Meet marginal utility – your new BFF
So, for the sake of keeping it simple, let’s say marginal utility is the utility you get from spending your money. You can spend your money on a latte and get good (but short term) marginal utility. It’s hard to put a value on warm frothy milk on a cold day. But, you could also spend, say the equivalent of 4 or 5 lattes on a brand new fancy schmansy coffee grinder so you can enjoy yummy coffee at home.
Even more simply put, it’s not how much money you spend so much as how you spend your money. Over Christmas, we bought a deep fryer. Don’t panic. I’m not eating deep fried mars bars every day. The price of the deep fryer was roughly equivalent to a night out at a local restaurant for a family of four. While I enjoy a night out, I’ve already had greater marginal utility for my little deep fryer than any meal I’ve ever had at any restaurant. Home made fish and chips, old fashioned doughnuts – you get the idea. It might make me cheap – but that’s okay – and one bite of a homemade doughnut and you’ll agree. Cheap is pretty darn good.
Especially when it comes to defying your debt.