A rachet wrench is a tool that only turns in one direction. When we say racheting consumption, that direction is assumed to be up. As we grow older, we tend to advance in our jobs and make more money. For most people, making more money means spending more money. We get used to more privacy, more space, more comfort and luxuries. And it is *hard* to go the other way — our internal sense of entitlement rails against any drop in living conditions. We might see our friends spending more and implicitly encouraging us to do the same. Or we might move into a neighborhood where others are spending more, and it’s easy to compare ourselves with our neighbors and increase our spending to match. Believe it or not, studies have shown that what makes us happy is not how much we have, but rather knowing we have more than our peers.
I see strong a strong parallel between racheting spending consumption and racheting eating consumption. As we grow older, we also tend to eat better — no more cereal or Ramen noodles for dinner. Coupled with a more sedentary lifestyle, the end result is a slowly racheting weight. I’m not sure if there is a clear spiritual analogy for high spending consumption, but it makes me think of Ezekiel 16:49 :
Now this was the sin of your sister Sodom: She and her daughters were arrogant, overfed and unconcerned; they did not help the poor and needy.
It’s getting close to the end of the year, and many of us will think about New Years resolutions. Here are a few suggestions for fighting the racheting effect:
- Knowledge is power. You can’t combat racheting without knowing how much you truly spend. In the past, June and I tracked our spending in an Excel spreadsheet; we have 5 years worth of data now. But that is a real discipline to sit down a few times a year and categorize / balance everything. This year we’re trying mint.com to see if that makes it easier. Do other people have systems they use and recommend?
- Set goals. Each person’s financial situation is different, so it’s hard to find a one-size-fits-all solution. Maybe your goal is to get out of credit-card debt. Or to increase your giving by a set percentage from last year. Gary’s recommendation is to limit your spending to the living wage for your area. Any billionaires reading this blog might consider joining Facebook CEO Mark Zuckerberg in signing the Giving Pledge to give away the majority of your wealth in your lifetime.
- Do it together. Like exercise, financial discipline is easier to stick to with a partner or group. Join us in starting a new group in your area, and tell us how you’re doing!