Earning money is a learned skill. If we put in the time and effort, we can learn to increase our earning potential. But making money is only half the battle.
An equally important aspect of personal finance is spending money. 🙂 Some people may not realize it, but spending is a learned skill as well. This means we can learn to become better shoppers. Knowing where to look for deals, buying in bulk, and eating with the seasons will naturally help us save. But if we buy an expensive blazer on sale and only wear it once, then are we really saving money, or are we spending our earnings on something we don’t really want to keep? ?
This is why part of being a skilled spender is understanding how much utility we’ll get out of our purchase. Utility refers to the total satisfaction received from consuming a good or service. For example I normally wouldn’t pay for a donut. ? In fact, even if it was free I probably still donut want one. I’m just not a big fan of the hole thing. ? But I’ll gladly pay for a Hershey’s Cookies ‘n’ Creme. That’s my favourite chocolate bar!? So to maximize my utility I would pick a Hershey’s over a donut given those two choices, even though the Hershey’s is likely more expensive. In other words, the value of my purchase comes from how much enjoyment it gives me, – not from what I paid for it. 😉
Consumers who understand this correlation between their spending and utility are smart. 🙂 They tend to be excellent spenders since they don’t waste their hard-earned income on rubbish that doesn’t give them much fulfillment. Economists even have a unit of measuring enjoyment or utility, called Utils. 😀 At the end of the day it’s not about maximizing savings, but it’s rather about maximizing happiness. 🙂 Instead of looking for deals on pricing, we should be looking for bargains on satisfaction. 😀
My $1,500 Gift
Everyone and their cats ? have heard of Wal-Mart. It employs about 2.2 million people worldwide and is the largest private employer in the United States. Viacom is one of the largest broadcasting and cable company in the world by revenue. It holds really cool brands like MTV, Nickelodeon, and Paramount – which puts out high grossing movies like Mission Impossible, Transformers, and Star Trek. 🙂 Together Viacom and Wal-Mart makes about $500 billion every year in sales. To me becoming a shareholder of these giant corporations, which means I’m entitled to a slice of all their future profits, is a much better use of my money than buying some overpriced gadget like the $1,500 Google Glass.
Let’s all continue to increase our earnings in the new year and practice being mindful of what we buy. Becoming an expert in both making money and spending money to maximize marginal utility is the ultimate path to financial enlightenment. 😉
Random Useless Fact