Overconsumption: How Much is Enough?

by Bill Creasy

I. Introduction

Many people in the U.S. seem to spend an enormous amout of time and effort getting more material goods, like bigger houses and fancier cars. It has even been said that consumption is patriotic. It helps the economy, and it shows terrorists that "they haven't won."

The question of "how much consumption is enough?" is very important and must be discussed. It involves perennial questions such as "what is the meaning of life?" and "what is the best way to be happy?" These are not easy to answer, but they are questions that are central to a philosophy of humanism.

The consumer-oriented nature of our society makes these uncomfortable issues for mainstream media. The media depend on advertising to encourage consumption. In other words, they have a vested interest in unlimited consumption.

II. Approach to the question

One approach that I find to be very useful is by Joe Dominguez and his associate, Vicki Robins. They have written a book, Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence (Viking, a division of Penguin Books USA, New York, 1992). They also have some audio tapes of lectures and courses that are available from the web site, www.newroadmap.org. The first work on the subject was Dominguez's "Transforming your relationship with money and achieving financial independence," a taped, 8 hour lecture (produced and distributed by The New Road Map Foundation, P. O. Box 15981, Seattle, WA, 98115, 1986). These works offer a complete mixture of a philosophical examination of the fundamental questions with a very pragmatic approach toward a solution.

The philosopy begins by assuming that a person's happiness and sense of fulfillment should determine how one's money is spent. A person spends his or her life working at a job to earn money, and that money should be spend in the best possible way. Wasting the money that you earn is the same as wasting your life. Mindless consumerism, spending money for the sake of spending, is not good because it means one's life is being wasted. In other words, people should handle their money as one mechanism for making themselves happier, rather than as an end in itself.

After establishing the basis, Dominguez and Robins developed a very businesslike plan for handling money for the most benefit. Dominguez originated this approach in the 1960's. He began as an investment banker on Wall Street. Robins joined him in the early 1970's, and she has done a lot of work to popularize the ideas.

III. Philosophy

Dominguez begins the taped course by explaining that the goal of the Industrial Revolution is to make life easier and decrease the amount of labor that is necessary to live a good life. To a large extent, it has succeeded. Life is better and easier.

Unfortunately, people do not act that way. People still expect to work as long and hard as generations ago, "nine to five until you die." Many still expect to earn more money than their parents did. Tradition says that more material possessions are better, and that acquiring more stuff makes one happier. In spite of this common idea, surveys have shown that millionaires do not feel significantly happier than poor people.

Dominguez discusses his idea about the subjective amount of fulfillment as it is related to the amount of money a person spends. Starting from zero, increasing the money spent causes more fulfillment. This is true as one acquires first necessities and then some luxuries. In this region of the curve, spending money feels good.

However, beyond a certain amount, more spending does not increase fulfillment. The curve levels off and even begins to drop. For example, it is good to have a house for shelter, but buying a bigger house than is required doesn't necessarily make a person that much happier. It may provide more comfort and space. It also makes a larger mortgage, more taxes, more fear of robbery, more housework and yardwork to do, and more expenses. These problems mean that the person will have to work longer and harder to make money to pay for it. Thus, more money spent may not give more fulfillment and doesn't feel as good. It is important to consider the "net fulfillment," the good from spending money minus the disadvantages of earning it and maintaining the property. The net fulfillment can actually decrease with more money spent.

Thus, the fulfillment curve has a peak point which is the best amount of money to spend. This point, for lack of a better word, is called "enough."

The point of the curve isn't to identify an exact value. It is to illustrate that for particular lifestyle and interests, spending as much money as possible is not the best way to be happy. It is better to find the optimal point than just spend mindlessly. Of course, this point is subjective and must be chosen by each peson.

IV. Practical procedure

What is the best way to find out how much is enough?

Dominguez actually seems more comfortable with the practical aspects than the philosophy. He developed a program involving nine steps.

The key to the program is, "Keep track of every cent that comes into or goes out of your life." It is necessary to know where your money comes from and where it goes. If money is important, it is worth keeping track of it.

There is some effort involved with having to account for all your money. It takes time and discipline to write down spending. But there is really no other way to get the information that you need. It is astonishing that many people have no idea where their money goes. At the end of the week, they find that their pay is gone and they don't know where it went.

Accounting is the basis of running any business. The point of the program is not just to save or budget as much money as possible, though. The point is to make it and spend it in the way that gives the greatest fulfillment.

Once the information about your personal spending is available, you can use the information to improve spending habits. Itemize and tabulate spending, and decide what is worth it. Look at each category and decide what is "enough." Eliminate spending that isn't worthwhile. This a completely subjective assessment. Are there items that you buy that really aren't worth the money? Many people find that just by keeping track of their spending, they cut costs by 20% by reducing spending that is obviously a waste.

Another step is to plot the results. Before following the system, income can be the same as spending. After tracking, spending goes down.

After spending decreases, there is extra money left at the end of the month. The first priority is to pay off debts. If the person has no debts to pay off, it can be saved. Through the miracle of compound interest, it starts growing.

Income goes up, since the individual thinks of new ways to make money. Spending goes down as more ways to save money are found without decreasing fulfillment. Interest keeps growing. Eventually, inevitably, we reach a crossover point where interest income becomes larger than the monthly expenses, and income crosses spending. Again, this depends on the individual, but some people have achieved the goal in relatively short time of 10-20 years.

We can call this point "Freedom." From this point on, the person is financially independent and doesn't have to work for income but rather can live on interest alone. By tracking interest and expenses, it is possible to predict when the crossover point will happen and plan for it. Instead of working until age sixty five and expecting social security to provide support, we can anticipate the day when we can stop working for a living and spend time doing what makes us happy.

There are different strategies for the details of investing and savng, but the principle is the same.

Many people are terrified of inflation, but it is a bogeyman. People like Dominguez have lived under this system for 25 years, during the worst inflation of the 1970's, and they got along fine. (Dominguez died a few years ago.) For example, food can be bought cheaper today than it could in the 1960s.

V. Conclusion

There are many tricks that can be used to be frugal, and many more ideas were given by Dominguez and Robins, as well as other authors.

Dominguez and Robins also discussed social and environmental motives for decreasing consumption. There is a lot of concern in the developed world about overpopulation. How many people can be supported on the planet at a comfortable standard of living? An equally important aspect to population is consumption. Decreasing the consumption of the developed world is not as high a priority as decreasing population growth. This issue is not often covered in the mass media, since most media depend on advertising to sell as many products as possible.

The developed counties, especially the United States, consume resources out of proportion to their population. Americans are 5% of the population of the world but consume 30% of the resources. Do we consume too much or does the rest of the world consume too little? Could the world support 5 billion people if they all lived like Americans?

Regardless of these details, the important first step is to choose to handle money as a means to the goal of achieving fulfillment, rather than as an end in itself.

Once one has a healthy relationship to money, it is much easier to set goals, including financial independence. It is also easier to put the constant advertising of our consumerist culture into the proper perspective by setting one's own priorities.

This essay is an edited version of an article printed in the July 1995 issue of WASHline.