Introducing the Matrix

Once you've established your psychic value for an item, you need to know just one more thing: Love is not LOVE. This is the key to my financial planning system.

Allow me to explain.

I have a fabulous friend I'll call Eve, who bootstrapped herself from dirt-poor beginnings to considerable wealth. When contemplating a purchase, Eve asks, "Do I really NEED this?" Then she asks, "Do I really LOVE it?" If the answer to both questions is no, then however inexpensive an item may be, she won't buy it.

I'm using capital letters because Eve pushes the definitions of need and love much further than most people. Having survived abject poverty, she knows (as some wealthy people don't) that she doesn't actually require an indoor polo field or, for that matter, an iPod, though she could afford both. She also believes that once her needs are met, she shouldn't waste one penny or one second on anything she doesn't LOVE.

Not just love. LOVE. There's a difference.

This system has given Eve a dazzling joy dividend. Her closet contains no clothes she doesn't adore. Her history brims with people, places, and activities she is totally and completely crazy about. Every dollar of her fortune (way more than $700,000, I assure you) has been spent on things she'll never tire of. I'm not as disciplined as Eve, but to the extent that I imitate her, I find myself reaping maximum psychic return on my own investments.

When you assess psychic value as Eve does, ruthlessly culling all but the deepest needs and the highest loves, potentially complex financial trade-offs fall into a manageable two-by-two matrix that looks like this:

Martha Beck money chart

As you can see, I recommend you pay top dollar for things in category 1, bottom dollar for things in category 2, and all your remaining money for things in category 3. Don't spend a red cent for anything in category 4.

Leveraging the Matrix

Of course, each week you and I carefully assess our income, expenses, retirement needs, and risk of illness or accident, then draw up a judicious budget that we honor religiously. After that, we flap our arms and fly to Jupiter, where we meet with other financially competent people to discuss hedge funds.


Here's the truth: Twice a year I meet with my wonderful accountant, Gary, who loves his job the way I love breathing. Gary meticulously walks me through my finances, which I think takes about an hour. I'm guessing, because after ten minutes, I fall deeply, deeply asleep. Everywhere else in the world I'm an insomniac, but Gary's office is to me what the poppy field was to Dorothy in The Wizard of Oz.

Eventually, Gary gently shakes me back into consciousness and makes sure I have a vague sense of how much I can afford to spend each month. Then he returns me to the real world, where I encounter financial decisions not as tidy equations but as chaotic demands: "Your dog needs bionic knees! Think fast!" In moments like this, I use my four-square system to make each decision. Here's how it works:

Start by writing a list of all the things you're spending money on. If a product or service falls in squares 1 or 2—in other words, if you really, truly need it—you must budget for it before buying anything extra. (I'd encourage you to ask yourself how things like retirement savings and health insurance will affect your quality of life; they may not be exciting, but if you're honest, you'll probably find you need them.) At the end of the exercise, you'll have two categories of needed items: things you love and things you don't.

Start with category 2 and purchase the need-but-don't-love items. This is where, as Gary says, you should "care enough to pay the very least." Buy the generic medication. Use coupons. Haggle. Pinch pennies until they scream for mercy. Having saved all you can on category 2, move on to items you both need and love. In this category, buy the best things you can afford. Be lavish. Don't worry about what other people say is a great value or a waste of money; check with yourself.

For instance, I obviously need food, and of course I love it; I find there's nothing like it when you're hungry, but I don't love it the way true foodies do. So I spend very little on my meals. On the other hand, I both need and love a user-friendly computer, so I invest in deluxe, state-of-the-art, turbocharged models. My friend Sheila recently admitted she really needs to have a computer, though she definitely doesn't love it. She got a steal on a pre-owned model that's a bit slower and clunkier than mine. We both made the right choice to maximize our own amount of joy.


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