This Women’s Month, we take a moment to appreciate Mother Earth. After all, she bears the brunt of sustainability challenges brought about by human consumption. In light of this, it is important to reflect on our own relationship with material goods and how it can impact our long-term financial stability.
There is a thought-provoking graph outlined in the book “Your Money or your Life: Transforming your relationship with money and achieving financial independence” by Joseph Dominguez and Wicki Robin. Called the Fulfilment Curve, it intriguingly charts the money spent on goods against the level of fulfilment those good provide.
The premise of the curve is that, at Survival level, we feel a relatively high degree of fulfilment for money spent on resources consumed. The difference between having food or not, between having a roof over your head or not, in terms of fulfilment, is vast. At the Comforts level, for example, when you buy your first toy, bicycle or games console, fulfilment is on the rise. This pattern is reinforced and as we mature, and we internalise the idea that material things from outside contribute to our needs and bring us fulfilment.
The extra TV, car or house does not bring us as much fulfilment as the first one. In economics, this is called the law of diminishing returns.
However, at the Luxuries stage, the curve begins to flatten out. A lot more money needs to be spent on resources consumed to feel a little more fulfilment. The extra TV, car or house does not bring us as much fulfilment as the first one. In economics, this is called the law of diminishing returns. The peak of the fulfilment curve is Enough - a plateau or point where spending more money and acquiring more “stuff” no longer brings fulfilment. In fact, the opposite is true. Spending or acquiring more creates Clutter, Complexity and Hassle. Enough is the place of maximum fulfilment and happiness in exchange for money spent or material consumption. (It’s worth noting that money spent on non-material things – such as experiences - will still add to a sense of fulfilment beyond this point.)
To get to or remain at the point of Enough and to achieve long-term fulfilment (and sustainability), we need to stop and think about where we are on the curve and where we want to be. Imagine a graduate buying a smart new suit: it could impact their confidence and help them land that new job. The utility of this consumption is high and beneficial to your long-term financial security and it moves you in the direction of Enough. Yet a fifth pair of the same style of shoe might not be. In fact, it may prove nothing more than a hit of instant gratification, reducing your savings and creating Clutter – moving your further away from Enough.
Our own short-term consumption can affect our ability to sustain ourselves in the long run financially.
Buying your first home will have huge utility, in terms of feeling safe and cosy. But the third house multiplies the maintenance and staffing costs. If you pause, check the impulse and wait before signing the offer (or stop to consider the energy costs of managing a third house) you might reconsider the purchase. Instead, you could feel the deep satisfaction that will come from continued, diligent saving and financial sovereignty. This is obviously incredibly personal and subjective, but a helpful illustration of this curve. We all value different things.
Being aware that more material consumption or money spent does not always bring additional happiness or fulfilment after a certain point is useful. Especially since our own short-term consumption can affect our ability to sustain ourselves in the long run financially. Is it worth it if it’s not contributing fulfilment? The added burden on sustainability demands that we consider our consumption.
In the realm of investments, this consumption awareness means you should look not just at market risks and returns, but sustainability-adjusted risk and return. We are all stakeholders of the earth, and we need to be good stewards.
The Investec Global Sustainable Equity Fund will help you align your investment portfolio with these objectives. This is a specialist fund for an experienced investor who understands markets and wants to invest for the long term. The Fund seeks to identify investments with strong and sustainable Environmental, Social and Corporate Governance (ESG) characteristics. The Fund will invest in high quality global companies which have a net positive impact on society and the environment as defined by their contribution to the United Nations Sustainable Development Goals. Goal 12 is about ensuring sustainable consumption and production patterns, which is key to sustain the livelihoods of current and future generations.
Our planet is being depleted by consumption. If the global population reaches 9.8 billion by 2050, the equivalent of almost three planets will be required to provide the natural resources needed to sustain current lifestyles. (Source: United Nations)
We need to be more conscious of our consumption habits, especially since more is not always more in terms of fulfilment. There is a point of Enough and we should aim to live there.
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