Okay…so before you ditch out on me because I mentioned “inverted U-curve” in my title – hang on just a quick second! This is going to be much more straight forward than what you may be expecting. You see, I picked up a haul of books from the library this fine fall evening (seriously, I scored on some great reads) and happened to get my hands on a copy of David & Goliath by Malcolm Gladwell. Now, I know inverted U-curves did not just stem from Gladwell’s book – but his chapter depicting the inverted U-curve (to classroom size & family wealth) got me thinking…what is the optimal point for thinking about personal finance on the inverted U-curve?
For those of you who may not have read David & Goliath, or cannot even remember the last time you discussed an inverted U-curve (possibly even Kuznets Curve) – no worries! Here’s a short breakdown:
An inverted U-curve can depict any concept – where on the left hand, vertical axis are benefits ranging from none to most. On the right hand, horizontal axis is a theme/concept/idea ranging from none, to some, to too much.
After looking & following along the graph, this is what you will discover: too little of something can be considered a bad thing. Too much of something can be considered a bad thing. But when you discover that middle ground, or the right balance – you’ve found your optimal point.
The inverted U-curve can be used for a wide variety of things in life. For example: too little of exercise can be detrimental to your health – too much exercise can actually lead you to injuries – but discovering the right amount of exercise and fitness for you leads to the most optimal health for your body.
Alright, so let’s actually talk about the inverted U-curve & what this means in terms of personal finance….
You know, what this post is actually supposed to be about?
I digressed a bit, but thanks for sticking out with me in that quick intro/lesson. Check this out…
You see, the inverted U-curve of time spent thinking about personal finance is something that each one of us can relate to at one time, or another.
With the horizontal axis relating to the amount of time we think about personal finance (on the spectrum of none, to some and ultimately too much), we experience the benefits of little – to some – to the most.
When the amount of time we think about personal finance is NONE:
- We don’t track what we make & spend
- We have no clear depiction or plan of what our money goals are
- We do not have any ambitions to even save money
- We cannot provide encouragement to others for their financial goals
- We potentially believe the falsehood that money grows on trees
When the amount of time we think about personal finance is TOO MUCH:
- We obsess on whether we are keeping up with all of our financial goals
- We do not feel the amount we are saving and our plans are “enough”
- We consistently question any and every purchasing decision
- When practicing money extremes (from frugality to hyper-consumerism) we lose sight of what we value
- We forgo opportunities to invest in ourselves because we are afraid there will be no pay off in the future
When the amount of time we think about money matters is SOME and at its OPTIMAL POINT:
- We free up time to spend on things we value with the people we love
- We have an ease of mind because we know we have an emergency fund in place & the right amount of insurance coverage
- We are confident in all of our purchasing & saving habits
- We smile & share encouraging words with others that reached a financial milestone
- We have more headspace to strengthen any and all areas of life other than just our personal finances
I cannot say that I am always perfect and consistently spend the optimal level of time in regards to personal finance. I am far from that. What’s important to me is the recognition of this inverted U-curve. If I am thinking too little to none, my goals & finances definitely derail. If I tip over to the too much thinking on personal finance, I fall to the insecurities and scrutiny of my own goals (not even ones that someone made up for me)! C’mon..what’s up with that?
Determining when the scales are tipped allows me to get right back to that balance of the ‘perfect’ amount of time to think about my finances. I recognize, that sometimes my optimal point can also be in flux. It takes time to recognize what is too scarce, and what is too extreme. Yet when I discover which trend makes me feel most comfortable and on track to spend in save in accordance with my values – I know I’ve hit my optimal point.
So whether your optimal point of personal finance thoughts means having a consistent “money-minute” check-up every day, only a monthly budget overview, sharing an in-depth conversation with a partner for a few hours on financial goals, chatting with friends in passing about a 401(k), or even doing the “20 minute end of the year money tune up” – so be it! Each and every one of us will have a different optimal point of time spent on personal finance in terms of the inverted U-curve. The question is: what is your optimal time spent thinking about your personal finances that works best for you?
What is your optimal amount of time spent thinking about personal finance? How can we discover we are thinking too little, or too much in terms of personal finance? Let me know in the comments below!