How do you measure standard of living?

Consumption is considered in economics to be the best way to measure standard of living. The more you consume the higher your standard of living.

Many people maximise the consumption of food, drink, clothes, technology, property, cars, holidays, for enjoyment, show their status in society, to maximise their standard of living.

However, doesn’t this simply lead to excessive consumption – and at what cost?

Over consumption has a financial cost. The money has to come from somewhere; income, debt or savings. The more you spend today the less you will have for ‘rainy days’ and retirement; excessive consumption will catch up with you eventually. Those that borrow too much won’t enjoy a higher a standard of living when the bank comes knocking at the door.

Over consumption has a physical health cost. Just walk down any high street and see the number of people that are struggling with their weight. Those that pop into a coffee shop for a mid-morning coffee and cake are consuming around half their daily recommended calorie intake in just a morning break. It doesn’t take much to realise too many of us are seduced by advertising to over consume.

Over consumption has a mental health cost. The levels of anxiety and stress harboured by those that need to earn ‘lots’ to pay the bills, service debts and support a lifestyle they don’t even have time to enjoy. And the stress and anxiety doesn’t stop with you, it effects your family.

How do you start to face the reality of your own consumption?

Perhaps consider your income, look at what you earn per hour. Not just the time between arriving at work and the time you leave, but include the total time you devote to work, including travel time and the extra time at home checking emails, making calls. If you are self-employed, run your own business, this is a great exercise to do.

Gross annual income = £36,000

Less tax and NI = £8,000

Less travel costs = £2,000

Net annual income = £26,000

Total hours worked (365 – 137 days off) x (8.5 work + 2 travel + 1 extra) hours = 2622

Net hourly income = £9.92

Do you earn as much per hour as you think?

What about the other aspects of your life?

 

To improve your standard of living, should you consider your well-being.

Rather than using consumption as a measure of standard of living, use well-being.

Well-being includes all the things you value, though often neglected, like your physical and mental health and that of your family; your relationships, your friends.

Financial security of course, is important, and for many balancing the books each month is a struggle, but that doesn’t mean your well-being should be neglected.

To maximise your well-being you can ask yourself “what do I really value?” “What is important to me?”  Why not write it down.

What do you consume? How do you spend money? Why not write that down as well.

How do your values compare against your consumption? What does it tell you?

Small changes are much easier to make. Somethings you don’t need, which you can stop. Don’t make big changes or change everything at once – just think small changes, they are so much easier to implement. You will be able to gradually refocus your expenditure to increase your well-being.

Going back to economics, rather than maximising consumption to increase your standard of living, doesn’t it make much more sense to aim to maximise your well-being – with the minimum of consumption.

 

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