Spending Begets Spending: Beware The Diderot Effect

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Share this lesson! So key to understand and internalize.

One of the finest pieces ever written on the saving-versus-spending challenge was an essay penned way back in 1772 by the witty and wise French philosopher Denis Diderot. It was titled, “Regrets On Parting With My Old Dressing Gown: Or, A Warning to Those Who Have More Taste Than Money.” In it, Diderot eloquently chronicles how his beautiful, new, scarlet dressing gown came to wreak havoc on both his mood and his finances.

Soon after receiving the gown, it became apparent that his surroundings, though formerly very pleasing to him, were not in keeping with the gown’s elegance. He felt compelled to replace his tapestry, his artworks, his bookshelves and chairs, and finally, even his beloved table that has served as his desk.

Eventually, a poor Diderot sat uncomfortably in his stylish and now formal study. “I was an absolute master of my old dressing gown, but I had become a slave to my new one,” he lamented. All of us have some Diderot in us. Therefore, the reference “group” you often need to be most wary of is not your affluent friends, or even your wealthier work colleagues;

it’s you, yourself. Few things influence your spending decisions of today more than your spending decisions of yesterday. Spending begets spending. Spending begets spending. A line worth repeating. Nowhere does the “Diderot effect” do more financial harm than in the area of home renovations. In fact, I’m convinced that during the renovation process, many people go temporarily insane — well, for most it’s temporary. How else can their spending decisions be explained? First, most set their initial budgets from slightly to wildly beyond what their finances and common sense would dictate. Then, invariably, the projects come in over budget because, well, that’s what projects do. “If we’re going to redo the bathroom floor, we might as well put in radiant heating while the tile is pulled up.”

Finally, and most troublingly, once the bathroom has become palatial, the kitchen pales by comparison. “Our cupboards are so 2015.” Diderot is once again resurrected and the “cycle of renovation” rolls on. The four most expensive words in the English language? “While we’re at it…” I’m not saying, “never renovate.”

Heck, a lot of my close friends and family members are in the industry, and hey, I made significant improvements to my own home just a couple of years ago. I love the Baeumlers, they’re friends. But, for crying out loud, get a hold of yourself. The upgrades, including the future changes that the current rental will inevitably lead to, have to be completed within the context of affordability.

More than half the people I know who are in trouble with their lines of credit arrived there by excessive home-renovation expenses. I really don’t have a problem with indulgences like heated marble floors — I wish I had them. However, when people are purchasing that kind of opulent item, especially with borrowed money, while not fully funding their RRSPs or TFSAs, yeah, that’s an issue.

And, in this particular case, there’s no excuse: The low-cost, old-style technology still works wonderfully — buy slippers! Remember Diderot. Above all, remember the alternative title of his insightful piece: “A Warning to Those Who Have More Taste Than Money.”