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How’s it going everybody this is pete the bush today i’m optimizing your usage of money money money money money now a lot of us would just go through life not really thinking about what is best for us just sort of seeing the marketing absorbing things and we go out to the store whatever we see we tend to buy but there are indeed various optimizations that you
Can do me being an engineer i see different ways to optimize certain things for certain purposes when you have a budget there are certain fixed costs that you have no choice over you have to buy certain things all the time every single month and for those things you might want to optimize for utility value this is in terms of whenever you buy something you want
The least costs per use for that particular item now you can see if you buy something and use it just once or use it a few times and then you forget about it the cost to you per use would be very high so it’ll look like something like this your utility will be very high at first and then it goes down to like almost zero so the total amount of time that you use
For this item is very little but if it happened to cost a lot it’s gonna cost you a lot every single use let’s say you only use this five times over here and it cost $100 well every single time that you use it it’s gonna cost $20 however let’s say you buy a knife set and it costs $100 as well but you use it over a lifetime you use it maybe 1,000 times that means
Every single time that you’re using it it only costs you 10 cents even though yes you’re gonna pay $100 up front so for example maybe a set of good knives you’re gonna use it and it’s just gonna keep on going maybe use it a little bit less later on maybe more or something but you can see there’s a lot of area under this usage so you have a total usage that’s very
Very high therefore the cost per use is very very low so when you buy things to minimize cost per use it’s one type of optimization where you’re trying to maximize your utility value here now utility is not the only thing you want to optimize for sometimes maybe after you have your budget set aside for whatever you know all the constant things that you need to
Buy the things that you require and things like that maybe you have a small fund of discretionary things that you want to buy things that would make you happy maybe every single month you have let’s say 100 dollars to spend this on now for this 100 dollars there’s the same thing that happens here you could have a curve that goes okay you know there’s a certain
Amount of happiness given across a certain time frame now to give an example maybe you like to gamble although i don’t recommend gambling or anything but let’s say you like to gamble and you go to the blackjack table and then you put $100 on blackjack and yes that is fun for you right but it only lasts maybe like 10 minutes or so so it’s gonna be a huge spike of
Very fun and then afterwards maybe you have negative happiness even because of your losses but let’s just call that zero you have this huge spike of fun but it’s not gonna last very long so you multiply this happiness by the duration of time it’s gonna be quite low so when i looked around for this metric where you have essentially happiness times time i couldn’t
Find anything so i’m gonna call this bt b’s haha kind of like btus where that’s a unit of heating bt b’s well you know i can name things after my own channel name i guess so your happiness level over here let’s rate it from one to ten okay that’s really easy people can usually give a number from zero to ten actually of how happy they are with a certain thing and
For how long they are so let’s call this gambling and let’s call this ten so let’s call this time you know one tenth in an hour so i’d like to call b t b’s in units of zero to ten times hours so it’s sort of happiness hours which is the units of b t b’s gambling a hundred dollars away let’s say it only takes you one tenth of an hour it gives you an happiness level
Of ten well that gives you a one btb value for this thing you could also let’s say you go get a massage or something and it costs you $100 perhaps you know it gives you a happiness level of ten but then it lasts one full hour and then afterwards maybe it tapers off or something and let’s not count that but if you multiply all this out then you get a bt b value of
Ten ten beatty bees so to extend this a little bit further let’s say you buy a massage chair and it’s not quite the same as you know human hands massaging you because it’s not as good so let’s call that you get a satisfaction of let’s say seven however you get to use it let’s say 50 times so it’ll look like something like this really long so it’ll be like seven
Times fifty it’ll be three hundred fifty dtbs’ so you guys can see a little bit closer above what i drew over here instead of maximizing for utility instead you’re trying to maximize for happiness now happiness is not the only metric that you can maximize for maybe you can maximize for contentment or as a business maybe you can maximize for maximum profit now i do
Realize that you may assign different values to how happy certain things make you may be certain things make you happy may be going to the movies make you happy so i realized it’s gonna be completely different for everyone so part of this is to be able to look back upon yourself and really critically think about how happy certain things certain events make you and
To judge how long certain things make you happy now i’m gonna take first class plane tickets as an example let’s just say a first-class plane ticket cost three thousand dollars the flight is ten hours long and let’s say the whole time that i’m in that plane ride i am having maximum happiness or satisfaction so i rate it a ten times ten hours so i get 100 bt b’s
If i fly coach let’s say i pay $600 i get zero satisfaction out of it in fact i might be suffering even but let’s just call it zero satisfaction and it’s gonna last me 10 hours in order to ride that coach plane ride however i’m gonna have 2400 dollars left over to enjoy at my destination let’s say i split this across 50 meals something that i personally enjoy and
I rate each of these meals you know 7 a or 9 or 10 and then i add all this up i might end up with a total of 300 to 500 be teepees rather than only 100 just from that plane ride but the idea is given limited resources ok you have a certain amount of money how can you use it how can you divide it up so that you get the maximum amount of happy durations happiness
Times time not just little spikes of happiness okay you want to look at how long it makes you happy so you have the whole idea where people keep on saying oh you know if you do experiences it’s gonna last much longer than buying things well do you really buy this they have research done on it but i don’t know depends on what item it is i do think that people do
Miscalculate on how happy they are so that’s why i stress on try to think about past things that you buy how happy and how long they actually make you so given the thought you might want to optimize your discretionary spending and really think critically about how much happiness time you get for each dollar that you spend you can go further by dividing it by the
Amount that you actually spent so here’s an example let’s say you go and watch the latest movie and it cost you ten dollars and let’s say this is a very very good movie so it’s you rate it at a ten and you enjoyed it for two whole hours so this is equal to 20 v tvs and then you just divide this ten dollars divide it by 20 v tvs equals 50 cents per btb so now let’s
Look at a different scenario where maybe we get netflix instead and then we don’t watch the latest movie let’s say netflix it cost $10 a month and then you watch you know five movies every single month so that’s 10 hours total but then because it’s not at the theater you don’t get the full experience you don’t get like you know a giant screen maybe you have a pretty
Big screen you have a sound system or something so let’s call it like you get a satisfaction of eight eight you get a db tvs here so 10 divide it by 80 so you get 0.125 / tb tb so this is less money to buy per unit of happiness satisfaction time so this is only 12 cents compared to the previous 50 cents per bt beep so in a way this is cheaper per unit of happiness
Time so what’s the lesson here is really hard to realize how long certain things make you happy for people are not made this way to realize how long things are gonna make them happy have you guys ever bought a ticket for certain random shows you know before you go in they have all these advertised been going oh yeah you know this is great but then after you go in
You know you get like a few minutes of entertainment and then you’re like oh this is it and then you come back out and you’re like wow i just paid ten dollars for like five minutes of entertainment so when you actually get good at evaluating how much things are worth to you it’s gonna be worth different leave to each person maybe i know some friends they really
Really like oint in a movie so they might rate this at 10 and then they might rate you know watching a netflix you know like a 3 instead so the value might be there for those type of people their value might be there for people who ride first class plane tickets the value might be there for people who buy very expensive hotels because sometimes they might rate
Things at a higher level than i would so this is different for every single person so realize this i’m not trying to say oh don’t buy movies don’t buy first class plane tickets and such like that so it all really depends on how much you value each one of these everybody basically has a limited amount of funds to disperse amongst different things now you want the
Maximum utility so you need to optimize how much you put in each one so when you go and put money in each thing that you like it better have a really really high btb so thanks for watching this video i know this is kind of ridiculous to assign my own unit to something it’s just because i looked around and there isn’t a name for something like that and i’m like
Hey that’s a project perfect chance for me to name it abbey tv because this is essentially something that i do all the time and i feel like it goes really well with this channel optimizing for happiness times time so thanks for watching this video i hope this kind of opened ups you’re thinking about how you should spend your money how to optimize your spending if
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To my channel over here and click that bell icon next to the subscribe button so that you get a new notification when they’re all below a brand new video thanks for watching
Transcribed from video
How to Optimize Your Spending By BeatTheBush
