When we make financial decisions, we’re often balancing what we gain against what we give up. A helpful way to understand this is through a simple idea: marginal utility. And nothing explains it better than chocolate.

What Is Marginal Utility?

Marginal utility is the value or satisfaction you get from consuming one more unit of something. It shows us why the first bite feels amazing… and why the tenth bite doesn’t.

The Chocolate Analogy

Imagine you’re offered pieces of chocolate, one at a time.

  • Piece 1: You’re delighted. It’s sweet, enjoyable, and feels like a treat.

  • Piece 2: Still good, though not quite as special as the first.

  • Piece 5: You’re starting to feel full. The enjoyment is dropping.

  • Piece 10: You’re over it. The idea of more chocolate may even become unappealing.

This drop-off in satisfaction is called diminishing marginal utility. Each additional piece gives you less value than the one before it.

Why It Matters in Financial Decisions

The same principle applies to money and investing.

1. Diversification

Putting every dollar into one asset might feel efficient, but like the tenth piece of chocolate, each additional dollar in the same place tends to add less benefit. Spreading investments improves overall value and reduces risk.

2. Spending and Lifestyle Choices

The first upgrade to your home, car, or holiday may bring significant enjoyment. But continual upgrades often provide less meaningful improvement. Understanding this helps prioritise what truly matters.

3. Insurance Decisions

The right amount of cover delivers peace of mind. Too much can mean paying for diminishing returns—more cost without much added benefit.

4. Saving for the Future

The satisfaction of spending today is real, but future financial security also has utility. Balancing these helps you stay on track without feeling deprived.

Bringing It All Together

Marginal utility helps explain why more isn’t always better—and why thoughtful planning leads to better outcomes. By recognising where the “first piece of chocolate” moments really are in your financial life, you can make clearer decisions that deliver more value and less regret.

If you’d like to explore how this idea applies to a specific goal or investment, we’re always happy to help.