What is the Law of Diminishing Return?
The law of diminishing return can be applied to many aspects of life. To begin with, it’s important that you understand what it means. The idea behind this law is that the more you buy or consume of the same item, the less rewarding or satisfying it will become. Understanding the Law of diminishing return and identifying when you are experiencing it, can help keep you on budget. Let’s look at a few examples:
FOOD
How many times have you gone into a restaurant with your eyes bigger than your stomach? I know we all have at one point or another. But the difference is how we handle it. Do you think it’s better to order 3 hamburgers (for all vegetarians please consider this a veggie burger for this example 
) all at once or is it better to order what you would normally eat (perhaps 1 or 2)? The first hamburger that you bite into seems to melt in your mouth and tastes incredible. The second one still tastes good, but not as good as the first one. Now after the first 2 hamburgers, you are full. But what are you going to do with the third one? You don’t want to throw it away and there is no one around that you can give it to. So, of course, you eat it. The third one has even less taste than the second one and to top it all off, you feel so full you can barely walk to the car.
After looking at this example, don’t you think it would have been a better choice to only order what you would normally consume (1-2hamburgers), despite the abnormal hunger, and wait to decide if you should order the third one or not. If you eat the first hamburger (or even the first two depending on your normal order) and then discover that you are full, you would have been more satisfied stopping here instead of stuffing yourself. Buying less also helps you to spend less money. Overall, the idea is to consume till you are satisfied and not exceed this point; this way you will feel better and spend less!
This same idea came be applied to eating at home. For example, you have food leftover from dinner. You think to yourself, “There isn’t much left, I should just finish it now.” By this point, you are already really full, eating the rest will not even be enjoyable. The return on eating the food left is on a completely downward slope. Perhaps a better idea, would be to save what’s left and bring it to lunch with a side item such as a piece of fruit. This is what I find myself doing a lot of the time in addition to batch cooking. This way I enjoy the food and experience less diminishing return and also save money. Now I have lunch to eat tomorrow and don’t have to pick something up which can be more costly than cooking at home.
CLOTHES
Have you found clothes in your closet that you bought awhile back and still have not worn yet? Or do you see clothes in your closet that you have only worn once? If you own too many clothes, you will also experience diminishing return. I used to be as a guilty as the next girl who liked to shop. However, moving several times has taught me to change my habits. The more you move, the less “stuff” you want to move, hence the less you want to own. Learning this lesson has helped me to change my habits to buying less and utilizing what I have more. This also helps me to stay within my budget and still buy a few nice things that I actually use instead of leaving in the closet to collect dust.
Next time you order food in a restaurant or are shopping at the mall, remember the law of diminishing return and how it can help you increase your utilization and save more money.
Have you heard the law of diminishing return before? Will this now help you think differently before consuming? What are your thoughts?
Image: photostock / FreeDigitalPhotos.net & Image: Suat Eman / FreeDigitalPhotos.net
I certainly have heard of the law of diminishing returns, the only problem is that I didn’t think it applied in the one thing I had most trouble with. I used to work and work and work on my business until I wore myself out. I wasn’t aware that the law of diminishing returns applied in such a case. Since I’ve learnt to relax and to rejuvenate I’ve become so much more efficient. The law of dimishing returns is everywhere!
Kian | Awesome Life Coach recently posted..A Little Known Way to Smash your Everyday Demons Once & For All
Great example Kian. I’m sure we’ve all felt this way at some point. Finding a way to be efficient is definitely key.
Although I use leftovers for lunches, I think you make a good point. When I do shop for clothes, I do think how I can combine or stretch a various outfits. I usually buy when I need to replace versus just to buy clothes.
krantcents recently posted..Am I an Entrepreneur?
Great tip to combine various outfits. I also find that I now shop out of need and not out of want. This way it increases my utilization rate and is more budget-friendly.
Interesting idea… I suppose my Cable is becoming that way for me right now. Time to cut the cable!
Doctor Stock recently posted..Stock Market – It’s a Small World After All
Too much of anything can be bad
I definitely see this in my life. I think I had some diminishing returns today at lunch. I had 3 chicken tenders and the third one just wasn’t as good as the first. But the cookies and cream shake after made it all better!
LaTisha @YoungAdultFinances recently posted..Create a Vision Board for 2012
Lol. At least you made it better in the end.
I love having 1 or 2 pair of jeans I wear over and over again. They feel special, and I feel wasteful if I have much more.
Food, I try and eat slow and savor everything. My body gets full quick i.e. in 5-10 minutes vs. the normal 20 minutes it seems!
Financial Samurai recently posted..Fix The Car Or Buy A New One?
I agree Sam! I think most people have their favorites that they wear and the majority of their clothes just collect dust. Having two pairs of jeans is a great way to keep it simple (with a high utilization rate and ROI) and easy on the wallet. Eating slow is definitely a great strategy to use for food.
I have most definitely heard of the law of diminishing returns, and have applied it in the workplace. It’s often shown that different types of marketing investments can have a good ROI, up until a certain point when the message is no longer impactful. Thus, there have been diminishing returns.
In personal life, I think about it too. Here’s an interesting example: I wanted to get my youngest child to eat some really healthy food, so I told him he could get a snack if he finished his healthy food. His eyes lit up as he said “OK!”. Now, if I kept doing this, it wouldn’t have that same magical effect.
The law applies in many settings. Good one to keep in mind!
Squirrelers recently posted..Yogurt, Differentiation, and Personal Branding? Yes!
Great points Squirrelers. Law is diminishing returns is all around us and is always great to keep in mind.
Great post. Food and clothes. I am guilty of both. I have eaten past that point. Ugh. I could barely move and almost disliked some of my favorite foods because of it. Clothes. I went on a shopping spree years ago. Nice stuff, but some items haven’t even been worn once. Too much of a good thing?
Buck Inspire recently posted..Top Panelist Takeaways from BWELA 2011 Part 2
I think most of us are guilty of both of these Buck.
And yes, sometimes too much of a good thing can be bad…
Does wine count as food Mary?
1 glass I’m good but the second glass makes me sleepy.
Paul @ The Frugal Toad recently posted..Weekly Roundup – Just Around the Bend Edition
I like your idea FT
I never really thought about it. I heard of the law but, oddly didn’t apply it to my situation. Hmm… I would say the food one applies to me
YFS recently posted..Comment on 8 Hidden Costs of Home Ownership by cashflowmantra
Law of Diminishing Returns can be applied to many aspects of life… it can also effect your personal finance