I try to eliminate as much “stuff” in my life as possible. There is a terrific model that applies to material possessions that resonated with me the first time I saw it. I failed to remember where, but here is my modest recreation in MSPaint.
Food and shelter is a requirement for feeling safe and secure. It’s nearly impossible to pursue anything else if you are hungry or not having your basic needs met. So it makes sense that those come first.
Small luxuries are different for everyone, but I treat these as the afternoon latte, the new article of clothing that you don’t really need but you want, or a piece of jewelry you will wear frequently. I also classify clear desk space in this category. An empty desk feels as good or better than any small luxury. This is the sweet spot for happiness per dollar spent. It is why Starbucks is so successful. A $5 coffee is ridiculous, but it’s cheap enough to feel like a small luxurious treat that won’t break the bank. This is the zone with the best retail therapy effect per dollar spent. Your small luxury level is most likely going to be relative to your wealth.
The hassle phase comes in the slow accumulation of persistent items. As the costs go up, the pleasure felt is not in proportion with the cost of the item, and accumulation begins. Now you have to manage the car, the boat, the insurance, the cleaning, the maintenance and storage of your newfound items. As these pile up in our lives, we start developing budget line items to maintain our accumulations. A budget line item is a financial ritual, and rituals determine our destiny. So I am very cautious of these types of budget line items.
The next phase of accumulation are those possessions that cause anxiety out of a fear of loss. You’ve seen this in almost any parking lot. The high end sports car is parked at the end of the lot the farthest away from the building at an odd angle to prevent cars from parking in the neighboring spots in an attempt to minimize the risk of dings or scratches to this toy. That is the icon of anxiety. The owner may be enjoying the car but he is also anxious about protecting it. The more valuable our possessions become, the more we worry about them being taken away. Humans hate a loss more than they enjoy a gain.
Money buys emotion, so if we are conscious of the return on investment, we can strategically decide to allocate our dollars more efficiently for the joy they bring. An extra $2,000 a year in your investment account may just not be worth the joy of the afternoon latte ritual.