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.

I mentioned a few weeks ago that, as with many others, my New Year’s Resolution was to lose weight. I am happy to say that I have lost 22 pounds since the beginning of the year. Between the HCG diet and now P90X (which is brutal), I feel better and my waistline is down several inches.

Unfortunately, we as Americans decided some time ago that instead of taste, nutrition, and health we wanted cheap food, a long shelf life, and fast preparation. Each time that I travel abroad, or even just to Canada, I am astounded by how good the food is, how much smaller the portions are, and the fact that I don’t feel like garbage after eating.

What many Americans don’t realize, or choose to ignore, is that fact that your eating and exercising decisions have long-lasting implications on aspects of your life outside of just health. Let me give you some examples.

Better looking people are hired and promoted more quickly

Historically, the taller and better looking Presidential candidate wins. Why? Because appearance affects our decisions. A recent study even showed that basketball referees call fewer fouls on players of their same race. Inappropriate? Yes. Human nature to judge a book by its cover? Yes

By having poor health, being overweight, and having more personal hygiene, you are negatively affecting your ability to increase your income. But there are fat millionaires you say. Of course there, but don’t plan on being one. If you want to improve your position or pay, then work out. As an example, women weighing 25 pounds more than the average woman earns $13,847 less. Whereas women weighing 25 pounds less than average earn $15,572 more. You may chalk that statistic up to the short skirt effect, but I bet the number for men are comparable (and I look terrible in a short skirt).

I’ll be perfectly honest. I will be applying to MBA school this Fall. One of the reasons that I want to be in better shape is so that I appear more physically appealing in the interview. I’m only 5’10” so I need the rest of my to be proportionate to my height.

Better health leads to fewer trips to the doctor and dentist

When I lived in Mexico City, we would use Coca-Cola to clean the grime off of the tiles in the shower. I have also used Coke and a toothbrush on several occasions to clean leaked battery acid off my car battery. If I can use soda to clean battery acid, you better believe it is destroying your insides. In fact, you have to drink 70 cans worth of water to clean 1 can of soda and its toxins out of your body.

Deals.com released an infographic at the beginning of the year outlining how much money you can save by controlling your diet. Obesity, or even just being chubby, adds a host of health risks and problems. Most overweight people I know suffer from heart disease, diabetes, respiratory complications, low energy levels, etc.

Also, consuming sodas and other sugary foods will leave you in the dentist’s chair more often.

Watching TV makes you fat

Another fascinating statistic from the Deals.com infographic is that for every two additional hours of TV watching, you are 23% more likely to be obese, which makes sense. If you are sitting, then you aren’t moving around and you are probably munching on snack foods loaded with preservatives and carbohydrates.

What if you turned off the TV? Or even threw it out? We sold our TV two years ago this Fall and we love it. We have no cable bill (cha-ching!), we spend more time working on side income (cha-ching!), we are more active and healthy (cha-ching!). You may call us radical, but I call us happy.

Eat better, be healthy and save money

Basically, that’s all I’m trying to say.  I agree that life is too short to miss out on. But a life of medical bills, missed income (think fewer vacations), and being a walking TV guide is not much of a life. So resolve to eat better, get some exercise and save money in the process.

What are your thoughts? Agree or disagree?