Using the Nature of Human Adaptation to Hack Personal Finance


It’s well known that humans adapt surprisingly quickly to their surroundings and their circumstances.

Most of us have heard about the famous psychology study that revealed most lottery winners return to their same level of happiness in a matter of only months after winning millions. This is because they elevate their standards immediately after winning. Ordinary cars, houses, and clothing suddenly become not good enough. They need larger houses, faster cars, and more clothing to produce the same amount of happiness as before. 

This phenomenon isn’t unique to lottery winners. We all do this. When good things come our way, we have a tendency to say it could still be better. This is why bigger houses, more stuff, and more money usually doesn’t make us quite as happy as we think it will. There’s always someone out there who has it better than us.

Likewise, humans adapt to bad circumstances just as quickly as good ones. When we get fired from a job, have something important stolen from us, lose a pet, get a speeding ticket, or whatever else, most of us recover and return to our baseline level of happiness faster than we could have predicted.

When bad things come our way, we have a tendency to say it could still be worse. This is why most disasters and challenging circumstances don’t make us quite as depressed as we think they will.

Chasing the Happiness Spike

Most of us are familiar with the Hedonic Treadmill theory. According to this theory, as people make more money their expectations and their desires tend to increase in tandem. This causes people to buy bigger houses, newer cars, and more stuff, all while maintaining the same level of happiness. 

Many of these new purchases actually do lead to a spike in happiness in the short-term, but as time goes on we adapt to them and they become ordinary.

The spacious house doesn’t bring the joy it once did, the car quickly becomes outdated, and the stuff goes unused.

Thus, we have to go out and buy a bigger house, a newer car, and more stuff to regenerate that happiness spike. It’s a never-ending treadmill. You can acquire more and more stuff, but you’ll just become used to it over time.

Using Adaptation to Hack Personal Finance

This nature of human adaptation can be used to hack personal finance.

Just as you can become accustomed to bigger houses, newer cars, and more stuff, you can also become accustomed to smaller houses, used cars, and less stuff while maintaining the same level of happiness.

Here’s how I’m using the power of adaptation to hack my way to a nearly 80% savings rate:


Two months ago I moved out of my three-bedroom home I used to live in with my family to a fairly small apartment with a roommate. I had the money to place a down-payment on a house but I chose to save a huge chunk of money by splitting rent on an apartment instead because I knew I would get used to the apartment quickly and I would be just as happy as if I had my own house.

When my roommate and I first moved into our new apartment, we had to decide who would get the larger master bedroom and who would get the regular bedroom. He offered to pay $20 more per month in rent to have the master bedroom and I was happy to accept. After only a week I was already used to living in a smaller room. It doesn’t even feel small anymore. It’s the easiest $20 per month I have ever saved.

This housing situation works well for me because I actually spend very little time at home anyway. I’m at work, the gym, or Starbucks for most of my day and I only spend the evenings at the apartment relaxing or sleeping. Living small allows me to save a ton of money each month and be perfectly happy while doing so.


I drive an ordinary Honda Civic. It’s reliable, gets me to where I need to go, and gets great gas mileage. I don’t feel the need to get a fancy car to show off for anyone. I can afford to buy a new car but I know that I would just get used to it quickly. It would lose both its appeal and value in only a few weeks. 


Packing my lunch is the easiest, hassle-free way I save money on a regular basis. It’s so simple for me to meal-prep all my lunches for the entire week each Sunday and it saves me from buying expensive, sometimes crappy lunches at work. 

Spend More or Spend Less, You’ll Adapt Either Way

Whether you buy a new car every three years or drive the same old car you’ve had for a decade, you’ll be just as happy.

Whether you live in a massive McMansion or a tiny home, you’ll adjust to each lifestyle pretty quickly.

Whether you buy expensive lunches at work everyday or develop the simple habit of packing, you’ll get used to each routine over time.

To hack personal finance and increase your savings rate, recognize this truth:

Whether you embrace excessive large-scale living or small simple-living, you’ll adapt to each lifestyle quickly. 

By choosing small simple-living, you’ll be just as happy but you’ll have a much higher savings rate than if you choose excessive large-scale living. 

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Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

4 Replies to “Using the Nature of Human Adaptation to Hack Personal Finance”

    1. A small room also make you more intentional about what you buy since you don’t have as much space! 🙂

      Also, when you pack your lunch you learn new skills (i.e. learn to cook), instead of learning to open your wallet !

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