Having assigned all the parts of our costs, we need to determine how exactly they affect our life.
For urgent expenses, only the active period is important. For example, the produce purchased on the weekend has a one week period of urgency. Dividing the sum by the number of days, we obtain the average daily contribution of current expenditures to the value that we call the standard of living for the considered period.
For spending on pleasure, the period of urgency is not so important as the period of influence. An event can last only one hour, but the impression of it may be fresh for a week or a month, this is exactly the period of influence. It is also important to assess efficiency: an unhappy order in a restaurant can spoil the memory of the evening and reduce the efficiency of spending to zero. Performing the same calculations as with current expenditures, i.e. dividing the sum by the period of influence and multiplying by the efficiency, we obtain the average daily contribution to the standard of living for the period of influence. Note that this part is more inert, as it is accumulated for months and years.
Also, an expense can be marked as a penalty to the pleasure, i.e. deliver an unpleasant experience. For example, medication might be unpleasant, though useful.
For investment expenses, of more importance, too, is the period of influence, in which the investment impact effects, such as
Typically, the effectiveness of investments is difficult to estimate at once, and so such an estimation can be done later. Dividing the amount of investment by the period of influence, we obtain the investment contribution to the standard of living for the period.
This type of spending can also be marked as a penalty if it has a negative impact on our future, for example, smoking might be enjoyable but it’s harmful.
An aspect of an expense can be marked as the subsequent effect. This means that the period of influence begins after the end of the active period, and not with it. We can enjoy an entertaining film right from the opening titles, while the advantage of driving courses can only be taken upon completion of the lessons, this is exactly a subsequent effect.
Now let us describe the capabilities of analyzing the data we have introduced.