Becoming wealthier can sometimes feel like a never-ending journey in a consumerist world where having material  items has come to stand for success and happiness. This insatiable desire for newer, better, and more expensive material things has led to the "keeping up with the Joneses" phenomenon, a race to outdo each other regarding material goods and ways of life. One way to avoid the pursuit of chasing newer and better things is based on an interesting principle: the diminishing returns of wealth.

"Amidst the pursuit of material wealth, we often forget that happiness is not a race to accumulate but a journey to appreciate the moments that truly enrich our souls."

Diminishing Returns of Wealth

Imagine a person eating with their hands and receiving a wooden spoon suddenly. At this initial stage, the improvement from not having to eat with their hand is the actual improvement, and the fact that the new tool makes this person happy and content. This simple change to how they eat improves their quality of life by giving them a taste of comfort and ease that they couldn't get before. But as time passes, the wooden spoon becomes more familiar, and the happiness it brings starts to wear off.

This same person then gets offered a stainless steel spoon, which is a step up in terms of material and value. This upgrade might make the person feel even better about themselves as they enjoy how modern and durable their new spoon is. Still, the law of diminishing returns comes into play, just like before. Even though the stainless steel spoon is better than the wooden one, the slight increase in happiness is not as noticeable, as they are still not eating with their hands, just with a different spoon.

At this point, the complex psychology of materialism starts to show itself. People often get stuck in a cycle of increasing consumption because they think the next thing they buy will make them happy. This cycle, however, can lead to dissatisfaction and an unfulfilled desire for the next "upgrade".

As people try to get wealthier, the law of diminishing returns shows itself more and more. The move from stainless steel spoons to gold or platinum spoons might seem like the next logical step, a sign of achieving the highest success and wealth. But the truth is that going from stainless steel to precious metals doesn't make you happier, as this person went from a wooden spoon to a stainless steel spoon. 

The "keeping up with the Joneses" phenomenon is caused by constantly comparing your material possessions to those of others. Such comparisons can make you feel like you're not good enough and keep the cycle of diminishing returns going. This cycle makes people always want more, even though each new thing they get makes them less happy than the one before. This relentless pursuit can strain your person's finances, hurt your mental health, and detract from the relationships, experiences, and personal growth that give life meaning.

How to Escape Keeping Up With The Joneses

So, how do we get out of this situation? Happiness is about making experiences and personal growth more important than gathering things. A piece of wisdom from the Stoics: There's nothing wrong with enjoying life’s pleasures as long as you know how they affect your life.

The first step is to recognise that pursuing wealth beyond a certain point rarely results in a significant increase in happiness. Minimalism and mindful consumption can help people live happier lives by assisting them to appreciate what they already have instead of always wanting what they don't. I always say the less you own, the less you have to worry about, which leads to less anxiety. 

Summary

Ultimately, the diminishing returns of wealth show us that happiness and contentment don't come only from having things. Our lives are improved by simple pleasures, connections, and the search for meaningful experiences. So, let's break out of the cycle of materialism, get off the comparison treadmill, and live a life that's more than just chasing after short-lived luxuries. 

At Finsights, we want you, the everyday hero, to take control of your finances, become aware of financial independence, grow your knowledge, and let us be your financial independence partner. 

Onward to Financial Independence