— Comparing two or more actions: Which action provides the greatest return, in terms of my/our holisticgoal, for the time and money spent?Use the marginal reaction test to ensure you are making the best possible allocation of your money, time and labour resources, and the maximum movement possible toward your holisticgoal.
It is used when comparing two or more alternatives, each of which would achieve a similar result, In almost all situations where several ways of achieving a similar result are identified, you will find one gives a better result per unit of time or money invested. Americans often call it the ' biggest bang for the buck!', and it does seem to express the purpose of the Guideline pretty well.
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This test is run last because its value is in comparing alternatives. Sensibly, you are unlikely to use this test until you have identified two ways that would achieve the required movement towards your holisticgoal. I like to think of it as the “casting vote test” – the one you use to make the final choice when everything else is pretty much a dead-heat.
Use the test any time expenditures are made. It is a key test when doing holistic financial planning, but you would also use it any time emergency expenditures were being contemplated.
Used in conjunction with Gross Profit Analysis, this test will help in many financial planning considerations.
At times you may find the test a little subjective. This is because the test is not only comparing results in an effort to maximise profit, but is also testing actions in order to achieve the maximum return in terms of your holisticgoal ie. all of your values. At times you may find that profit is secondary when using this test. Your judgements might then compare quite distinct quality of life issues against a financial objective. Such is the flexibility of this test.
When considering the use of time, this test can prove invaluable. We only have a fixed amount of time available each day. Think about each job you do. Is this action a ‘high profit per hour of your time’ action, or is it a ‘low profit per hour’ action? What value could come from redeploying your time?
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