The Most Important Investment of Your Life
14 June 2009 in FinanceToday, after spending the night on a lightweight camping mat, I thought about the importance of things we buy. Why do we we buy so many things, how do we prioritize what we buy, and what is most important? After a little thinking, I have an answer to the most important possession a person can buy. The short answer: a mattress! The long answer? Keep reading…
Why do we buy so many things? Because we can! After finding a place to stay and food to eat, we start applying our incomes to things like cars and phones. Then, with those utilities, we can move and communicate better, making ourselves eligible for better jobs and higher incomes. With those higher incomes, and all our basic and utility needs already met, we have extra money to spend on useless stuff.
How do we prioritize what we buy? Well, few of our possessions are needed. Those few basic things—food, water, shelter, clothing—are easily affordable for a healthy individual willing to work. Additionally, we have other possessions, luxury items like phones, vehicles, internet, medical coverage, and electricity that provide social and occupational utility. These utility items allow us to live more comfortably. A third level of possessions—things like jewelry, electronic toys, landscaping items—have absolutely no utility. There are gray areas and exceptions, but you see that with each level the possessions become less important to sustaining our lives.
I think of it as a 3-layer cake. Imagine the cake’s bottom layer represents our most basic needs. That is where our initial flow of money will go, so that layer is big and establishes the foundation upon which we can build. Whatever “dough” we have left will go to buy helpful, but unnecessary, things. Keeping with our analogy, that second layer will be smaller than the bottom layer. Finally, we might put a little bit of dough into that topmost layer, buying ourselves or loved ones a jewelry present, for example. With a well-balanced budget, the 3-layer “cake” should be nicely molded, firm, consistent throughout, and well proportioned, with each level being smaller than the one below it. Problems happen when the layers are not well-defined or proportionate.
Consider all the people you’ve known with financial problems, and I bet they had inverted or misshaped “cakes.” Too much of their money probably went into that top layer of useless, but nice, things, making the top layer bigger than the foundation, leading to a collapse. Ever know someone whose car cost more than his house? The other common problem I’ve seen is a poorly defined bottom layer, where people don’t have enough dough to fill (pay for) the large cake mold (house) they bought on credit, leaving a very thin bottom layer and poor foundation. What happens to the cake and the over-extended home purchaser is the same: burned!
Some people can get away with having upside down or misshaped budgets if they have enormous amounts of money or keep their expenses within their means. Those people, however, probably have upside down personal values as well.
What is the nost important thing we can buy? In answering this question, I assume that everybody reading has food and shelter. If you don’t have those basic needs met, then stop reading this and get to work! After meeting those basics, I believe a top-notch mattress is the single most important possession we could ever buy. We spend a third of our lives there. A good night’s sleep is necessary for optimal functioning when awake. A good mattress can increase our lifespans and decrease medical problems. Additionally, mattresses last for many years, with most carrying manufacturer guarantees of 10 to 20 years. If there is one thing to splurge on, it is a mattress. Mattresses are investments in our well being.
Would you agree that a mattress is the most important thing a person can buy, after securing a home and food? What in your life is something you absolutely, positively will not settle for less than the best? Do you think budgets are like layered cakes, or do you think that’s a silly analogy? How do you prioritize your own purchases? Have you ever found yourself or friends with an upside down cake, and, if so, were there any financial problems?
I do agree, however sheets for my bed have always been important. You raise a good point with the matress. I’ve always said if I could give everyone one thing it would be a good set of high thread count sheets. Because a good nights sleep is crucial! The other item I don’t skimp on is tires for my car.
Excellent topic.
Hi Brook, I agree with the gist of your post: that people can live comfortably on less than the average American salary. However, if you want to say that medical care is not a necessity, then I wonder what percentage of the American population really can live the lifestyle you describe? Because there are *many* people who need medication (not simply Prozac, but stuff like insulin without which that person would soon perish). And with such a pre-existing condition, finding private health care later in life becomes cost-prohibitive, if not impossible.
Wendy, sheets are so important. I’m traveling with a sleep sheet just in case I get stuck on a dirty couch somewhere. Tires are nothing to mess with either. I bought used tires once, to replace an old set on my vehicle. The used set wasn’t much better and needed to be replaced soon. For safety reasons, if you do high speed freeway driving or any long distance driving, dependable tires are a must.
Jellow, thanks for the comment! I agree completely that many people need medication and that medical care can be expensive. American medical care is admittedly a weak spot in my knowledge because I’ve had the luxury of not having to worry about it for my entire life, until now. Since writing the Live on $1100/month article, I have made calls to medical insurers and talked with a handful of friends about the topic, trying to get a good grasp of the issues. You are right, though, that people have medical problems beyond their ability to prevent. Here’s another interesting take on the issue, and a look at how personal responsibility can help eliminate a lot of (but not all) medical issues: I spent a night at a polygamist ranch last week and talked about the issue with them, too. Through hard physical work, eating well, taking herbal supplements, and taking overall personal health responsibility, they stay physically fit and healthy. They can get away with not having medical coverage because they take care of themselves so well. If they have serious issues, they’ll go to the doctor and pay the bill, which in the long run ends up being less expensive for them than monthly medical coverage. More on this topic later…