You're listening to TIP.
On today's episode we bring back Morgan Housel to discuss his newest book, The Art of Spending Money Simple Choices for a Richer Life.
Morgan needs no introduction to our listeners.
He's the New York Times bestselling author of The Psychology of Money and Same as Ever, and his books have sold over 8 million copies.
He also serves on the board of directors at discuss the intersection of money and happiness.
Why Buffett's inner scorecard can empower us to use money as a tool instead of letting money use us.
Why the happiest people we know are oftentimes the most content.
Why chasing status is a game you'll never be able to win.
Why not all of our big spending decisions need to be run through a spreadsheet.
The shocking story of how the Vanderbilts lost billions of dollars due to social debt.
Why Morgan highly prioritizes spending money on independence and so much more.
During the last 15 minutes or so after I let Morgan go, I also took some time to share some of my biggest lessons from reading the book.
You know, money is one of those really fascinating things where most people naturally assume that they would be better off if they had more money.
But, as Morgan highlights, some of the most financially successful people also turn out to be incredibly miserable.
The eye and the psychology of why we spend money, the way we do, is critical to understand.
Anyways, the book was super fascinating and I enjoy chatting with Morgan about it, so I definitely encourage our listeners to go pick it up.
Without further delay, I hope you enjoy today's conversation with Morgan Housel.
2014 and through more than 180 million downloads, we've studied the financial markets and read the books that influence self-made billionaires the most.
We keep you informed and prepared for the unexpected.
Now for your host, Playthink.
Welcome to the Investors Podcast.
I'm your host, Clay Fink, and today I am pleased to welcome back Morgan Housel.
Morgan, thank you for joining me today.
Good to be back.
Thanks again for having me.
So I just finished reading your third book, The Art of Spending Money Simple Choices for a Richer Life.
I have about 20 pages of notes from reading this.
So please bear with me as I grapple with all these wonderful ideas you shared.
So I thought we'd start by talking about money and happiness.
Most people naturally assume that more money will make them happier.
The issue, of course, is that once you have a certain amount of money and your basic needs are met, more money really only has a marginal impact on our happiness.
It just doesn't move the needle as much as we'd expect it to or like it to.
And I wanted to share a quote from the book that just really hit home for me.
You write, most of what makes you happy in life has nothing to do with money.
And realizing that once you have money can be a painful admission.
So talk to us about how you view the relationship between money and happiness.
Can earning and spending more money make you happier?
The answer is yes.
I am not one of those people who says it doesn't make any difference.
But there's a lot of asterisks on that comment.
There's a lot of notes underneath that.
One of the most interesting studies in behavioral finance.
That kind of in my mind settled a very long-running debate.
The debate was, does earning more money make you happier?
And for decades...
Some studies said yes, some studies said no, and nobody really agreed on much of anything.
And a couple of years ago, a study came out that in my mind was like the tiebreaker here.
Very quickly.
What it showed was, if you are already a depressed and anxious individual, earning more money is probably not going to make you any happier.
But if you start out as someone who is already happy and fulfilled and a pretty joyful person, then earning more money will make you happier.
It's almost like it's leverage in either direction, but it's not going to necessarily change who you are.
And I think that's a really important thing.
And that's why some of the studies and the anecdotes will show that like yes, you can find people who made a ton of money and were still miserable, or more miserable than before.
You can find people who don't make a lot of money and they're very happy people.
And then they got a raise and they were even happier and it was great.
So that's one of the things there.
The other thing is just to kind of put a point on that Which of these two people would you rather be?
These fictional people that I'll describe.
Number one is a billionaire living in a mansion with a private jet, but you're on your fifth divorce.
Your kids don't talk to you.
Your community hates you.
You're being sued left and right.
You're in terrible health.
You're morbidly obese.
You don't sleep at night.
You're addicted to alcohol.
That's one person.
Or you are decidedly middle class.
You earn $75,000 per year. but you love your spouse.
Your kids adore you.
They can't spend enough time with you.
Your grandkids love hanging out with you.
Your community loves you.
You love your job.
You're in great health.
You sleep eight hours a night.
Which of those two would you rather be?
And it's not a trick question, because I think honestly some people would say I'd still rather be the first person.
And I would respect that answer.
But to me, it's crazy.
It's crazy to look at that, but I think you have to put it in those stark terms before you realize yes, there is a long list of things that money can do for you.
There is an even longer list of things it cannot do for you.
And that's easy to overlook, because the fact that money is so tangible and I can compare mine to yours because it's so apples for apples just in our ability to count it up means that it is very easy to jump to the conclusion that it is the key to our problems.
If you wake up every morning and you're like, man, this life isn't what I imagined.
I want something more.
It's very easy to leap to the conclusion that the solution to your problems is going to be more money.
Very easy to jump to that conclusion, because if I wake up and I'm kind of dissatisfied with life, If I said I need to become a better dad, that's a good, noble goal.
That might be true.
How do I measure that?
How do I track my progress?
How do I know if I'm a better dad this year than I was last year?
Very difficult to measure.
But if I wake up and I say I want to increase my net worth by 25, I can very quickly measure that down to the penny.
I can compare mine to yours.
And so, because it's so tangible, I think we overemphasize the importance in what it can do for our life.
Yeah.
And it's so easy to just look at the impact that more money can bring us, given all the things that money can buy, while ignoring all the things that money can't buy.
Many of the things that you highlighted in that first person in your example, And I think so much of happiness is just a game of expectations, right?
You look at here in the US, we've seen society at large continue to prosper.
But alongside that, people's expectations for what it means to be successful have likely grown even faster, as people buy bigger and nicer houses, fancier cars.
And this really ties me back to Buffett's concept of the inner scorecard. just so important.
Are you living a life that you truly want to live, or are you using what you have relative to other people as your scorecard for success?
So how about you talk a little bit about managing our expectations as it relates to money?
The very imperfect but, in my mind, helpful exercise that I do personally is I always want to ask myself if nobody were watching, what lifestyle would I live?
If maybe, I was on a deserted island with just my wife and children, but nobody else could see my house, my cars, my clothes?
Nobody could see it.
How would I choose to live?
And I think in that exercise everybody immediately understands the difference between utility and status.
Once you assume nobody's watching, the idea of status becomes ridiculous.
And so in that situation, I would not want a gigantic mansion.
I would want a nice house with a great view because I can enjoy that.
I would not want a Lamborghini.
I would want like a pickup truck.
I would not want branded clothes.
I would want comfortable clothes.
You immediately understand utility versus status.
The reason I do that, and it's hard to do that because the truth is nobody is watching.
I heard this great quote from the comedian Jimmy Carr a couple weeks ago.
He said, in your 20s, most people worry about what other people think of them.
In your 30s, you say, I don't care what anybody thinks of me.
And in your 40s, you finally realize the truth, which is that nobody was thinking about you all along.
I think that is so true that we overestimate the extent to which people are watching us.
And therefore, we overestimate how much status we get out of having nice things.
It's not that you get no status, you get no attention.
That's not it.
But we overestimate it.
We always think that if we had a nicer house, a nicer car, nicer clothes, that other people would stop and stare.
Look at Clay's clothes.
Look at Clay's house.
Like, wow, he must be doing well for himself.
The truth is, it's very rare that people do that.
And to the extent that they are looking at your house or your clothes, they are, by and large, imagining themselves having those things.
Like they're bypassing giving you the respect.
They just think, oh, if I had that jacket, people would respect me.
It's a very common thing to do.
And so I think back to your question about expectations.
Once you really understand the game of social status and how nobody is thinking about you as much as you are, then I think your desire for status, material status at least declines.
And that, to me, is a wonderful thing, because then you actually get to use money for what I think is its highest purpose, which is independence and living the life that you want to live, rather than trying to live a life of showing off for other people who aren't even paying any attention.
And so that's how I've always used it.
And look, I want to make a point.
I like nice houses.
I like nice cars.
I want to look nice.
This is not like, oh, go live in a burlap sack because nobody cares.
It's not that at all.
But I like nice houses for my family.
We have a house with a wonderful view.
My kids enjoy that.
I enjoy it every morning.
But you don't get to see it.
And that's okay because you're not looking to begin with.
There's a great quote that I heard from a guy named Kevin Kelly.
And he said, show off the inside of your house, not the outside of your house.
I think that's a great framework for a lot of things.
Like the inside of the house, my family and friends are the ones who are looking at it.
And those are the people in life who I want to impress.
The outside of the house is strangers driving by and they're not even looking.
I think a lot of the core of this, of the expectations game, is whose attention and admiration do I want in life?
It's different for everybody.
And that's pretty much it.
And I want those people to like me, to love me, to respect me, to admire me.
But it's just those like six or seven people.
And other than that, the rest of society, they're not paying any attention.
And even if they are, I don't necessarily care what they think about me.
And so, once you drill down to that level, I think it pushes you towards the expectations of what you're trying to achieve and understanding that what you actually want is respect and admiration from the people who you want to love you.
And that's a small group of people.
And one last thing I'll say about this is that that small group of people for me my wife kids, parents they don't care about my car.
They don't care about my clothes.
What my kids care about is that I'm a good dad.
What my wife cares about is that I'm a good husband.
What my parents care about is that I'm living a life consistent with the values that they taught me.
There's no materialism in that.
And so even if I like nice houses, nice cars, and I do, I like fast, fancy cars.
I like big, fancy houses.
I really do.
But I have to remind myself that the people whose attention I truly want do not care that I have those things.
And many of the good things in life are oftentimes free or cost very little.
Your parents.
All they probably care about is seeing you and spending time with you and having that quality time and whatnot.
And when it comes to spending money, it's just so easy to judge how other people spend money.
When I first started getting real exposure to money like being in college, experiencing having no money and whatnot and looking at all the nice things other people could buy it's just so easy to judge them.
And one of my key takeaways from all of your work is that all behavior makes sense with enough information.
So jumping all the way back to chapter one of The Psychology of Money.
You titled that chapter.
No One is Crazy.
And you talked about how it's just natural to view everyone's decisions as wrong when they're different than your decisions.
So you can look at someone's spending habits and just think, that person's crazy.
And I'm actually reminded when I read D.L.
Carnegie's How to Win Friends and Influence People.
One of the things I really took away from that book is if you were in that person's shoes with those exact same experiences that form their belief set, you would very likely do the exact same thing that they're doing.
That, you think, is crazy.
So for me, I've almost learned to just be a little bit less judgmental with how someone behaves, because we all have these different experiences that shape how we make decisions, including decisions with our money.
Totally.
And you are right to point out that the first chapter of psychology money, is very similar to the first chapter of the art of spending money.
I did that intentionally because I think it's the most important part of finance that you have to figure out what works for you and do that and be very careful taking your cues from people who have different goals than you are.
For psychology of money, I frame that mostly in terms of investing, how people invest their money.
But I actually think it plays a bigger role in how people spend their money, that people don't just spend money because some things generate more happiness than others.
There's a very deep psychological component of a hole that you're trying to fill.
I spend my money this way because my psychology dictates X, Y, and Z about what I want in life.
Or I'm a hyper saver.
I can't spend my money because I experienced this traumatic event at some point in my life that has scarred me forever and therefore I have to save so much because I have that kind of mentality in psychology.
Everyone has their own version of that.
And so many bad financial decisions come whether it's in investing or spending or saving or earning when people look at somebody else and say well, that strategy is working for them, so maybe I should copy it too.
And sometimes that will work, but a lot of times you end up copying a strategy that is right for that person but is very wrong for you.
And I think people really understand this with something like your taste in food or your taste in exercise and whatnot.
Like imagine how dangerous it would be if everyone looked at a world champion bodybuilder and they're like, oh well, that's what I should do.
You'd be like, no, no, no, you absolutely don't have to.
That works for them.
That lifestyle works for them.
It would drive you absolutely bonkers and you probably don't even want to look like that.
So please do not copy that even if that's working for them.
That's an extreme version, but there's so many different variations of that.
And so there were points in my life when people would criticize how my wife and I spent.
Now, during this period, we were much more frugal than we are now.
We were very, very frugal, but the truth is we loved it.
We loved being super frugal at that point in our life.
It's a little bit different now, but I had some friends who would just give me so much shit about it.
And I think it dawned on me early, like in that period I hadn't really formed a lot of thoughts on this yet, but it dawned on me and I was like no no no, this absolutely works for us.
And if I spent my money like you do, we'd be miserable.
But I understand that if you spent your money like we do, you'd be miserable too.
And that's okay.
Can we just admit that there's no right way to do it?
Again, I hadn't really formed many thoughts on that, but Now that my wife and I spend our money a little bit differently than we did five or 10 years ago, if I come across someone who is hyper frugal, I don't judge them anymore.
I'm like, hey, I was there.
That worked for me.
And now this is working for us.
And you just have to figure it out.
So not only is it different person to person.
I think it changes throughout your own life.
As your income changes, if you have kids, if you get married, if you're going towards retirement, your own desires and aspirations are going to change within your own life, not only looking different person to person.
So it's an unhappy answer.
I think for a lot of people that there's no formula for how to do this, for how to spend money.
And I think, to the extent that people have written about how to spend money, They come up with a formula like don't buy things, buy experiences.
And like those aren't necessarily bad, but I don't think there's any formula whatsoever.
I've talked about this a little bit before, but on the idea of like, oh, buy experiences.
My wife and I came to this realization a couple of weeks ago that like travel's not for us.
And we came to that idea when we realized that for the last like five vacations we've taken, the best part of the trip was coming home.
The best part of the trip was we got home.
We were like oh, finally back to the house and everything is in the right place and whatnot.
And we're like how many times do we need that experience before we just say maybe this isn't for us?
I travel a lot for work.
My idea of a vacation is not traveling.
That's a trip for me.
And so.
But look, I think for a lot of people it is true that you're going to gain a lot of happiness by spending money on travel.
And at other points in my life, my wife and I did.
Now we have little kids, so travel is very different.
And so the idea that there's no formula because the formula of spend money on experiences, for me, the experience that I want is being home with my kids.
And so to each their own.
And I think it's a big relief when you come to that, because not only do you use money in a way that truly works for you, but you become less cynical about other people's decisions.
I think it's not a healthy behavior to look at other people and say look at those idiots doing it wrong.
That's not a healthy realization in life.
Yes, people can make mistakes and do things that they'll end up regretting.
But if you're constantly going through life and saying anyone who has a relationship with money that is different than my own is wrong, that's not a healthy spot to be in.
Yeah, you make such a wonderful point.
Spending money on experiences.
I'm reminded whenever I take a seven-day vacation or whatever.
I just get all antsy and I just want to go back to work, get back in my own space and whatnot.
And it reminds me you talked about in the book how experiences can be a wise way to spend money, because of just the memories that you're able to build.
The memories can oftentimes take a lot of the good parts or maybe a lot of the bad parts or whatnot.
But buying things, you might use those things for a year or two or whatnot.
But memories are something that can stick with you for a lifetime.
Yeah.
I mean, I'm a very nostalgic person, so maybe other people have a different view than this, but that is my most cherished asset by far are the memories.
I started thinking about this a year or two ago when I read I think it was in the New York Times an interview with an elderly woman.
And she said I'm paraphrasing.
But she said the best part of growing older is that you can time travel in your head.
So she was, I think, 90 years old.
And her point was like, at age 90, you can be like, let's remember what it was like to be 50.
Do you remember what it was like to be 20?
What it was like to be 70?
You have so many memories to compare the current day to and to sit and reminisce on.
I think that is like the ultimate compounding asset is not a thing, not even necessarily an experience, but a memory.
And a lot of that, I think, for not everybody, but for a lot of people.
Some of their strongest best, most powerful enjoyable memories came from high school.
Again, not everybody, but for a lot of people, that's the case.
That's why high school reunions are so popular.
You get to CP, you get like all those memories.
And what is like a common denominator in high school?
You have no money.
You have 00 and you formed absolutely amazing, incredible relationships with people you'll remember forever that you cherished.
Again, not everybody, but I think that's by and large true.
And so my realization a couple of years ago was a family vacation to Maui with my wife and kids.
My favorite place in the world is Maui.
I love it.
And I was building sandcastles with my kids on the beach.
And I think at the time, my kids were like three and seven, something like that, young kids.
And I remember sitting there being like, this is a 10 out of 10.
I'm building sandcastles with my two little babies in Maui.
This is as good as life gets.
And that's true.
I think that was 10 out of 10.
But then there's this realization that like wait a minute if I was, instead of in Maui, if I was at home And instead of building sandcastles, I was playing Legos on the living room floor.
That's like a nine out of 10.
It's almost as good.
So the realization was like, what I actually want is not being in Maui.
What I want is uninterrupted time with my children.
And I can get that at home for free.
And that's truly what I want.
The fact that it was in Maui versus a living room floor bumped it up.
Maybe one notch made it a little bit more memorable, because within the memories you can distinguish it more from your everyday life.
But let's not pretend that what mattered was the scenery, what mattered was the company.
I think it's true for a lot of people that when they say they like travel, what they actually like is detaching from the monotony and the rigmarole of daily life.
It's not necessarily getting on a plane and being jet lagged and seeing something new.
It's that you have to travel in order to detach yourself from work and family obligations, whatever it might be.
And again, I'll say this a billion times.
It's not true for everybody, but that was definitely true for me that realizing what I actually wanted was uninterrupted time with my family.
And I could do that for a lot cheaper than flying them across the Pacific Ocean.
And so I think everyone has to figure out what is actually making them happy.
And for a lot of people, it's going to be your friends, your family, your health.
And you can use money to enhance those things.
And so I make the point in the book that buying a big house might make you happier if it makes it easier to host your friends and family.
So if buying a big house with a cool backyard means that you can have a barbecue with your friends every Saturday awesome, you're probably going to have a better life.
But the house itself is not making you happy.
It's just like a conduit towards something that is more powerful, which is your friends, your family, your company.
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All right, back to the show.
So you have a chapter titled The Happiest People, I Know, where you explain that the happiest people you know are the most content.
And this immediately made me think of my grandmother.
This lady is practically always happy every time I see her.
There's absolutely zero desire to impress others with material things.
And she clearly puts a huge emphasis on our relationships and being of service to others.
And it's a reminder to me that So much of happiness is based on just a shift in our mindset and understanding our psychology, and turning inward instead of looking outward and looking for that praise and admiration from others.
Well, let me give you the contrast to that with someone who I don't know and actually know very little about.
But my understanding is that Larry Ellison, who just this past week became the richest man in the world net worth of about 400 billion my understanding, without knowing him, is that he has had that deep desire to be the richest man in the world for 30 plus years.
And so here is someone who, in the last couple of years, would wake up with a net worth of 100 billion, 200 billion.
20 years ago, 50 billion, unfathomably rich.
And he woke up every morning saying, this isn't enough.
It's not enough.
I need more money.
I need more and more and more.
And I don't know if he's a happy or an unhappy person.
I don't want to pass that judgment on him.
But it's very interesting that somebody can be worth 100 billion and wake up and say this ain't enough.
I need more.
I need $300 billion more than I have.
And if you contrast that with, you mentioned your grandmother, my grandmother-in-law, who I wrote about in the book, who were, by any definition, poor.
Not just middle class, she was poor.
But she didn't want any more.
She had no desire to have an extra dollar.
She was making virtually nothing.
She had no assets.
She lived in a very small house. but she did not want anything else.
She gained all of her pleasure from playing in her garden birdwatching, talking to her friends, hanging out with her grandkids.
That's what made her happy.
And I think if you actually compared the financial happiness of my grandmother to Larry Ellison, my grandmother was happier. because the equation for happiness with wealth is what you have minus what you want.
Larry Ellison has an unfathomable amount, but he wants more.
My grandmother had nothing and she didn't want anything else.
And so if your goal is to be happy with your money, that equation is going to dictate your life what you have minus what you want.
And look, again, that's not a plea to say you should not want any more.
You should just be content with what you have because I want more.
I want more money.
I have material aspirations.
But you have to keep that formula in mind.
You are never going to be content unless you fulfill both sides of that equation.
And almost all of our effort in life is the first part, more, more, more, more, more.
And we are, I think, instinctively blind to the second half of yes.
But you have to actually balance that out with saying this is enough.
And I think when people daydream about having a bigger house, a faster car, whatever it might be, when they daydream about how great that life would be, what they are actually doing is imagining themselves being content with those things.
So when you daydream about living in the mansion on the lake, what you are actually doing is is imagining yourself in that house saying this is enough.
I don't want anything more than this.
But the truth is, a lot of times, if you are in that mansion on the lake, what you're doing is looking across to your neighbor's house and you're being like oh, their grass is a little bit greener.
Their house is a little bit bigger.
Maybe someday if I had that, then I'd be happy.
And so it's the lack of contentment that gives people the sense of unease and unhappiness that they're trying to fill with just having more and bigger stuff.
The last point I'll make that I think is very important is that I want to live in a world in which the vast majority of people wake up every morning saying this isn't enough, because that's where progress comes from.
The fact that you have deca billionaires who wake up every morning and say, this isn't enough.
I need to go build bigger products, faster products, better products.
That's a great world that you and I get to benefit from.
This is not like a mental illness.
I want to live in a world where people are discontent.
That's why the world gets better.
And my kids, your kids will live better than we do.
But at the individual level you have to recognize that it is the root of so much of your angst that you have around money.
One of the other points in the book that relates to this is you talk about how your propensity to be jealous of what others have can increase as you become wealthier.
Of course, if you can't afford rent or you can't pay for food, then having money is existential.
But once you cross some sort of threshold, the urge to climb that social ladder can just go off the charts.
So I think that's something really important to understand as well.
I think it was Bill Gates who said this many years ago.
He was like, look, anything over a million dollars, and this may have been 30 years ago he said it so we can adjust it for inflation, but he's like, any net worth over a million dollars, his saying was, it's the same hamburger.
His point was like he, as a deca-billionaire, he's eating the same hamburger as you and I.
He was like life doesn't change that much.
He also made a quote, something along the lines of look, his house has 30 bedrooms or whatever, but he can only sleep in one bed at a time.
And it's probably the same mattress that you and I are sleeping on.
There is a point at which a level of wealth and it's not that much wealth Most of what you're getting is bragging rights against others.
And of course, at lower levels, that's not true.
You're talking about housing and food and education, then there's more existential things.
But at a lot of level, what we're getting at is just me versus you.
What's my scorecard versus your scorecard?
And so I think the irony is that a lot of the most financially anxious people are very wealthy people.
Because the truth is, whether your net worth is 10 million or 10 billion, there's not a lot of difference in your lifestyle.
You're probably eating the same food, sleeping on the same mattress, etc.
So then, what you shift to, what your ambition shifts to, is why does Steve, why does Sue have more money than I do?
What did they do?
I need to work harder to catch them. get in this more superficial rat race.
Whereas at lower level, you're like, oh, if I work harder, I can pay for my kids to go to college.
That's good.
That's good ambition to have.
At the higher levels.
You just get into this BS bragging game with other people and that's a mental illness.
I think so much of our modern society sort of feels like a dopamine trap.
You look at our social media feeds, our smartphone notifications or whatnot, our food.
What role do you think dopamine plays in people's difficulty with spending their money intentionally?
I think it's a lot.
It's always been a lot, but it's probably more than ever, because one of the things that's great but has a downside is that we live in a world that is richer than ever more wealth, more materialism, more material abundance than any human has ever had.
And that's wonderful.
We should all be grateful to live in that world, but there's a downside to it as well.
And I think if you and I were having this conversation 200 years ago, By and large people would be like I wake up and I go to work on my farm, and I do that because my kids need potatoes to eat.
And that's why we do it.
And it's our whole life.
Whereas I think a significant portion of the population wakes up and says, I have this excess money.
After I've paid rent and bought groceries, I have this excess money and I don't know what to do with it.
And what I want to do with it is climb the social ladder relative to my neighbors, and only my neighbors, but everybody on social media.
And that is a very difficult game.
The game 200 years ago of farming to feed my kids.
Now granted, that was like for a lot of people a very difficult life and they had short life expectancies and they dealt with all kinds of ailments and illnesses.
It was a simpler life.
It was not an easier life, but it was much simpler.
And I think today we live in a very complex world where a lot of people have excess money and they don't know how to spend it.
And they're bombarded with comparisons to other people of their clothes, their house, their jewelry, their cars.
And it's just a much more complex world that we live in.
What I just said has been true for hundreds of years, but social media, just in the last 10, has dropped a nuclear bomb on this, because it used to be that people compared themselves to their neighbors and their coworkers, and that was pretty much it.
And now people compare themselves, particularly young people, to a curated highlight reel of fake happiness, fake beauty, fake wealth on social media.
And so it's made it, so that it's easier than ever to feel like you're falling behind, to feel like other people are doing better than you.
And what does social media maximize for?
I think it maximizes for FOMO and anxiety.
Your feed is going to give you the pictures and the posts that are going to maximize your FOMO and anxiety.
It's always been an issue, but it's easier than ever to, even if you're statistically doing well and statistically making a lot of money and statistically living in a perfectly nice house for your family.
Even if those are true, it's easier than ever to feel like you're falling way behind.
One of the funny things about your book is that you won't find a guide to budgeting, but one of the practical ideas I loved was a quote from Ramit Sethi.
Ramit wisely said to spend extravagantly on the things you love and cut costs mercilessly on the things you don't.
So that's just so well put because saving is, of course, important, at least in my opinion.
But I think spending on yourself is also important.
And one of the ways I try and implement this into my own life is I pretty much drive a pretty basic vehicle.
I've done that for the past seven years.
And while I could certainly afford, you know, a nicer, newer vehicle, I've avoided it.
And one of the reasons I've sort of leaned into that is so that I can spend sort of however I like in other areas without feeling any guilt at all.
Just a few weeks ago, I had a chance to fly out and see a friend for a weekend.
And I just know it easily fits into my budget because you know I'm making some other sacrifices in other areas of my life.
So how about you talk a little bit about this quote from Ramit?
I think for his individual example.
I don't want to put words in his mouth, but I'm pretty sure his thing is he loves clothes.
He loves fancy, very expensive clothes.
He couldn't care less about his car.
And so if you look at pictures for Meet Online, he's very well-dressed, looks amazing.
But my understanding is his car is not that.
And for his personality, he's like, that's what I want.
He doesn't care about cars.
He loves clothes.
And the point is not to say you should spend your money like that.
The point is that he figured it out for himself what he likes and what he doesn't like.
And he spent bountifully on what he likes, which is clothes.
And he cut mercifully what he doesn't, which is cars.
And everyone has to figure out what that is for them.
For some people, it's food, it's wine, it's travel.
It's housing, it's cars, whatever it is.
The point is that you have to figure it out for yourself, that there is no formula.
And so I don't spend a lot on clothes.
I buy a Levi's and a cheap t-shirt and that's perfectly fine for me.
But I spend my money on other things.
We have a really cool house and I spend my money on independents, which is a unique thing, but that's how I view it.
I view it as savings as purchasing independents.
And so everyone has to figure out what works for them.
There is no formula.
I'll give you one of the examples.
I like wine, but I'm not a wine connoisseur.
And there's so many people who are like, oh, Morgan, this is a $200 bottle.
It's going to blow your mind.
You've never tasted anything like this.
And they hand me a cup and I take a sip and I'm like, this could be Charles Shaw for all I know.
It tastes the exact same.
So I'm not a wine guy at all, but I know other people and it's so important to them.
Their wine collection is like such a treat and a treasure for them.
Great.
Awesome.
Very happy for you.
And you just have to figure it out what works for you.
How about you talk about the story of you buying your first house?
I know, not all your spending decisions are confined to a spreadsheet or a budget, and life just isn't as simple.
This is 2016, I think it was.
Our first child was an infant just born.
And my wife and I were very happy renters for a long time.
But once our child was born, our first child, it was like a switch in my head.
I was like, I have to own a house.
It has to be mine.
I can't deal with the potential of a landlord kicking me out.
Our son is screaming at 2 a.m.
Our infant son's screaming at 2 a.m.
I don't want to piss off our neighbors in the apartment complex.
So I was like, we need a house.
So we found this house on Zillow nearby.
And when my wife and I looked at it on Zillow, we were like, oh, it looks nice.
Let's go check it out.
But we're just collecting information.
We're not going to buy this house.
We just want to like, let's go see what a house looks like.
They had an open house and we pull into the driveway and my wife gasps and she says, I love it.
And I did too.
And I knew at that point, I was like, this is not a fact-finding mission.
This is not a spreadsheet.
We love the house and we're going to buy it.
And we did that day.
And so the idea that we went into it and we were like, oh no, this is just rational, just collecting a little bit of data.
But when you get there, here's one of the things it had a kid swing in the front yard, really beautiful, hanging from a cherry tree.
And my wife and I, with our infant son, we were like, ooh, I could picture him.
And it's not like spreadsheets and ration is out the door at that point.
It's all emotion.
And I don't regret buying the house.
It was great for us.
We lived there for five years and it was perfect.
There was nothing wrong with it.
But we should not pretend that this was a spreadsheet decision.
It was not.
It was pure emotion.
I think the same was when an 18-year-old is picking where they go to college or the decision to have kids to begin with.
Those are not spreadsheets.
That's all emotion.
You make those decisions in the heat of the moment, at the dinner table or in the car, wherever it might be.
You're not doing that in Excel.
And so I think that's the reality of it.
And a lot of people get into trouble when they think it's just a spreadsheet.
And their decision to buy a house was like oh well, the interest rate and the cost of capital is like no no no, that's important, but don't pretend that that's what it is.
And so the idea that a lot of particularly big decisions, there should be a lot of head in there.
There should be a lot of spreadsheet in there, but heart is playing a big role in that too.
And that's okay.
Because if you're just doing it with spreadsheets, you're just making decisions in your head.
That's probably a pretty boring life.
That's not how you want to go.
Having some of your decisions driven, at least in part, by your heart versus your head is a great way to do it.
Because that's when you get closer to the quirky things that you like.
So there's a lot of things that I might buy and you might buy that we can't explain on a spreadsheet.
It doesn't make any sense.
You're like, yeah, but I love it.
I can't explain why that is, but I love it.
Just as pulling into the driveway, when we saw the kids swing, we were like, I love that.
Now, if it's too much heart, you're going to get yourself into trouble.
You're going to buy a house you can't afford.
So there has to be a balance, but the heart is always playing a role in those big decisions.
And one of the other ideas that I appreciated that you shared was that there's so much more than just the price tag.
You talk about the hidden forms of debt.
So we're all familiar with debt that can go on a company's balance sheet or on our personal balance sheet.
But what's more elusive and potentially more dangerous are the other forms of debt that we can become imprisoned by.
I'm reminded of a line from your previous book where you said that risk is what you don't see.
I think what some people need to realize is that There are costs related to money and the things we buy that you won't necessarily find on the price tag.
And it can be pretty painful to realize that after you've bought such thing.
And it relates to one of your stories from the book where you were contrasting the life of two billionaire families with vastly different lifestyles.
One was the Vanderbilts and the other was Chuck Feeney, who most people probably have never heard of.
So I was curious if you could talk a little bit about this idea of social debt, hidden forms of debt in these two families.
Yeah.
So the Vanderbilts, everyone knows who they were.
When Cornelius Vanderbilt died in the late 1800s, his net worth adjusted for inflation was 300 or 400 billion.
And interesting thing about it, within three or maybe four generations there was virtually nothing left.
A little bit, but virtually nothing left.
They spent all of it.
And within there were three generations of Vanderbilts who their sole purpose in life every descendant, every son daughter cousin, every single Vanderbilt heir, their purpose in life was to spend as much money as they possibly could on the biggest houses, the biggest yachts, the biggest parties.
They just blew it as quickly as they possibly could.
And if you read the biography of these people, the Vanderbilt heirs, they were all miserable, without exception.
And the reason why is because money dictated every single inch of their life.
Money dictated who they could marry, where they could live, what they could do for career and hobby, what they were supposed to like.
The irony is that these people were the most, at least at the appearance, was they were the most financially independent people on earth.
And the reality was money dictated everything in their life.
They actually had no independence whatsoever.
The first Vanderbilt heir was who didn't get any money when basically all the trust funds had dried up.
This is now a well-known thing, was Anderson Cooper from CNN.
His mother was Gloria Vanderbilt.
She was kind of the last person to get a big trust fund.
And he's talked about this.
Anderson Cooper's talked about this.
He's not only the most successful Vanderbilt heir in 150 years, he's probably the happiest, because he was the first person where money did not control every single minute of their life.
And so the Vanderbilts had this, in my mind, was like this hidden form of debt.
And the debt was expectations, social expectations, where money was controlling every aspect of their life.
And I contrasted that with Chuck Feeney founded the duty-free stores in international airports where you can buy a giant jug of tequila and stuff for no sales tax a giant box of cigarettes.
They're in every international airport.
And he made billions of dollars from this.
I think at his peak, his net worth was about $10 billion.
The well-known part of Chuck Feeney's story is that he lived like a pauper and gave it all away.
He lived in a tiny little apartment and flew coach and drove a modest car and gave away $10 billion.
That's the well-known part of his story.
The less well-known part of his story is that when Chuck Feeney first became a billionaire in the 1980s, he lived like it.
He lived like a billionaire.
He had mansions all over the world.
He had a private jet.
He had a yacht.
He lived like a billionaire.
And he didn't like it.
It wasn't for him.
He liked being a normal person who gave his money away.
He has a quote that I love.
He said I realized one day that I was happy when I was giving my money away, and I was not happy when I wasn't giving money away.
This is what he liked.
And he wanted to live like an everyday person and give everything away.
That's what made him happy.
And what I love about Chuck Feeney is not that he did that.
It's cool that he lived like a pauper and gave it all away, but that's not what I love about it.
What I love is that he figured out what works for him.
Money did not control anything about him.
And he said, look, society tells me I should have a private jet and a yacht, but I don't like it.
I like living this way.
So I'm going to do that.
He was in more control over his money than anyone else I've ever seen.
And I love the fact that he figured it out for himself.
And there are some people who can't spend money or, like the Vanderbilts, they can't spend money fast enough.
And in both of those situations, the money controls them.
It's a hidden form of debt that, like their expectations, are a debt that has to be repaid before they can live a good life.
That social debt was so enormously big for the Vanderbilts that even 300 billion left them miserable.
And Chuck Feeney had zero social debt.
He could just use his money as a tool to live a better life.
And I didn't know him.
I actually don't know that much about him other than what's been written publicly.
But I would bet that he would be one of the happiest billionaires just because he had full control over money.
It didn't control his personality at all.
Yeah, it's a difficult balance, because it'd be easy to say you don't care what other people think about you or how other people view you.
But then you're put in a situation where everyone's sort of following these sort of guidelines.
And if you don't follow those, you can be excluded from your group or excluded from your social circle or whatnot.
So it's such a difficult balancing act that I think all of us are unconsciously playing.
So much of life is a competition with other people.
And that's a good thing.
It's a healthy thing.
That's why there's been so much progress is because we're competing against one another competing for jobs, competing for money, competing for spouses.
It's a competition.
And so when money plays a role in that and you just use it as if I use it as a tool just to gain a leg up on you socially, that's inevitable.
It's been happening forever.
It will happen forever.
At the individual level, it leads to a lot of misery.
Another difficult part of the art of spending money is that just the future is fundamentally uncertain.
We don't necessarily know how much money we'll need in the future, how much money we'll make, et cetera.
And with the benefit of compound interest, there are going to be many people in our audience who will have more money than they'll ever need.
Maybe they already have that today but never really enjoy that money because of that uncertainty that is always hanging above us.
How do you think about balancing this short-term versus long-term dynamic when it comes to spending money?
To me, the best definition of risk in life, for virtually everything, is just what are you going to regret in the future?
That's the definition of risk.
Risk is not the stock market going down.
It's not going into debt.
Risk is regretting what those things will do.
And I think the truth is, most people don't have a very good sense of what they're going to regret, either because they're short-term thinkers they're not even thinking about themselves in the future or they underestimate what they might regret in the future.
There's a great quote from Jerry Seinfeld where he says self-control is empathy with your future self, your ability to look at yourself in the future and empathize with that person of what you're going to be going through.
And so whenever people are talk about save money for tomorrow or YOLO, like spend it today because you don't know if there's going to be a tomorrow.
I think the only definition of risk is what are you going to regret?
And that plays a role of a lot of things in life, health, relationships.
I think with money it is getting to some point in your future and looking back and saying either I spent too much or I didn't spend enough.
It could be either of those two things.
And it's going to change throughout your life.
I've been a big saver for my entire life since I earned my first dollar when I was a teenager.
I've saved the majority of what I've earned.
If I, heaven forbid, were on my deathbed tomorrow, I would not regret any of that.
I would not think about the trips I didn't take and the cars I didn't buy.
I would have so much pleasure knowing that, because I saved money, my wife and kids are going to be okay.
Nothing would give me more happiness than that.
But 50 years from now, that might not be the case.
When hopefully, my kids are on their own, and standing on their own two feet, then I might look at all that savings and be like I wish I had done something with it sooner.
I wish I had given it away sooner, given it to my kids sooner or spent it on myself sooner.
And so it changes throughout the course of your life.
But always asking what are you going to regret is I think the only way to think about risk.
Because we think about risk in crazy ways.
In the stock market, we're like, oh, risk is the risk of our portfolio going down.
For spending, it's like, oh, not spending enough or whatever it might be.
If you always think about it through the lens of what am I going to regret at various points in the future a year from now, 10 years from now, 50 years from now I think it's a much better way to think about it.
I think one of the most powerful ways this changes your thinking is with debt.
It is very uncommon that people go into debt for a big purchase other than maybe a house or And 20 years in the future say that was worth it.
Maybe for some advanced degrees like med school or something, but even for a bachelor's degree.
Pretty uncommon that you're going to finance a bachelor's degree at a private university and 15 years later say that was worth it.
And particularly spending on credit cards and whatnot.
You buy a TV on a credit card, you're going to get a joy out of it the first week that you own it.
And after that, you're just going to get used to it, but the debt stays around.
There's very high likelihood you're going to regret that.
And so different for everybody.
And most people don't have a good sense of their future regret.
But if you think about risk in that way, I think that's the best way to do it.
Let's take a quick break and hear from today's sponsors.
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All right, back to the show.
You alluded to this a little bit earlier, but I really appreciated how you highlighted it in the book.
You essentially don't believe there's such a thing as unspent money.
To you, money that is saved buys a claim check on the future is the way you put it.
And every dollar of debt you hold is a piece of your future that someone else controls.
I've sort of always thought about savings as buying optionality, and that's just been so invaluable to me.
You're right.
I spend frivolously on independence.
I blow tons of money on having control over my calendar.
Why is independence your highest ROI for where to allocate your money?
Of course, different for everybody, but I think independence is what most people want, whether they know it or not.
It's a very human thing to just want to wake up and say I can do whatever I want to do today, even if what I want to do is go to work.
It's on my terms.
It's for me.
I think most people have a deep desire for independence and autonomy.
Charlie Munger once said that too.
He said, I had no desire to get rich.
I just wanted to be independent.
And he got both, but I think that's what people want.
And I think why it remains elusive for some people is because they view saving money as idle money.
If I save $100, that's just $100 sitting there wasted when it could be spent.
The change in thinking for me was if I save $100, that's not saving money.
I just purchased $100 of independence.
I purchased $100 of my time in the future that I now own and nobody else does.
And I desperately just have always wanted independence.
That's been true for my entire career.
I can do good work, but I'm not a good worker.
I'm not good when people tell me what to do and when to do it.
I just want to do it on my own terms.
And so that's always what I wanted.
And once my mindset shifted from saving money to buying independence, it made it so much easier to save.
Because at various points in my life, when I was saving a lot, I had a view of like, maybe I should be spending more of this.
And I'd be happy because I'm saving a lot of money.
It's just sitting there in cash and in stocks, not really doing much.
Once I viewed it as like, no, that's my independence account.
I was like, oh, let's go full bore on this.
And it's made me happy.
And reaching some version of financial independence has left me I was about to say happier, but I think the better way to phrase it was less anxious.
And everyone's propensity for anxiety is different.
But mine, when I felt like I was very dependent on other people, I had a lot of anxiety.
I didn't like it at all.
I didn't sleep well.
I wasn't very happy.
And so I don't know if becoming financially independent has made me happier.
It's made me less anxious.
That's a big lifestyle improvement.
It's not necessarily happiness, but it's a much better position to be in.
I found that many people think of financial independence as something that's just totally unattainable.
And they tend to think of independence as either black or white.
You're either financially independent or you're not.
And this mindset, unfortunately, can keep a lot of people from saving any money at all, even if it's $100 a month or whatnot.
And it's just painful to watch, given what you and all of our listeners know about just the power of compounding.
You actually argue that financial independence... lies on a spectrum.
You share 15 levels of financial independence.
I'm not going to make you list all of them or whatnot, but I'd love for you to talk a little bit about that framework.
I think, if you view independence as black and white, you're either purely financially independent or you have to work.
That's a bad way to look at it.
You should view every single dollar as a little bit more independent than you used to be.
And independence is a spectrum.
So if you have enough savings that, if you were to lose your job, you could wait until you found a good job.
You didn't have to take the very first one that you found in order to feed yourself.
That's a level of independence.
If your car can break down without ruining you, that's a level of independence.
If you have the ability to live where you want instead of where you have to.
That's a level of independence.
So independence is always on a spectrum.
I had a friend in college.
He said he made so little money that he was like, why would I save $50?
I can't do anything with $50.
I might as well just spend it.
So he didn't save anything.
And I think that's the broken mentality.
If you view every dollar that you save as a piece of your future that you now control, like that very subtle mindset shift, I think, makes it easier to save.
Lastly, we don't have the magic formula for spending money and living a good life, but we can take Charlie Munger's approach of inverting the problem and ask how we can spend money to live a miserable life.
What would be your guide to spending money poorly and living a miserable life alongside that?
I think the two biggest by far would be number one.
You should assume that money will solve all your problems.
That's a ticket to a terrible, miserable life.
And a lot of people do that.
And so a lot of people who don't have good relationships, don't have good health, will assume like okay, but if only I made twice as much money, then those things would be good.
And the truth is you have to solve a lot of problems in your life before money will do anything for you.
And so assuming that money is a solution to your problem, that's a ticket to misery.
The other is anchoring my internal life on your external life.
So when I think about my own life, I am very aware of all the demons that I have in my head, as you are, of yours that I don't talk about and you don't talk about.
Everybody has their own version of this.
I am very aware of the inner monologue in my head.
But when I look at your life, all I can see is the outside.
And so if I look at you or anyone else and I say, wow, he's living a good life.
He looks like he's happily married.
He's got a nice house.
He lives with nice kids.
He lives a good life.
I can see that stuff.
I can't see what's going on in your head.
And so if I compare my internal with your external, that's always a ticket to unhappiness.
And it's very common to do.
Because again, I hide the parts of my life I don't want you to see.
And you, for everyone, showcase the parts of their life that they do want other people to see.
So I think everyone goes through life with a flawed picture of other people's lives and how they compare to other people.
And if you think like, oh, if only I had enough money, then I could have that life and whatnot, but you're only seeing a very small portion of that life.
And when you do that, I think it makes you more appreciative of other people's struggles and more appreciative of what you need to do in order to be happy and content yourself.
Yeah, that is such a great point how with money, you can see what it costs to get that.
You can see what people own and whatnot, but you can't see, do they sleep well at night?
Do they have a good marriage?
Do they have all these stresses related to debt and whatnot?
So that's all the parts you don't see, but it's easy to see how much they enjoy riding in their boat or whatnot.
So Morgan, I love your work and really appreciate you joining me here on the show again.
For those who want to get the art of spending money, where should they go?
Well, it's everywhere.
Amazon, Barnes and Nobles, wherever you're buying books.
I've written all my books in this style where you can start the book on chapter eight if you want.
All the chapters live independently.
And if one chapter isn't working for you, you can skip to the next.
That's how I think nonfiction books should be written.
Rather than rambling on one point, I want to make lots of little points.
So that's my style of writing.
And I hope you enjoy reading it as much as I enjoyed writing it.
Excellent.
Well, thanks so much, Morgan.
Really appreciate it.
Thank you.
All right, everybody.
I hope you enjoyed my conversation.
His books have just been so impactful and inspirational for me as a host here at TIP.
This is the third time we've actually had Morgan on the show, each for his three books.
So the other two books are, of course, The Psychology of Money and Same as Ever, both of which I would also recommend.
Morgan is one of those authors where you read his work and you feel like you just walk away feeling smarter.
So I wanted to put together a segment here to share some of the most impactful lessons from The Art of Spending Money, for me at least.
So I think an important thing to highlight here before I dive in is that the book is titled The Art of Spending Money, not the science of spending money, not the formula for spending money.
And this is intentional because there's no one universal formula for how to spend money.
And this is probably why so many people can get this area of life wrong or just have to regret with how they spend their money throughout their life.
So the first lesson I wanted to share here that I think is really important to understand is that money is not inherently good or bad.
It's simply utilize to enhance the quality of our lives.
So like Morgan, I value independence very highly.
Before I joined TIP, I was working in the insurance field as an actuary.
I was making decent money back in 2020, 2021.
And by society's standards, I felt like I was doing pretty good, but I really wanted more independence.
I was going to the office five days a week.
I had to work a specific set of hours and I didn't have a lot of independence and autonomy with my job.
So during that period I was saving over 50 of my income and sort of keeping an eye out for other job opportunities.
Now I've naturally been a saver ever since the first dollar I earned bowing my grandmother's lawn at the age of 11.
But now I realize why I enjoyed saving so much, and it was always just the natural thing for me to do.
The reason that saving was just so natural for me was that it gave me optionality.
I love the idea that if I had an opportunity to, let's say, give some amount of money, no matter how small, to a cause I really care about, I really don't even have to think about whether it fits in my budget or not.
Or just a few weeks ago, I had a chance to visit a friend up in the Boston area.
So I purchased that plane ticket with zero worries, knowing that I'm still going to hit my financial goals because I've added some cushion and some margin of safety to my finances.
My savings is what gave me that optionality.
So saving money allows me to easily make those decisions just quick and in a painless way.
So back to my original story.
In 2021, I ran into a job posting here at TIP to be a host, and I saw that the host could First work wherever they wanted.
And second, set their own schedule.
So once I realized that I was capable of doing the job, I wanted to sign the dotted line and start tomorrow.
And this was despite taking nearly a 50% pay cut in making that transition at the time.
So that is how much I valued having more independence at that time.
If we take an alternative history and say that I was using all of my income in my career, I had gotten say a brand new car that was financed by the bank.
So I had car payments, big insurance payments.
I took on a sizable mortgage payment and a new house and whatnot.
Then making such a jump in taking the pay cut.
It would have been impossible, both financially and psychologically.
Now, this isn't to say that you should save 50% of your income or work a job that's 100% remote.
Every job has its pros and cons.
My point is that you should do your best to use your money to minimize future regret and live the best possible life you can without worrying too much about trying to be perfect.
Had I not taken the job with TIP, I knew that 70-year-old me would 1000% regret it.
Lesson one make sure you are using money to enhance the quality of your life rather than trying to live the life that others expect you to live.
The second lesson I really appreciated that we touched on at the beginning of the interview is just how much happiness has little or nothing to do with money.
Morgan writes happiness is complicated, but if you simplify it into things like a loving family health friendship, eight hours of sleep, well-balanced children and being a part of something bigger than yourself, you realize how limited money's role can be.
It's not that it has no role, just smaller than you may have assumed."
I'd imagine that a good number of our listeners are objectively wealthy, at least from a financial perspective, but we still continue to look for the next thing in life that can make us happier, or at least I do.
I recently just got this new espresso machine to make delicious coffee in the mornings at home and I swear I could not love this machine more.
It was 100% worth it.
It definitely makes my life better.
Even with that new purchase, I'm still looking around my house and asking myself what else do I need?
While also knowing that I already have everything I need to live a happy life, which are things that I outlined from that quote from Morgan above.
It's this balancing act of wanting to improve my life while also understanding that what we have is enough, should the financial side of my life somehow go haywire.
It's so easy to look at other people's things and say, wow, I would be so happy if I had that.
And if you go into that person's mind, they're looking at their other neighbor thinking the exact same thing.
It's just this slippery slope that never stops unless we learn to appreciate what we have and what is most important to us.
Since there's no objective measure of what wealth really is, many people are buying newer and nicer things because it's nicer than what other people have.
He talks about in the book how the question of whether your home is big enough is actually is my home bigger than my neighbor's?
And I love the quote that Morgan shared during the interview from Winston Churchill.
When you're 20, you care what everyone thinks.
When you're 40, you stop caring what everyone thinks.
When you're 60, you realize that no one was ever thinking about you in the first place.
The ages are, of course, different than what he said earlier, but the point remains.
I'm likely always going to feel like I could add just one more thing to improve the quality of my life.
But what's important for me to keep in mind is that there's a few big things that will really carry the most weight for me.
When you can really hone in on those few things that you know move the needle, that can help simplify the way you think about spending money and reduce your stress.
And there are a lot of things that can make me happy that cost nothing.
For me, time spent with my four-year-old and six-year-old nephews and long walks on a nice day in the sun are just perfect examples of things I really enjoy doing.
And I really can't get enough of either of them.
And both of them practically cost nothing financially.
The third idea I wanted to share here is about the power of contrast.
Morgan explains that no drink will ever taste as good as a glass of tap water when you're thirsty, and the best meal you will ever have is cheap food when you're starving.
It's the contrast between our expectations and reality that makes us happy.
In other words, it's the distance between what you have now and what you either had or expected before.
One of the little hacks that Morgan shares is this idea that we're able to enjoy the luxuries in life more when we aren't constantly being exposed to them.
He writes, End quote.
I'm sure many of you can remember the feeling of getting your very first paycheck from a job.
When I got my first full-time job out of school at the age of 22, I felt like I was really on top of the world.
Going from really not being able to buy anything to being able to provide for myself was just an amazing feeling.
Now, later in my career I'm 31 today I contrast the stable paycheck that comes through every month as something that can easily be taken for granted.
It just doesn't nearly feel as good as that first paycheck did.
One of the reasons that we all tend to experience lifestyle creep as our income rises is because we become accustomed to what we already have and it becomes our new normal.
Morgan tells the story of someone he knows that has a private chef.
So this man he served a five-star meal three times a day, and it's something that he's done for years.
Anyone would love that sort of arrangement, but you just can't help but assume that the joy of such an amazing meal three times a day surely diminishes over time.
He doesn't have to struggle to get those meals.
There's no anticipation, no looking forward to that rare restaurant reservation, no contrasting between a normal meal and this exceptional meal.
So if you or myself go out for a really nice or delicious meal, say once a month, we can get the best of both worlds.
We get to experience the contrast of experiencing these amazing meals with people we love and really get to appreciate it and experience the happiness that can bring, while also understanding that there's value in being content with what we already have and somebody else is always going to be eating some nicer meal than us that day.
So the person who gets those nice meals every day just does not get to experience that same thrill and appreciation that everyone else can experience.
Organ writes, Organ writes.
So it's quite the paradox and something I've tried to implement in my own life, to some extent at least.
You think about things like going out to eat, taking an occasional vacation or even something as simple as going out for ice cream or a treat or a latte or whatnot.
The fourth and final idea I wanted to touch on here is related to social debt.
So Morgan and I got a little bit into this in the interview, but social debt is essentially the debt you owe to others that you won't find in a spreadsheet.
It's what happens when how you spend your money influences what people think of you in unwanted ways.
One of the interesting examples is that of lottery winners who have lost everything.
Most people would naturally assume that someone who's broke that wins 10 million lost that money because of poor guidance and a lack of maturity that's related to their finances.
So, for example, perhaps they went out and bought a mansion or whatever else they could get their hands on as quick as possible.
But one of the common denominators that Morgan explains of these stories is that once they win the lottery, they quickly become overwhelmed by social debt.
The minute people learn how much money they have friends family, strangers all feel entitled to ask, beg and steal in a way that leaves the winners not only broke but socially exploited.
Now, the asset side of the balance sheet in this equation is very simple to calculate.
The lottery winner's getting 5 million, 10 million, whatever the amount.
But the liability side is unquantifiable.
You can't measure losing your privacy or the nagging from your family members who want the winner's money.
NBA athletes are actually another example of quick riches withering away rather fast.
One player mentioned that most people assume that athletes go broke because they frivolously spend their money on jewelry and cars.
Sometimes that can be true, but the most common cause of athletes going broke is social debt.
If you grew up in poverty.
Making millions of dollars means that it's not just your money, at least in your mind.
It's mom's money, dad's money, and your friend's money too.
This is what social debt looks like in the extreme examples, but this can apply to all of us.
The more your identity becomes attached to your physical possessions, the more other people's thoughts about you influence your spending decisions.
And the more eager you are to constantly wow these people with something newer bigger, better and more expensive.
So I would caution against having part of your identity being tied to having nice things, because it can be very expensive to continue that experience for the rest of your life.
This could also be framed as, of course, lifestyle creep.
A lot of people, when they have a lot of money, they spend a lot of money and they start measuring themselves by what their friends have.
This is a really dangerous game to play, as you climb up the social ranks and find that there's always someone out there that has nicer things than you.
It's always the case.
But the point isn't to avoid nice things altogether.
I want nice things in life as much as anybody, but you should learn to appreciate that, what you have, and not measure your own self-worth by comparing yourself to others.
So I would really like to avoid that trap of social debt the best I can and tune in more to my own internal scorecard rather than looking for external validation.
Lastly, I'll close out the episode with a short list of how Morgan thinks about money in his own house.
He's got seven bullet points here.
Spend less than you make.
Quietly compound.
Money serves you, not the other way around.
No one is thinking about you as much as you are.
Independence is wealth.
Aim to be a good ancestor and love your family.
On that note, I'll be discussing the art of spending money further with our Mastermind community later on October.
I have a Zoom call scheduled with the group on October 23rd.
In our Mastermind community.
We have around 120 members who collaborate in our weekly live Zoom discussions or get together at our in-person events in Omaha or New York City.
We'll be getting together in New York the weekend of October 10th, which is just after this episode goes live.
So if you're in the area and would like to connect, feel free to shoot me an email at clay, at theinvestorspodcastcom.
The premise of our mastermind community is to give our members opportunities to network and learn alongside high quality and like-minded people in the value investing community.
We have an excellent group of full-time professionals, family offices, entrepreneurs and people who invest their own capital outside of their regular job.
I've really enjoyed connecting with and getting to know our members, who are from all over the world, and I'm excited to see around 30 of them soon here in New York City.
If this sounds interesting to you, you can hop on our waitlist to join the community at theinvestorspodcastcom.
Slash mastermind.
Or again, you're more than welcome to shoot me an email at clay at theinvestorspodcast.com.
With that, thank you for tuning into today's episode on the art of spending money.
And I hope to see you again next week.
Thank you for listening to TIP.
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