Ask Emily: How do I balance happiness and financial responsibility?

This guy’s got a lot of living to do.
This guy’s got a lot of living to do.
Image: AP Photo/Keystone, Simone Zimmerli
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Life is full of complicated questions. Economics has answers. Our new advice columnist Emily Oster is here to help you tackle the big and small dilemmas of everyday life, drawing on the powers of social science, clear-eyed logic, and common sense. In her first installment for Quartz, Emily takes on a topic many of us are thinking about in the first days of the new year: priorities. 

I have a good amount of debt in student loans. I’m paying off a pretty large amount each month and every time I get some extra money, I try to put it toward them.

I don’t have a very expensive lifestyle, but there are things I want to do with that extra money. I’m constantly torn between paying off more of the debt and actually trying to live my life in a way I can be happy–like eating out to spend time with friends, buying a new winter coat that keeps me toasty, buying gifts for friends and family, and traveling to decompress. How do I find a balance? What’s best for me in the long run to be happy but also financially responsible?

First off, congratulations on being among the few fiscally responsible people in the world. It sounds like you’re free of other sources of debt. The fact that you’re deliberately paying down your student loans–and that you have extra cash after paying for necessities–means you’re already off to a good start.

It’s completely understandable to want to take some of that extra cash and have a little fun rather than throw it at student debt, which can often seem like a yawning black hole to recent graduates. The person you have to negotiate with is your future self. Choosing to use the money now is effectively borrowing from yourself later on.

To be more concrete: let’s say your loan has a 5% interest rate, and you choose to pay down $100 now. This costs you $100 in the present, but delivers about $127 to you 10 years from now.

So the question is whether you’d rather have the $100 now or $127 in a decade. When you decide this, you probably want to think a bit about your future self. For example, if you expect your income to go up a lot over time thanks to your MBA degree, your future self may not care so much about $127. That would argue for spending it now.

On the other hand, maybe you’re pursuing a less lucrative career path, so future self isn’t much wealthier than you are now. But she also has two little kids to take care of. In that case, your future self probably needs the money more.

If you do decide to spend some of your extra money on fun stuff now, the next question is which item to spend it on–perhaps treating Mom to a spa day for her birthday, or buying a flight to Miami in February, or zipping up into that toasty new coat. Unless you expect your future self to be running a wildly successful startup, you probably do not want to buy all those things at once. Here, economics has a more straightforward answer: Start with the thing which delivers the most happiness, and proceed from there. (For my part, I’d opt for the travel–or maybe a nice pair of shoes. But to each her own.)

I don’t watch a lot of TV, but I feel left out of pop culture conversations about big shows–Game of Thrones, Scandal, Jane the Virgin, Master of None, etc. I want to feel caught up on the “moment” we’re all living in. So how do I prioritize my TV-watching? Do I start shows I’ve never seen a single episode of first, or finish the ones I’ve started and gotten bored with? Do I dump the shows I’ve gotten bored with? In all seriousness, how should I expend my energy on consuming pop culture when it always feels like I’m in the process of catching up?

An excellent question, and one close to my heart as someone who is also woefully behind on TV. I could suggest the approach I have taken, which is to acquire only friends with small children whose television viewing habits are limited to Sesame Street and Daniel Tiger’s Neighborhood. But let’s take your question head on.

One of the central issues in economics is optimization: how to achieve the best outcome within a budget constraint. This is basically what you are asking: how do I maximize my “with-it-ness” on a limited TV budget? Your guiding principle should be to consider the costs and benefits of watching TV “on the margin”–that is, how valuable or costly the next unit of time you spend cozying up to Netflix will be.

First, let’s sort out what you are trying to achieve. Usually people watch TV for pleasure, which would certainly argue for dropping the shows you are bored with. Under these circumstances, if you discover a show you like, you should watch the whole thing. Another episode of your beloved Veep  is probably going to make you happier than diving into the pilot of an untested show drawn from your grab-bag.

However, it seems like you are watching TV primarily so that you won’t feel left out during cocktail party conversations. In this case, I understand the instinct to watch a little bit of each show that TV-savvy friends and critics praise. But I think this is probably the wrong approach. It is not going to make you feel any more caught up in the cultural moment to have watched one episode of Game of Thrones–you’d be better off reading television recaps. And one episode doesn’t give you enough time to form an opinion and fully participate in water-cooler conversation.

So I think your best bet would be to let longer-running shows like Scandal and Game of Thrones go (at least from an investment standpoint) and take up with one or two shows  that are only one season in or just beginning now. You’ll have missed out on some pop culture moments, but at least you’ll be current.

That said, I think it’s worth asking whether you should allocate more time to TV at all. That depends on the returns you get from doing other things. If you spend your marginal 30 minutes watching TV, it should be the case that you wouldn’t prefer to be outside playing basketball or learning the Cyrillic alphabet. These other activities also have benefits: basketball lets you bond with friends, and you never know when you may find yourself with a job opportunity in Russia.

The theory of “revealed preference” holds that you can tell a lot about what people want from the choices they already make. This principle tells me that you probably have things you prefer to do with your time than watch more TV. If that’s the case, stay true to yourself–and resign yourself to some quiet nodding over happy hours when your pals start debating Olivia Pope’s love life.

Emily Oster is an associate professor of economics at Brown University and the author of “Expecting Better: Why the Conventional Pregnancy Wisdom Is Wrong — and What You Really Need to Know.

Got an everyday problem that could use an economist’s point of view? Send Emily your questions at askemily@qz.com.