The economics of running out

By Richard Barrington

Published: Wednesday, June 18 2014 3:37 p.m. MDT

Updated: Wednesday, June 18 2014 3:37 p.m. MDT

In a sense, personal finance is a battle of conservation. People manage their resources in the hopes they won’t run out of the essentials — only what people find essential can differ.

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Editor's note: This article originally ran on on Five Cent Nickel. It has been reprinted here with permission.

In a sense, personal finance is a battle of conservation. People manage their resources in the hopes they won’t run out of the essentials — only what people find essential can differ. This centers around the fear of losing money or some other aspect of your financial life, and overcoming that fear should involve some element of minimizing the reality of it happening.

Offensive vs. defensive finance

Fundamentally, some people approach finance on the offensive, while others are on the defensive. People on the offensive are driven by acquiring more, or advancing their careers and social standing. People on the defensive care more about keeping what they already have than acquiring more. Both an offensive and a defensive mentality towards finance can come from a fear of loss — but what you fear losing determines whether your approach is offensive or defensive.

What do you fear losing?

These common fears of loss may determine how you approach your finances:

  1. Time. People who frequently say “life’s too short” are likely to be more defensive than offensive financially. Rather than being driven by career advancement or amassing wealth, these people’s priorities are to save time for themselves, and they won’t hesitate to spend money on a vacation or other experience that they feel will enhance their appreciation of life.
  2. Money. These are people who are concerned about career setbacks, financial losses, rising prices or anything else that might cause them to run out of money. Often, these are people who have had to claw their way up from a difficult financial situation and never want to have to do it again, making them very defensive financially.
  3. New things. It is easy to see this simply as greed, but if you look closely, acquisitive people are driven by a fear of loss in a way — they would miss the constant thrill of having new things, so they are always on the offensive financially, looking to make and spend more money.
  4. Prestige. Acquisition is sometimes not about the things themselves, but about social standing. Fear of losing that standing makes people aggressive financially, as they seek to get further ahead of their peers.
To a large extent, concerns with time, buying things or prestige require a philosophical solution — you need to find a way to stop these concerns from becoming obsessions. People can be obsessed about running out of money too, but this is also a very real concern. So, conquering the fear of running out of money requires both a philosophical and financial approach.

Conservation, not compulsion

For people whose fear is someday running out of money, the trick is to conserve your resources without becoming compulsive about it. Here are some approaches that might help:

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