Kenny Rogers

What Kenny did, right?

 

[Khan]

What Kenny did, right?

I think he did, after being talked to by Harry Chapin.

 

[Midpack]

I think this is exactly right. Enough varies from person to person, but we all have an enough. Our goal is "a modest, ordinary life" - though it's relative to our past spending and meaningless to anyone else.

Unfortunately, most people I know still seem to think more money equals more happiness...

 

[Bikerdude]

I think he did, after being talked to by Harry Chapin.

Before or after Harry died.

 

[traineeinvestor]

It's possible that I don't understand what the curve is saying but it seems to implicitly conflict with studies that show that happiness peaks at a certain level of income.

The curve says that fulfillment continues to rise until we have "enough" but does not define what is "enough" - presumably on the basis that what amounts to "enough" will vary from person to person which means that the curve is saying that some people may achieve maximim fulfillment at higher levels than others - rather than everyone more or less maxing out at a given level of consumption.

Now I accpet that "fulfillment" and "happiness" are not the same thing, but they are close enough. Likewise, this chart is about consumption and the happiness studies are about income, but given that income and comsumption are highly correlated, the comparison is still a valid one (IMHO).

So how should we reconcile the two studies?

PS - I agree with the position taken that fulfillment does peak at some point and that consumption beyond "enough" is unlikely to add much, if anything, to quality of life etc.

 

[obgyn65]

Thank you TraineeInvestor. Please could you kindly provide references that may contradict the findings from the fulfillment curve ? I am new to all this but interested in learning. Thank you.

studies that show that happiness peaks at a certain level of income.

 

[traineeinvestor]

Thank you TraineeInvestor. Please could you kindly provide references that may contradict the findings from the fulfillment curve ? I am new to all this but interested in learning. Thank you.

There was a recent thread on this forum: http://www.early-retirement.org/forums/f28/day-to-day-happiness-peaks-at-75k-51999.html

As mentioned, I accept that it is not an apples to apples comparison but they are close enough that I struggle to reconcile the two conclusions.

 

[obgyn65]

You bring a good point TraineeInvestor. Maybe "overconsumption" is the key added dimension. 'Overconsumption" may be perceived as reducing fulfillment in life. At the same time, I do not think those posting in the thread you mention always see themselves as "overconsumers" (they have reached a "plateau"), hence they feel happier (or leading more fulfilling lives). Does this make sense ?

There was a recent thread on this forum: http://www.early-retirement.org/forums/f28/day-to-day-happiness-peaks-at-75k-51999.html

As mentioned, I accept that it is not an apples to apples comparison but they are close enough that I struggle to reconcile the two conclusions.

 

[Midpack]

You bring a good point TraineeInvestor. Maybe "overconsumption" is the key added dimension. 'Overconsumption" may be perceived as reducing fulfillment in life. At the same time, I do not think those posting in the thread you mention always see themselves as "overconsumers" (they have reached a "plateau"), hence they feel happier (or leading more fulfilling lives). Does this make sense ?

Old hat to this crowd but though it does seem counterintuitive to most people, it's not. Overconsumption can indeed reduce fulfillment/happiness - maintaining a life of excess can be more of a headache (and expense) than any (fleeting) fulfillment the excesses provide. Ask anyone who has gone thru decluttering/simplifying/downsizing their lives - it's a revelation. Most people buy stuff, it makes them happy for a while and then wanes, and they just buy more stuff and the cycle goes on endlessly. Never happy but for a moment. It's a pattern Americans have gotten particularly good at, thanks to Madison Ave etc. And it's also the reason no one labels themselves as overconsumers, even if they're way past "enough."

I'm giving a highly simplified example because it's preaching to the choir here. The chart is conceptually right IMO. Read Your Money or Your Life or The Millionaire Next Door - one day their messages make sense to most people though they're not mainstream thinking.

To the point of enough varies from person to person, a big part of it to me is cost of living. I don't think the difference in actual activities, possessions etc. varies as much as the relative cost between say living in NYC, NY vs some of the very low cost areas of the USA or other countries.

 

[Katsmeow]

The curve says that fulfillment continues to rise until we have "enough" but does not define what is "enough" - presumably on the basis that what amounts to "enough" will vary from person to person which means that the curve is saying that some people may achieve maximim fulfillment at higher levels than others - rather than everyone more or less maxing out at a given level of consumption.

I think that you can look at the chart as not being so much subjective as allocating for different costs of living. That is, it seems to say that when you have just enough to afford some luxuries is the top. You could afford one Corvette but don't have enough to just go buy 10 of them.

On the other hand the income or assets it would require to get that point might be very different in different parts of the world.

All of that said, I don't think that everyone agrees on what is a necessity and what is a luxury.

 

[MasterBlaster]

That curve is straight out of "Your Nobey or Your Life". These type curves are discussed ad nauseum in that book.

And it's not the income that limit's your happiness. It's what you have to give up and what you have to do to get that income that limits you happiness

 

[audreyh1]

I think "enough" is a mentality. For some folks, it takes little to feel like they have "enough". For others, they never have "enough".

An interesting experience for me when I had enough company stock to feel FI and that retirement was a real possibility. Some folks, like me, retired when they could easily support their current lifestyle plus a little extra for travel or upgrade home or whatever.

Other folks had more grandiose ideas. One of my colleagues who probably had 2x what I did, was too busy building his enormous mansion on the lake. I think he had half his net worth on margin to finance that. So he wasn't ready to retire. He didn't like staying home with the kids anyway - so that also motivated him to keep working.

I remember another (more junior) guy at work remarking that it was easy for me to retire because "I had never developed expensive tastes" or something along those lines. In other words, I could retire early, because I was happy with "less". I got the feeling he needed to be able to show off his wealth (whenever he finally achieved it).

I know with certainly that feeling like I had "enough" was definitely part of the motivation to retire early. I wasn't willing to "hold out for more".

Audrey

P.S. Actually, I do have expensive taste. I definitely enjoy top quality things and food, wine, whatever. I just am very happy with small doses which do not break the bank. I am just not into toys or fancy houses or conspicuous consumption. That saves a lot of money!! It kept me out of debt most of my working life, and it made it much easier to reach FI!

 

[Amethyst]

Some people equate money = power over others. People who like power can never get enough of it.

Amethyst

 

[rescueme]

Some people equate money = power over others. People who like power can never get enough of it.

Amethyst

I have to agree. Did you know my father?

 

[ronin]

If you drink too much, you get drunk.
The engine won't start
if you're always tinkering with it.
If you hoard wealth,
you fall into its clutches.
If you crave success,
you succumb to failure.
Do what you have to do,
then walk away.
Anything else will drive you nuts.

Tao Te Ching
(a modern interpretation of Lao Tzu
perpetrated by Ron Hogan)

Somethings have been known for a long, long time.

 

[GusLevy]

[QUOTE

[/QUOTE]

This graph is probably vaguely familiar to many here as it is a simplistic graphic form of the economic principle of the law of diminishing utility. Hermann Gossen and the topic of marginal utility is a central topic of modern Microeconomic theory.

From a microeconomic perspective, the graph is technically incorrect in that the curve should not be so extremely parabolic as it should be a measure of total fulfillment accumulated rather than an actual literal plot of the additional marginal utility for each additional value expended or spent. The total fulfillment curve will generally appear to something like the left half of the parabola and then a flat line from that point on after the point when additional fulfillment is nil. The actual marginal utility curve will then be the plot of points of the first derivative of the total fulfillment curve - that powerful rate of change thing that will go to zero at the point where the total fulfillment curve turns flat. (Yes, the total fulfillment graph will actually turn technically parabolic at the point where the additional marginal consumption creates negative utility.)

Anyway, the Happiness at $75k study merely concludes that in the aggregate, $75k appears to be the level at which point the common or average person has their total fulfillment curve turn flat or the point where the marginal utility curve goes to zero.

 

[Emeritus]

Diminishing marginal utility clearly applies to consumption of discrete articles or personal services. I.e. you can only eat so many hot dogs or wear so many cashmere sweaters or use so many prostitutes. . But when you apply it to expenditures rather than articles it is not so clear. It does not account well for the increased base cost of activities. i.e. planes instead of cars, unique objects etc. I.e. does it apply to owning a Rembrandt? Owning 5 Rolls Royces one thing, but 5 Rembrandt paintings is another. As a final note it does not apply to non consumption expenditure i.e. spending money on charity etc.

 

[rmark]

Really, really short synopsis of​

‘Transforming your relationship with money and achieving financial independence’​

by Joe Dominquez​

How much have you made and what is the used value of all you own​

Record spending, totaling into personalized categories, dividing by real hourly wage​

(net income - work costs) / (work + commute + wind down time)​

Too many hours spent in some categories, not enough in others?​

Repeating monthly identifies misplaced spending leading to a more fulfilling lifestyle​

Work is for income, not socializing. Look to increase your income​

Invest directly in long term Treasury bonds for stable long term income​

Treasury bond yield x investment = income​

 

[rmark]

the (as far as I know) original fullfillment curve ended with a tombstone at the right hand end, signifying your limited time available.