Meaningful Returns

My wife and I have a good friend who is an excellent nutritionist. Awhile back she told us something about food and our brains which is profound, and which has a very strong parallel in the world of money. Her basic point was that swearing off certain “junk” foods (like chocolate, cookies, donuts, etc.) altogether can actually be quite dangerous because so often we are successful for a time, but when we trip up, we wipe out completely and eat like two donuts and a biscuit from Rise all at once (not that I’ve done that). Then we feel guilty, and swear those things off again, and so on and so forth. Death spiral.

A generally more effective strategy is simply to limit those junk foods to certain occasions, and then enjoy those occasions when they arrive. Over time this method effectively tricks your brain, and the cravings associated with those foods are easier to control, leading to a positive feedback loop in your diet. Plus, donuts are a gift. To waste that gift would be just awful.

Budgeting works in a similar way. Often we think that the key to budgeting is cutting all our small habits like Starbucks or Netflix or whatever. But the problem with that approach is twofold: 1) Even if you were to successfully cut all those small “discretionary” expenditures from your budget forever, they’re small. As in, cutting those lattes ain’t going to fund your retirement. And 2), because you love coffee and Parks and Recreation season 2, cutting those things out makes you kinda sad, and when you get sad you buy that new TaylorMade driver or that entire rack at Anthro.

With budgeting as with dieting: cut the big things (regular donuts and soda, high mortgage and car payments) and sweat the small stuff only when necessary.