What Is A Spending Threshold And What Is Yours?

If you’re an endurance athlete you might be familiar with lactate threshold.  It’s defined as:

the level at which the intensity of exercise causes lactate to accumulate in the blood at a faster rate than it can be removed, making it the border between low and high intensity work

To put it another way, lactate threshold is the point at which if you go any harder it’s unsustainable, but if you go easier you’re under performing and not reaching your potential. 

Negotiating the back and forth of that line is the key to performing well at endurance sports.  And of course this applies in other parts of life.

 

Stress

As pain ripped through my quads after climbing a steep hill on a bike ride one day, I thought about how lactate threshold relates to life in general.  I climbed the hill at a pace that I could not sustain for much longer.  I was over my lactate threshold and my muscles burned intensely. 

But the thing that let me do it with confidence is that I know the hill, and can visually see the top of it just ahead.  While I’m putting out an effort that’s utterly unsustainable for much longer, I don’t need to do it for much longer to finish the hill. 

As long as I time the physical effort correctly with the length of time needed to perform it, I finish without collapsing or bonking. 

So let’s apply this to job stress.  Our jobs create numerous stress points.  Deadlines, endless emails and meetings, difficult relations with coworkers, and dangerous commutes are all parts of work life.  In total, most jobs leave us in a constant haze of stress that waxes and wanes, but that often gets to levels that are unsustainable. 

When job stress gets to an unsustainable level, things start to unravel.  It affects all aspects of life.  Not only does your work performance decline, your health declines, your personal relationships get strained, and your body starts releasing too much of the stress hormone cortisol. 

Too much cortisol in the blood over time creates inflammation and leads to chronic conditions such as arthritis, fibromyalgia, lupus, colitis, and a long list of other autoimmune diseases.  In short too much stress over time will shorten your life. 

And it’ll make the shorter life you do live miserable.

 

Stress Threshold

When you have too much stress in your work life or life in general, it’s unsustainable.  But too little stress might mean that you could take on a bit more and perhaps move faster up the corporate ladder or achieve more professional goals.

Negotiating this “stress threshold” – like lactate threshold for endurance sports – is important.  The ideal level of stress is sometimes called “optimal anxiety”.  I’ve written about it before and I find it a deeply fascinating subject. 

Preventing the excessive work stress that will shorten your life while achieving an optimal level of stress that will advance your career, pay, and satisfaction is a delicate balance that so many of us fail at. 

And just as there’s a stress threshold, there’s also spending threshold.

 

Optimal Spending

It’s easy to get excited about financial independence and FIRE and go at it so hard that you get consumed by it.  Same for a passion project or side hustle.  While 110% effort and “going all-in” may seem like the recipe for success in an endeavor, it could also be the recipe for burnout. 

If you cut your spending too much and obsessively focus on savings and money at the expense of other aspects of life, you might be running at a level of effort that’s unsustainable for the long term.  It’s akin to sprinting up a hill that goes on for miles.  You won’t make it that way.

Success often takes restraint.  You have to know when to ease the throttle on something to keep it running at a healthy pace. 

Spending threshold could be considered the level at which you’re spending enough to live in contentment, but are still saving enough to make solid progress toward financial independence. 

In my experience, finding your spending threshold is key to make progress towards financial independence while staying happy.  And since it’s called personal finance, each person’s spending threshold level will be different.

Just as navigating the stress threshold is key for your work life, navigating your spending threshold is paramount for your financial life and future. 

 

Spending Threshold

Fortunately for me I found my spending threshold early and never strayed too far from it for most of my career.  It allowed me to achieve financial independence and semi-retire in my mid 40’s. 

And four years of semi-retirement has virtually eliminated the most toxic and egregious forms of work stress from my life.  The liberation and joy of working only 20 hours a week is life changing, and something everyone should experience.

So find your spending threshold and try not to stray too far from it.  If you go over it for a while that’s okay, but realize that you can’t stay in that state and achieve your financial goals. 

And if you stay under it for a while that’s okay too but just be sure you’re not depriving yourself of happiness and joy in life. 

Your turn – Do you feel that you’re at or near your spending threshold?