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Lets assume, for a moment, that we are headed into a period of time when we may all have to be a little less self-indulgent. Higher taxes and incomes that fail to keep up with inflation could contribute to what former governor Jerry Brown used to say was a need to "lower our expectations." That might not be such a bad thing.

At least some self-indulgence is rooted in a need to stay even with our perceived peers rather than how much we spend in an absolute material sense.

Alan Greenspan's new book refers to the Harvard study asking graduate students if they would be happier with $50,000 a year if their peers earned half that or $100,000 a year if their peers earned twice that. The majority chose the lower salary. Greenspan goes on to say, "Rising incomes do raise the level of happiness, but only up to a point and only for a time. Happiness has been proven to be largely detached from economic growth. It is determined by how we view our lives and accomplishments relative to those of our peers. The novelty of a higher standard of living wears off as newly affluent people adjust to a different status in life, and the new level is perceived as normal. Any gain in contentment is transitory."

As a nation, we are all arguably at some higher economic level, but now, like a nation of Woody Allens, a level of anxiety has kicked in - especially after a 20 percent loss in the stock market.

We are conditioned to live in a society that uses stress as an engine of economic achievement. Some 400,000 Americans lose their jobs every week. Not all societies think like we do. In France, only 36 percent of the population believes that the free-market system is the best vehicle for operating an economy. An astounding three quarters of young French men and women aspire to having a job in government. Maybe the lack of economic stress accounts for the French conundrum - the fact that they eat much richer foods but have far less heart disease.

But downsizing our expectations is as difficult as delaying our gratification. We are paddling upstream. In Dan Ariely's book, "Predictably Irrational - The Hidden Forces that Shape our Decisions," he outlines the extent to which we are often lured into ridiculous financial decisions by a variety of manipulative marketing tools.

Relative financial decisions consign us to a prison of bad money management. Here's an example from Dan's book: We easily consider spending an extra $3,000 on leather seats in a new $25,000 car, but we wouldn't consider spending that much more for a leather couch - even though we'll spend more time on the couch. We also rarely stop to think how many other things we could buy, like vacations and books, for the same $3,000. The operating principle is that the leather seats are part of a much larger expenditure, so their cost seems like a much smaller number to us.

In another example, a person had traded in his Porsche Boxster for a Toyota Prius. The reason was because he realized that the cheapest Porsche was the first rung of a ladder that would have him yearning for a Porsche 911 and eventually a Ferrari. Lesson: the more we have, the more we want. The only cure is to break the cycle of relativity.

Kevin Spacey's character in the film "American Beauty" looks around the over-decorated living room and says to his wife, Annette Bening, "This is not life. This is just stuff."

With the inevitable financial challenges ahead of us, both individually and as a country, this could be an opportune time to reassess the fundamentals behind our financial decision-making.

Maybe it's time to carefully reconsider how we planned to spend or invest money - while keeping in mind that most decisions (especially the bad ones) are based on emotions. Then we pick whatever rationale we need to support what we feel like doing.

Cynical political advisors claim that the average American voter thinks at a third grade level. That's us. We adults can be like putty in the hands of social forces that shape our financial habits. It's time to recognize this and wise up.

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