This may seem silly but it’s true – donuts are a great way to test the law of diminishing returns.

As a brief refresher from your school days, the law of diminishing returns states that at some point, each additional “unit” yields lower returns. In other words, you get less out of it than you put into it.

This same law applies to consumerism. At some point, you get less out of stuff than you put into it. As you over-indulge yourself through dining out, buying electronic goods, shopping, watching too much TV, etc, you reach a point where you are putting more into it than you are getting out.

We tested this law once in high school through the consumption of donuts.

The Donut Test

This test is something that you can do yourself at home.

Step 1: Buy one dozen donuts. We used simple glazed donuts, but you can use whatever you like.

Step 2: Eat one donut and rate your satisfaction level with the donut on a scale of 1 – 10 (10 being the highest). Our test subject rated the donut a 10.

Step 3: Continue to eat donuts and rate each one immediately after eating it. Our subject rated the 2nd donut a 10, the 3rd donut an 8 and so on.

What was astounding to see was just how fast his satisfaction level dropped. The 4th donut fell to a 4. As he filled and started to over-consumer, the same donuts that were a 10 only moments before became 1s.

The donuts hadn’t changed. However, all things are relative. The first donut was great because our subject was hungry and excited at the prospect of eating so many donuts. With each ensuing donut, his appetite disappeared and was replaced with disgust.

Each donut returned less and less even though our subject was putting the same effort into eating them. And yes, he ate 10 donuts.

The effects of over consumption

Our test subject was lucky. He walked away with nothing more than a stomach ache.

The effects of rampant consumerism are far more detrimental. Let me give you some examples.

• The credit crunch is the result of people who couldn’t get enough. They wanted more house than they could afford. Although a smaller home with smaller monthly payments would have sufficed, many Americans chose to over-extend themselves. As the market collapsed, the return diminished and they found themselves putting more in than they were getting out. Feeling the pressure, many chose or were forced into foreclosure.
• Spending some time around the television being entertained can be a great way to relax. However, you can quickly over-watch TV. Rather than enjoying one show and then spending time together as a family, reading or working on a project, many Americans spend hours each day watching mind-numbing shows. The negative effects of TV are very well documented: violence, obesity, poor grades, etc.
• One area that my wife and I personally struggle with is eating out. We don’t spend a lot of money on clothes or electronics. We don’t even own a TV. However, we really enjoy eating out. Sometimes it’s because we don’t have time to prepare a meal, but mostly, it’s because we enjoy getting out and eating good food. The problem is that we tend to blow through our Dining Out budget pretty fast. In fact, we rarely stay within that budget. We have to pay for our over-eating out from another budget area or from savings. If we use savings, then we are putting ourselves at risk by dipping into the emergency fund.

Overcoming your addictions

Nobody wants to call it an addiction, but in most cases, it really is.

I know that you can “stop at any time,” but here’s some help either way.

• Stop Lying, 5 Ways to Stop Overspending
• 6 More ways to stop overspending and save money
• Timebox your way to better financial health

Ultimately, you need to recognize when you have reach the point where the benefits you are receiving are fewer than the resources that you are putting in.

Don’t keep eating donuts.

Stop.

Now.

Really.

One of the expense categories where my wife and I struggle the most is dining out. And I imagine that we are not the only ones. In fact, many of m friends find themselves splurging a little too often on dining out. So why the lack of self control despite having a budget and feeling so committed at the beginning of the month?

Here are my thoughts. Please add your own reasons in the comments.

Commit to a dinner plan before you are hungry

Much like the adage, “Don’t grocery shop while you are hungry,” you should avoid making the “What’s for dinner?” decision while you are hungry. Though don’t just decide early in the day that you will be staying in, actually commit to your decision by putting the meal into action. For some of you stronger willed individuals, committing may mean just getting the chicken out to thaw. For the rest of us, we need to go the extra step and practically make half the meal before getting hungry.

Another reason for committing early in the day is to avoid the temptation after work while you are in the car running errands or driving home. Many of our lapses in judgement are a result of deciding what to do for dinner while we are driving around. Going home, preparing the meal, cleaning up, etc. sounds like so much work when, “Hey, isn’t Cafe Rio just around the corner?”

So at least plan on your meal early in the day or week. It’s even more effective though if you can commit to your plans be beginning your preparations.

Reduce the size of the expensive main dish

I’ll give you an example to illustrate what I mean. I have a family of four. My two little girls don’t eat a lot, so we grilled up only three chicken breasts for dinner last night. My girls shared one breast, my wife and I shared a breast, and the third was stuck in tupperware as my lunch for the following day. Now, half a chicken breast won’t fill many guys, including myself. So we made garlic bread (purchased for $1) and vegetables such as corn (which we buy in bulk from Costco). By the end of the meal, I was full despite having had a small portion of protein (the most expensive part of the meal).

So get creative and add tasty, inexpensive sides to your dinner time meals that allow you to make a smaller portion of the expensive part of the meal. This same tip is also great for losing weight. Controlling portion sizes is one of the biggest factors in a successful, long term diet plan.

Make sure to have leftovers from dinner

Another expense category where many families struggle is work lunch. Your best laid plans to get up early to make sure that you have enough time to make and pack a lunch can easily fall through if you hit the snooze button one too many times. However, if you have leftovers from last night’s dinner already packed and ready to go, then you are much less likely to eat out come lunch time.

This money saving tactic obviously isn’t rocket science but does take some planning and forethought. For example, not all meals re-heat well or a recipe may only serve four but you need it to serve five in order to have one leftover meal.

You also have to practice self-control at dinner time. It’s happened more than once that my wife has made extra but my appetite took over and I ate everything. So stop after your portion is gone. This is also a healthy habit to form as well. Extra servings are rarely needed.

So what other tips do you have for saving money at dinner time?

Why do we feel the need to eat out?

I mean really. Of course there are the advantages like no preparation or clean up. But is it worth the extra expense?

For example. I called my wife about 5:30PM yesterday to let her know that I’d be coming home from work in about 30 minutes. She then mentioned that we didn’t have a meal readily available in-house and that she wanted to take her younger sister who’s staying with us out for a meal. Being in a good mood, I said, “No problem. You girls decide where you want to go and I’ll be home shortly.”

Due to health conditions, my sister-in-law has a very strict diet that excludes many types of food. So they decided on seafood and off to Red Lobster we went. Since crabfest is going on, my wife and I both ordered a pound of succulent snow crab with about a dozen shrimp scampi. The food was enjoyable. My 10 month old loved the crab.

But then the bill came. Seventy-three dollars later, I’m sitting there thinking, “Why did we do this?” The effects of cognitive dissonance were beginning to set in.

Cognitive disso-what?!

Better known as “buyer’s remorse”, cognitive dissonance is what we experience when our actions don’t fall in line with our beliefs. Our brain raises a red flag saying, “Why are you doing this? This action goes against what we believe about the world or ourself.”

And yet, we as consumers are so well trained to ignore that mental alarm and act in contrary to our beliefs and desires. I believe that fundamental to the issue is the habit of instant gratification that has been nurtured by the “me” or “now” generation. Our grandparents, the people who survived the Great Depression, are skilled ninjas in the art of waiting. And yet, that crucial skill seems lost on many Americans.

What are your beliefs about spending, budgeting, and frugality?

I propose a simple, yet potentially life changing exercise. Sit down this afternoon with a pad of paper and answer three questions.

1. What did your parents teach you about money?
2. How do you currently view money and its affects on your lifestyle, goals and dreams?
3. What actions, such as eating out, are currently in contrast to your views?

From this simple task, you may discover that your attitudes are what they should be. Or that your behavior does not reflect your beliefs. Also, you may discover the root of the issue – your childhood (said slow and deep).

So how bad is eating out and what can you do to change your habits?

Here’s what a few of my colleagues have to say on the topic:

Lunch Savings Calculator provided by Mortgage-calc.com allows you to input what you’d spend making a homemade lunch versus eating out, for how many years, and the investment rate you could yield with the savings.

Saving Money Not Eating Out by Me Financially Free outlines how he estimates an annual savings of $2,340 by not eating out for lunch.

How Much Money Can You Save by NOT Eating Out over at OutOfYourRut.com not only addresses the potential savings, but gives you eight suggestions for spicing things up in the kitchen.

Save Money by Not Eating Out for an Entire Month presented by Les O’dell at Good Financial Cents talks about some of the non-financial benefits in addition to the financial benefits from not eating out.

What tricks or tips have you used to avoid eating out? For more information and commentary, fan us on Facebook!