Frugality, Productivity, and the Local Maximum

Bear with me a little bit as I go down a (hopefully interesting) side path.

A few days ago, I read an interesting article by Cory Doctorow entitled How to Do Everything: Lifehacking Considered Harmful, on the issue of how most productivity strategies such as having an organized to-do list helps you find the most productive way of doing the urgent things in your life but doesn’t really help you step back and take a bigger look at things.

Doctorow uses his own life as a colorful example. Once he reached a point where his time was essentially filled, if he wanted to add something new, he could essentially only replace things. If something new came in, something else had to go away. So, in order for that to be a net positive, the new thing had to serve more purpose in his life than his old thing.

Eventually, he reached a point where everything he did with his time served double or triple duty. If something wasn’t providing fulfillment in multiple spheres of his life, it wasn’t an effective use of his time.

That sounds great at first glance, but here’s the problem: It commits you to remaining the exact person you are with little room for genuine growth or new challenges. The areas of your life that you happen to focus on now become so burdened with commitments that those areas become stronger while other areas simply atrophy and wither away.

There is simply no breathing room to step back and look at new things. There is simply no room to relax and reboot. Over a longer period of time, you eventually wind up with a huge set of commitments that you may not be fully happy with, and then you’ll find yourself miserable.

Essentially what Doctorow is describing is a local maximum, something hinted it in a great comment to the article by Arne Brix.

Here’s a simple way to think of a local maximum. Think of the greatest day in the last three years of your life. What was the absolute best day you had in that timeframe? That day is the “local maximum” of the last three years. It is not the best day of your whole life, most likely, but only the best day of the last three years.

The thing is, Doctorow is also describing a local maximum, just in a bit of a different way. He’s identifying the most effective way for him to get the most out of the areas of his life that he cares about right now (or at least over the last couple of years). That isn’t necessarily the areas of his life that he cares about the most over the course of his life.

Right now, for example, an area of my life that is of the utmost importance is my role of being a parent. It’s arguably at the very top of the heap these days. When I try to maximize the productivity of my life and choose what things I take on, my role as parent looms very large over those choices. I commit to things that enhance my role as a parent, like being a youth soccer coach or leading a youth group or planning a birthday party or choosing a career that provides the time flexibility I need to support my children’s growth as best as I can.

Those choices, however, just push me toward a local maximum. While the choices push me toward the things I care the most about as the parent of three school-aged children, they don’t necessarily push me toward the things that I’ll care about as much over the full scope of my life.

Frugality and the Local Maximum

So, let’s bring this idea of the “local maximum” back to personal finance.

As we’ve discussed before, frugality is the most useful personal finance tool in the moment. It really does help you find your “local maximum” in terms of spending, because it’s all about considering how to get the maximum value out of every dollar in hand.

Frugality is concerned primarily with your current paycheck and, to a smaller extent, your next several paychecks. The choice to buy store brands reduces your current expenses and gives your current paycheck more breathing room, for example. The choice to buy in bulk reduces your overall expenses over the next several paychecks. Shopping around for a better cell phone plan reduces your expenses for the next year or two.

All of those things are great frugality strategies, but they essentially only solve the “local maximum” problem. They help you to find the most efficient way to spend the money you have now, but on its own, frugality does not help you find your “lifetime maximum.”

The thing is, quite often, people just need to find that local maximum for a while when it comes to their finances. They’re in a tight spot and they need to know how to get through the next few months, and frugality is really the most efficient method for getting there. Knowing how to shop effectively, knowing how to control your own impulses, knowing how to find free and low cost local resources – all of those tools are really effective at getting people through the next few months. They’re all about maximizing your dollars right now, and that’s what many people care about.

Stepping Out to the Global Maximum

What we’ve established is that productivity strategies like a smart to-do list and frugality strategies like buying store brands both focus intensely on that local maximum. On their own, they don’t really help you find a global maximum.

(To be clear, a “global maximum” in this context is finding the best solution over the course of your whole life or at least a very large portion of it.)

So, how do you find a global maximum?

First of all, you take advantage of the benefits of finding your “local maximum.”

With regards to productivity, you use things like a to-do list and an effective calendar and smart scheduling and paying attention to your focus and energy levels in order to give yourself some amount of free time. The purpose isn’t to squeeze in some extra activity, but to give you an afternoon or a day each week where you have time to unwind and relax and step back and think about things in a broader context.

With regards to frugality, you use things like buying store brands and buying in bulk and making your own meals and shopping around for a better cell phone deal in order to have some money left over at the end of the month, which you then use to build an emergency fund and eliminate debts.

What do both of these things have in common? Rather than just using the benefits of frugality and of productivity to commit to even more things and buy even more stuff, you use those benefits to escape your local maximum and start to find your global maximum.

If you stick with productivity strategies, you start to give yourself a lot of free time to think about your life in a bigger way and to try out new things and explore new interests. You have a window to start tapping into new areas without sacrificing where you’re at now, and that enables you to start moving your life in a new direction as older commitments wind down.

If you stick with frugality strategies, you start to build up a healthy emergency fund and you start to pay off debts. That means that, over time, you have smaller and smaller debt payments and life emergencies don’t push you to the financial edge any more. Eventually, you have a nice emergency fund and your high interest debts are gone and you can start looking at building big things for your future, like saving for a house or switching careers or launching a small business or investing for retirement.

Of course, you can also use productivity and frugality to find an even better local maximum.

You can use productivity to find enough breathing room to take on another commitment right now or add another routine that amplifies something you care about right now. Productivity might find you the margin you need to, say, agree to serve on a committee or to commit to a family dinner at the dinner table five nights a week.

You can use frugality to find enough breathing room to keep surviving week to week financially. Switching to buying store brands and other little tricks can help you simply get to your next paycheck when the going is tough. Frugality can also help you add another bill to the stack. If you can find a way to save $10 a month, you can subscribe to Netflix!

In other words, frugality and productivity are tools; they can either help you find a local maximum or a global maximum. They can either help you pile more on your plate or help you find a different plate entirely.

The question is, how will you use those tools?

Piling On or Getting Out?

We can talk on and on and on about the specifics of frugality and the specifics of productivity, but the question comes down to how you are using those tools to alter your life.

Productivity can be used to pile more on your plate via adding more commitments, or it can be used to find a different global maximum by freeing up a window for long term thinking and trying new things.

Frugality can be used to pile more on your plate by simply helping you stumble to your next paycheck or afford another service, or it can be used to find a different global maximum by helping you start the process of building an emergency fund and eliminating debt and, eventually, investing.

You have those tools in your hand. What are you going to use them for?

It’s really easy for me to point toward the “getting out” solution. It’s easy for me to suggest that the best route is always to use those resources to move you toward the best possible life in the long term, the “global maximum.”

Use frugality to pay off debt. Use frugality to build an emergency fund. Start a debt snowball with that ground you’re gaining and pay off debt faster and faster. Soon, you have a whole new world of options before you and things like switching careers or having kids no longer seem financially impossible.

Use productivity to give yourself a weekend day to explore new projects and think about the big picture. Dabble in new things until you find something deeply meaningful, then start to dig into it. Gradually change your commitments to constantly allow yourself to incorporate new things, but keep that window of future thinking and exploration open.

Those are clearly the best long term solutions as they almost purely point toward the global maximum – the best possible life you might have in the long run.

However, the hard truth is that using those tools for the long term doesn’t really help you get through the moment. You’re essentially choosing to use a tool that would make life a little better right now and using it in a way that doesn’t make life immediately better, but instead helps out at some nebulous point way down the road.

Using frugality to pay down debts leaves you with a very tight financial life today without that extra perk of Netflix.

Using productivity to give yourself a Sunday full of free time for reflection and trying new things leaves you with an incredibly crazy Monday through Saturday.

In other words, when you chase a global maximum, you actually have to move away from a local maximum, and that’s hard.

In order to really commit to the best long term life, you have to have a less than optimal short term life.

Making the Choice

At some point, you have to make a choice between those two options.

The “default” choice for most people is the local maximum. It’s why you hear stories of people with insanely full schedules. It’s why 78% of Americans live paycheck to paycheck.

The thing is, a lot of those people are using frugal strategies and productivity strategies in many parts of their life. They’re just using those strategies to load as much as possible on their plate right now.

Rather than using frugality to pay off debts, they’re using frugality in one part of their life to pay for an expensive car lease or for a subscription to HBO.

Rather than using productivity to give themselves breathing room, they’re using productivity to be able to commit to more things at work and in their family life.

We’re wired to think this way. We’re wired to prefer the short term by default. The lives of our ancestors were short and brutal – they had to choose the short term to survive. The local maximum was the route to survival.

That isn’t true any more.

It’s only through being aware that we’re going to unconsciously choose the short term, recognizing it in ourselves, and consciously choosing to do things that point us to a better life that we’re able to choose the global maximum.

Choosing the best day or week is easy and automatic. Using tools like productivity and frugality to get there is the easiest strategy, too.

Choosing the best life is hard. Using tools like productivity and frugality when they’re not making today or this week or this month great is very hard.

So, what’s the solution?

Three Strategies for ‘Global Maximum’ Thinking

The big focus in my life over the last year or two has been to give as much of my attention as possible to the global maximums in my life. What things do I really want to have in my life over the long term?

I want to have a long lasting marriage, not just survive the week. I want to have children who are moral and independent adults, not just pressing through the weekend with them. I want to have a healthy body and a healthy mind and great relationships and a healthy interior life, not just crawl out of bed each day crunching through more or less the same thing for the rest of my life.

By default, though, I’m always looking for the best day and the best week, not the best decade or the best life. What can I do to change that?

I’ve really found three big things that really push my life to a global maximum.

One, I automate as much of the routine of my life as I possibly can. I save money automatically. I pay my bills automatically. I invest automatically. Most of my to-do list each day is automatically generated (based on long-term goals – we’ll get to that in a minute). In short, I take a lot of the day-to-day decisions that I could mess up out of my hands.

Doesn’t that make for a boring life? Not really. I still have tons of decisions to make, but rather than choosing between a short term option and a long term option, I’m usually just choosing between two short term options. I’ve already made my short term versus long term choices as much as I possibly can.

Two, I’ve started using my Sundays solely for building the best possible long term life. I use the day for four key things: reflection, trying new things, planning out the week ahead, and pure leisure.

I spend at least an hour or so thinking about my life in the long term. I usually do this in the morning before anyone else is awake. I think about my long term goals and whether or not I really did anything to move forward on them this week, and what I could do better next week.

I spend some time planning the week ahead. I make a meal plan and a grocery list (grocery shopping usually happens later on Sunday or on Monday around here). I make up most of my to-do lists for the whole week. I plan out my writing for the week. Some of this is almost automatic, as a lot of my long term goals just generate things for my to-do list and calendar, like a commitment to walk every day and a commitment to exercise and so on.

I spend some time doing something new. Usually, this is done with a friend or a family member. It could be anything, but it has to be something I haven’t done before but have always thought about. It is a conscious effort to keep pushing the boundaries of my life.

Finally, I spend a lot of Sunday on pure leisure time, even if there are things left undone at home. I’ll forget that basket of dirty laundry and I’ll go play board games or curl up with a book. The point of pure rest is to simply give my mind a chance to unwind a little, and I find that if I give myself a big block of this, everything goes better during the week.

How do I find time for this? Well, the rest of my week is pretty clearly planned out. On Monday through Saturday, I mostly just follow my calendar and to-do list and I don’t really make a whole lot of major decisions on those days. I just get things done, and those things just happen to have a long term orientation.

Three, I consciously choose to enjoy the things I have rather than the things I don’t. If I have a desire to play a board game, I look at the board games I have. If I have a desire to read a book, I look first at my own bookshelf and then at the online catalog of my library. If I’m hungry for a meal or a snack, I see what’s already in the refrigerator or pantry.

If I have fifteen minutes of free time, I don’t wish that I had two hours. Instead, I try to enjoy those fifteen minutes. If I’m exhausted, I don’t wish that I had more energy. I go get some rest (because I recognize I’m going to be useless and very unproductive if I push on).

I find that, again and again, my worst mistakes are made when I don’t appreciate what I have in terms of every aspect of my life – money, relationships, time, energy, physical environment, and so on. I may not have a “local maximum” in every area of my life, but I have a pretty good one, and by taking advantage of the goodness that I have rather than constantly obsessing over what I don’t, I end up giving myself more than enough space to seek out an even better life.

Final Thoughts

When you make decisions about how to use your money or your time, ask yourself this simple question: is this helping me find a local maximum or a global maximum? Is this the short term choice or the long term one?

Just try out that habit today. I’m not telling you which one to choose, but just to think about as many choices as possible in that light and see what they reveal in your life.

What you’ll find is that if you start thinking that way a little, and you start making a few choices differently, and if you start putting aside just a little bit of your money and time and energy toward finding a global maximum instead of a local one, you end up very slowly marching toward a truly better life, one where you’re not just working for the weekend.

Good luck.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.