Art of Spending Money w/ Savings Expert Morgan Housel | How to Optimize Money & Happiness (TIP759)

Summary

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• Investment Philosophy: The podcast emphasizes that money is a tool to enhance life quality, not the ultimate goal. Independence and personal happiness should be prioritized over material wealth.
• Money and Happiness: More money doesn't necessarily equate to more happiness. Once basic needs are met, additional wealth has a marginal impact on happiness, emphasizing the importance of managing expectations.
• Social Media Influence: Social media exacerbates feelings of inadequacy by promoting unrealistic comparisons, leading to increased anxiety and FOMO (Fear of Missing Out).
• Spending Strategies: It's crucial to spend extravagantly on things you love and cut costs on things you don't. This approach helps in aligning spending with personal values and happiness.
• Financial Independence Spectrum: Financial independence is not binary; it's a spectrum. Each dollar saved increases personal freedom, allowing for better life choices and reduced anxiety.
• Social Debt: The concept of social debt highlights the hidden costs of wealth, where societal expectations can lead to financial and emotional burdens.
• Contrast and Contentment: The joy of luxury diminishes with constant exposure. A modest lifestyle allows for greater appreciation of occasional luxuries, enhancing overall happiness.
• Key Takeaways: The podcast underscores the importance of using money to support personal values and relationships, rather than chasing societal benchmarks of success.

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Transcript

(00:00) 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 that it's it's a just a much  more complex world that we live in. What I   just said has been true for hundreds of years. (00:21) But social media just in the last 10 has   like dropped a nuclear bomb on this because it  used to be that people compared themselves to   their neighbors and their co-workers 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. (00:41) 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 I think  it maximizes for FOMO and anxiety. [Music] Hey   everybody, today's video is broken up into  two segments. During the first segment,   we feature our interview with Morgan Howell. (01:06) Morgan just released this wonderful book,   The Art of Spending Money, which we're discussing  in today's interview. And then at the end of the   video, after I let Morgan go, I sit down to  share some of my favorite takeaways from the   book as well. I don't usually include the  extra segment at the end of my interviews,   but I just love Morgan's work so much that it was  worth it for me to just sit down, take some time   to really gather my thoughts around the book. (01:32) So, I hope you enjoy that segment at   the end for the last 15 minutes or  so. Without further ado, here's my   conversation with Morgan Hel. Welcome to the  Investors Podcast. I'm your host, Clayfink,   and today I am pleased to welcome back Morgan Hel.  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. (01:58) I have about uh 20 pages of notes from   reading this, so please bear with me as I grapple  with all these wonderful ideas he 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 only really only   has a marginal impact on our happiness. (02:23) 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.  (02:38) " So talk to us about how you view the  relationship between money and happiness. Yeah.   So, 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  and what but there's a lot of asterisks on that   comment. There's a lot of notes underneath that. (02:56) 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 years ago, a study came   out that in my mind was like the tiebreaker here. (03:16) And 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 it's almost   like it's leverage in either direction, but it's  not going to necessarily change who you are.  (03:42) 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.  (03:57) 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   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.  (04:14) 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. (04:32) 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 I'd  still rather be the first person. And I I   would respect that answer. But to me, it's crazy. (04:49) It's crazy to look at that and 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. (05:19) And if you start if you wake up every   morning and you're like, man, this life isn't  what I imagined. I 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 dissatisfied with   life, if I said I need to become a better dad,  that's a good noble goal. That might be true.  (05:41) 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. (06:04) 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 know, 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 (06:33) 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 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 (07:07) 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.  (07:25) And so in that situation, I would not  want a gigantic mansion. I would want a nice   house with a great view because I could 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. Like   you immediately understand utility versus status. (07:45) 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 realized the truth, which is  that nobody was thinking about you all along.  (08:05) And 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. (08:24) Look at Clay's clothes. Look   at Clay's house. Like, wow, he  must be doing well for himself.   The truth is that 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. (08:41) 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. (09:04) 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 views it. And look, I want to make a point. (09:20) 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. (09:37) 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. (09:53) 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. And so much of this, 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, but for me,   pretty much the only people whose attention I care  about are my wife, my two kids, my parents, and   like two of my friends, and that's pretty much it. (10:18) And I want those people to like me,   to love me, to respect me, to admire me. But  it's it's just 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 like what you actually want  is respect and admiration from the people who   you want to love you. And that's a small group of (10:47) 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. (11:02) What my parents care about is that like   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. (11:21) Yeah. And many of the good things in life   are often times 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. You know,   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 uh (11:51) 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. (12:11) So you can look at someone's spending   habits and just think that person's crazy. And I'm  actually reminded when I read Dale 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.  (12:34) 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 shaped 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.  (12:52) 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. (13:10) 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. (13:29) 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 I 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 (13:57) 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. (14:16) " You'd be like, "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. Please do   not copy that even if that's working for them."  That's an extreme version, but like there's so   many different the variations of that. (14:31) And so I I feel like a lot of   this came from 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.  (14:48) We It's a little bit different now.  But I had some friends who would just give   me so much 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, this absolutely works for us." And if  I spent my money like you do, we'd be miserable.  (15:04) 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? I hadn't really   formed any many thoughts on that. But now that  we my wife and I spend our money a little bit   differently than we did five or 10 years ago. (15:19) 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 like 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 or   if you get married, if you're going towards  retirement, your own desires and aspirations   are going to change within your own life. (15:39) Not only looking different person to   person. So 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.  (15:58) I've talked about this a little  bit before, but on the idea of like, oh,   by experiences, my wife and I came to this  realization a couple 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.  (16:15) The best part of the trip was like we got  home, we were like, "Oh, finally back to the the   house and like 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. (16:30) That's a trip for me. And so, but look,   for 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's very different. And so, the  idea that like 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.  (16:50) 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. (17:06) " 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. (17:23) I'm reminded, you know, whenever I take   7-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, uh,  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.  (17:43) So, even though 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 know,   you'll 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'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.  (18:02) I started to think about this a  year or two ago and I read I think it was   in the New York Times an interview with an  elderly woman and she said something along   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   ah let's remember what it was like to be 50. (18:21) Do you remember what it's like to be   20? What was it like to be 70? You have so many  memories to compare the current day to and to to   sit and reminisce on. I think that is like the  ultimate compounding asset is not 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. (18:45) 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 all those memories. And what  is like a common denominator in high school?   You have no money. You have 0.0. and you formed  absolutely amazing, incredible relationships with   people you'll remember forever that you cherished. (19:04) Again, not everybody, but I think that's   by and large true. And so, the idea that the  asset that I want to accumulate are memories,   and some memories don't cost anything.  And so, my realization a couple years   ago was a family vacation to Maui with my  wife and kids. I love that's my favorite   place in the world is Maui. I love it. (19:22) And I was building sand castles   with my kids on the beach. And I think by  the time my kids were like four and seven,   something 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   sand castles with my two little babies in Maui. (19:36) This is as good as life gets." And that's   true. I think that was 10 out of 10. But then  there was this realization that wait a minute,   instead of in Maui, if I was at home and instead  of building sand castles, I was playing Legos   on the living room floor. That's like a nine  out of 10. And then that it's almost as good.  (19:52) 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. Like 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 you can like within the memories you   can distinguish it more from your everyday life. (20:12) 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 rigma roll of daily  life. It's not necessarily getting on a plane   and being jet-lagged and seeing something new. (20:29) It's that you have to travel in order to   detach yourself from work and family obligations,  whatever it might be. And again, I I 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. (20:48) Um, 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 like buying a big  house might make you happier if it makes it   easier to host your friends and family. (21:06) 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 uh more powerful   which is your friends, your family, your company. (21:21) Jim Ran once said that you're the average   of the five people you spend the most time  with. And I really could not agree with him   more. And one of my favorite things about being  a host of this show is having the opportunity to   connect with highquality like-minded people  in the value investing community. Each year,   we host live in-person events in Omaha and New  York City for our tip mastermind community,   giving our members that exact opportunity. (21:49) Back in May during the Bergkshire weekend,   we gathered for a couple of dinners and social  hours and also hosted a bus tour to give our   members the full Omaha experience. And  in the second weekend of October 2025,   we'll be getting together in New York City for two  dinners and socials, as well as exploring the city   and gathering at the Vanderbilt 1 Observatory. (22:12) Our mastermind community has around 120   members and we're capping the group at 150.  And many of these members are entrepreneurs,   private investors, or investment professionals.  And like myself, they're eager to connect with   kindered spirits. It's an excellent opportunity  to connect with like-minded people on a deeper   level. So, if you'd like to check out what the  community has to offer and meet with around 30   or 40 of us in New York City in October,  be sure to head to theinvestorspodcast.  (22:42) com/mastermind to apply  to join the community. That's the   investorspodcast.com/mastermind or simply  click the link in the description below.   If you enjoy excellent breakdowns on  individual stocks, then you need to   check out the intrinsic value podcast hosted by  Shaun Ali and Daniel Mona. Each week, Shawn and   Daniel do in-depth analysis on a company's  business model and competitive advantages.  (23:09) And in real time, they build out the  intrinsic value portfolio for you to follow   along as they search for value in the market. So  far, they've done analysis on great businesses   like John Deere, Ulta Beauty, AutoZone, and  Airbnb. And I recommend starting with the episode   on Nintendo, the global powerhouse in gaming. (23:28) It's rare to find a show that consistently   publishes highquality, comprehensive deep dives  that cover all the aspects of a business from an   investment perspective. Go follow the Intrinsic  Value podcast on your favorite podcasting app and   discover the next stock to add to your portfolio  or watch list. So, you have a chapter titled The   Happiest People I Know, where you explain that  the happiest people you know are the most content.  (23:56) 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 her  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   uh understanding our psychology and turning inward  instead of, you know, looking outward and looking   for that praise and admiration from others. (24:26) Well, let me let me give you the contrast   to that with someone who I don't know and actually  know very little about. 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. (24:49) And so here is someone who in the   last couple years would wake up with a net  worth of a hundred 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.  (25:08) " And look, I I I I don't know if he's  a happy or an unhappy person. I I don't want   to I don't want to pass that judgment on him.  But it's very interesting that somebody can be   worth a hundred billion dollars 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.  (25:28) My my late grandmother was not just middle  class, it was just poor. But she didn't want   anymore. She had no desire to have an extra dollar  that she had she had 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, bird watching, talking to her   friends, hanging out with her grandkids. (25:50) That's 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. And Larry Ellison has an unfathomable  amount, but he wants more. My grandmother had   nothing and she didn't want anything else. (26:12) 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,   that's not again, that's not a plea to say you  should not want anymore. You should just be   content with what you have because I want more  money. I want I I have material aspirations.  (26:27) 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. And  we are like I think instinctively blind to the   second half of yes but you have to actually  balance that out with saying this is enough.  (26:46) 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 imagining   yourself in that house saying, "This is enough. (27:07) 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 if someday if I had that, then I'd be happy.  (27:20) " 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.  (27:40) 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. So I I this  is not like a mental illness. I want to live in   a world where people are are discontent. (27:54) 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 uh angst that you have around money.   Yeah. I think uh 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.  (28:16) So once you sort of realize that you you  see that chasing the status game or or recognizing   that there's this slippery slope of you know never  having enough being being a having that Larry   Ellison type mindset you know of course if 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 you know the urge to climb   that social ladder can just go off the charts. (28:42) So I think that's something really   important to understand as well. Yeah, I  think I think it was Bill Gates who said   this many years ago. He was like he was like  look anything over a million dollars and this   may have been 30 years ago he said it so  we could adjusted for inflation but he's   like any net worth over a million dollars. (28:55) He's like his saying was it's the   same hamburger. His point was like he as  a as a decillionaire he's eating the same   hamburger as you and I. Like like he's  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. (29:14) And it's 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. If you're  talking about housing and food and education,   then there's more existential things. (29:30) 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. (29:46) You're probably eating the same food,   sleeping on the same mattress, etc. But 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.  You get in this more superficial rat race.  (30:02) Whereas at lower level, you're like,  "Oh, if I work harder, I could I can pay for   my kids to go to college." That's important.  That's good. That's good ambition to have. At   the higher levels, you just get into this like BS  bragging game with other people, and that's like   that's a mental illness. I think so much of our  modern society sort of feels like a dopamine trap.  (30:20) You look at our social media feeds or  smartphone uh notifications or or whatnot or   food. Uh, what role do you think dopamine  plays in people's difficulty with spending   their money intentionally? Well, I think it's  a it's a lot. It's always been a lot, but it's   probably more than ever because, you know, one  of the things that's 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. (30:50) 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 if   you and I were t 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. (31:08) Whereas I think, you know, 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 not   only my neighbors but everybody on social  media and that is a very difficult game.  (31:28) The game 200 years ago of farming to  feed my kids. Now granted that was like that   was for a lot of people a very difficult life and  they had short life expecties and they dealt with   all kinds of ailments and illnesses but I think  it was actually it was a simpler life. It was   not an easier life but it was much simpler. (31:42) 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 that it's it's a just a much  more complex world that we live in. What I   just said has been true for hundreds of years. (32:04) 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 co-workers 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. (32:23) 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 I think it maximizes for FOMO   and anxiety. Like your feed is going to give  you what like the pictures and the posts that   are going to maximize your FOMO and anxiety. (32:43) And so it's it's it 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 in it.  (33:05) But one of the practical ideas I loved was  a quote from Reit Sati. Rem 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 money on yourself is also important. (33:26) And one of the ways I try and implement   this into my own life is, you know, I uh  pretty much drive a pretty basic vehicle.   I've done that for the past seven years. And  while I could certainly afford uh 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 however I like in  other areas without feeling any guilt at all.  (33:48) And 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 Rit? Yeah,   I think for his individual example, and I I  don't want to put words in him in in his mouth,   but I'm pretty sure his thing is he loves clothes. (34:06) He loves fancy, very expensive clothes. He   couldn't care less about his car. And so, my if  you look at pictures of of of online, he's very   well-dressed, looks amazing. But my understanding  uh is his car is is not that. And for his   personality, he's like, "That's what I want."  He doesn't care about cars. He loves clothes.  (34:25) 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. (34:43) Whatever it is, the point is that you   have to figure it out for yourself that there  is no formula. And so I I don't spend a lot   on on clothes. I'm wearing Levis'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 independence,   which is a unique thing, but that's how I view it. (35:02) I view it as savings as purchasing   independence. And so everyone has to  figure out what works for them. There   is no formula. I'll give you the one  one of the examples. I am I like wine,   but I'm not I'm not a wine connoisseur.  And there's so many people who are like,   "Oh, Morgan, this is a 200 b $200 bottle. (35:19) It's gonna 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. I don't have So, I'm not a   wine guy at all, but I know other people that it's  so important to them. Their wine collection is   like such a treat and a treasure for them. Great. (35:35) Awesome. Very happy for you. And you just   have to figure it out what works for you."  How about you talk about uh the story of you   buying your first house? I know uh not all your  spending decisions are confined to a spreadsheet   or a budget and life just isn't as simple. Yeah. (35:52) Was this probably is 2016 I think it was   our first child was an infant just born and  my wife and I would very happy renters for a   long time. But once our child was born, our  first child, I 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. (36:08) Our son is screaming at 2 am. Our   infant son's screaming at 2 am. I don't want to  piss off our neighbors in the apartment complex.   I was like, we need a house. So, we found  this house on Zillow nearby. And when my wife   and I looked at on Zillow, we were like, "Oh,  looks nice. Like, let's go check it out." But,   we're just collecting information. (36:22) This is not like we're not   going to buy this house. We just want to like  let's go see what a house looks like. And we   drive to it was they had an open house and we pull  into the driveway and my wife gas and she says,   "I love it." And and I did too. And I knew  at that point I was like, "This is not a   factf finding mission. This is not a spreadsheet. (36:41) Like we love the house and we're going to   buy it." And we did that day. And so the idea  that like 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.  (36:57) Really beautiful hanging from a cherry  tree. And my wife and I with our infant son,   we were like, "Oo, I could picture him on And  like it's not like spreadsheets and ration is   out the door at that point. It's all emotion.  And we I I don't regret buying the house. It   was great for us. We lived there for 5 years and  it was perfect. There's nothing wrong with it.  (37:15) But we should not pretend that this  was a spreadsheet decision. It was not. It   was pure emotion. I think it's the same as when an  18-year-old is picking where they go to college or   the decision to have kids to begin with or when  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. (37:33) 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   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 that's  not that's a yes that's that's important,   but don't pretend that that's what it is. (37:51) And so the idea that a lot of particularly   big decisions should there 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. (38:08) That's probably that's that's   not how you want to go. Like 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 like 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. (38:22) It doesn't 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, "Oo,   that's 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. (38:35) So, there has to be it 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. Um,   you talk about sort of the the hidden  forms of debt. 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. (39:03) I'm 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. (39:20) 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 Feny who most people probably have never   never heard of. So I was curious if you could talk  a little bit about this idea of uh social debt,   hidden forms of debt and these two families. (39:40) Yeah. So the Vanderbilts, everyone   knows who they were. When Cornelius  Vanderbilt died in the late 1800s,   his net worth adjusted for inflation was three  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. (39:56) 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, what  not, 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. (40:14) They just blew it as quickly as they   possibly could. And if you read the biography of  these people of the Vanderbilt heirs, they were   all miserable. Every single one, like 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, everything.  (40:36) The irony is that these people  were the most, at least 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 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. (40:59) 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 like 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. (41:17) 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  Feny. Chuck Feny founded the duty-free   stores in international airports where you can  buy like a giant jug of tequila and stuff for   like no no sales tax and giant box of cigarettes. (41:39) They're in 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 Feny's story is that  he lived like a popper 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.  (41:59) That's the well-known part  of his story. The less well-known   part of his story is that when Chuck Feny  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. (42:14) And he didn't like it. It wasn't for him.   He liked being a normal person who gave his money  away. He has this 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. (42:30) That's what made him happy. And what   I love about Chuck Feny is not that he did that.  It's cool that he lived like a popper and gave it   all away. But that's not what I love about 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. (42:48) I I 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. (43:05) 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. And there that social debt was  so enormously big under belts that even   $300 billion left them miserable. And Chuck  Feny had zero social debt. He could just   use his money as a tool to live a better life. (43:24) And I 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, you know, 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 following  these sort of guidelines and if you don't   follow those, you could be excluded from your (43:50) 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. No, see, you know, so much of life  is a competition with other people and that's   a good thing. That'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.  (44:09) 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 that's inevitable. It's   been happening forever. it will happen  forever but 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. (44:32) We don't necessarily know how much   money we'll need in the future, how much money  we'll make, etc. 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. (44:52) How do you think about balancing this   short-term versus long-term dynamic when  it comes to spending money? Well, 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. (45:11) 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.  (45:24) 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 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.  (45:42) 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. (45:59) 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. (46:23) That nothing would give me more happiness   than that. Um, 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.  wish I had given it away sooner, given it   to my kids sooner or spent it on myself sooner. (46:41) 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,   like not spending enough or whatever it might be. (46:57) 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 was is with debt. It is   very uncommon that people go into debt for a big  purchase other than maybe a house and 20 years   in the future say that was that was worth it. (47:23) Maybe for some like advanced degrees   like med school or something, but even for like  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 like spending on credit cards  and whatnot. You you buy a TV on a credit card,   you're going to get 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. (47:43) 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. You   alluded to this a little bit earlier, but I really  appreciated how you highlighted it in the book.  (47:59) 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.  (48:19) You write, "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. (48:42) 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 Monger 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.  (49:04) 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 that's  not saving money. I just purchased a $100 of   independence. I purchased a $100 of my time in the  future that I now own and nobody else does. And I   desperately just have always wanted independence. (49:25) That's been true for my entire career. I   just I'm not I 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 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  (49:49) sitting there in cash and in stocks, not  really doing much. Once I viewed it as like, no,   but that's my independence account. I was  like, oh, let's go full boore on this. And   it's made me happy. and reaching some version  of financial independence has left me I I was   about to say happier but I think the better  way to phrase it was less anxious and people   have very 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  (50:17) sleep well I wasn't very happy and so I 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, you know, many people think of   financial independence as something that's  just totally unattainable and they tend to   think of independence is either black or white. (50:40) You're either financially independent   or you're not. And this mindset unfortunately  can keep uh a lot of people from saving any   money at all, even if it's $100 a month or  whatnot. And you know, it's just painful to   watch given what you and all of our listeners  know about just the power of compounding.  (50:58) So you 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. Yeah, 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. (51:16) I think you should 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. (51:34) 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 uh live where you  want instead of where you have to and like have   a shorter comm that's a level of independence.  So independence is always on a spectrum. I   had a friend in college who was like he said he  made so little money that he was like why would   I save $50? I can't do anything with $50. (51:58) 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 it like that very subtle mindset shift   I think makes it easier to save. And lastly, we  don't have the magic formula for spending money   and living a good life, but we can take Charlie  Mer's approach of inverting the problem and ask   how we can spend money to live a miserable life. (52:24) 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, uh will  assume like, okay, but if only I made twice as   much money, then those things would be good. (52:50) 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.  (53:15) 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's live a good life. (53:31) 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 happiness to on  to unhappiness I should say. Um and it's   very common to do because again like I hide  the parts of my life I don't want you to see   and you or you for everyone showcase the parts of  their life that they do want other people to see.  (53:54) 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 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.  (54:15) Yeah, that is such a great point. How  uh, you know, with money, you can see, you know,   what it costs to get that. You can see what people  own and whatnot, but you can't see, you know,   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, you know, how   much they enjoy riding in their boat or whatnot. (54:36) Totally. 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? It's everywhere. And, you know,   Amazon, Barnes & Noble, wherever you're  buying books. Um, and the book is written,   I've written all my books in this style where  you can start the book on chapter 8 if you want.  (54:57) 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 non-fiction  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.  (55:12) Really appreciate it. Thank you.  All right, everybody. I hope you enjoyed   my conversation with Morgan Howell. 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. (55:38) 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. (55:58) 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's  I think is really important to understand is that   money is not inherently good or bad. (56:25) It's simply a tool that we can   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. (56:49) I was going to the office 5 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   mowing my grandmother's lawn at the age of 11. (57:13) 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.  (57:36) 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. (57:55) 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   um I was capable of doing the job, I wanted  to sign the dotted line and start tomorrow.  (58:23) 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. (58:44) 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.  (59:04) 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 1,000% regret it. (59:28) So, 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, 8 hours of sleep, well-  balanced children, and being a part   of something bigger than yourself, you  realize how limited money's role can be.  (1:00:00) It's not that it has no role,  just smaller than you may have assumed."   End quote. 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. (1:00:26) And I swear I could not love this   machine more. It was 100% worth it. It definitely  makes my life better. And 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. (1:00:47) 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. (1:01:11) 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 neighbors?" And I   love the quote that Morgan shared during  the interview from Winston Churchill.  (1:01:40) 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.  (1:02:00) 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 when it comes to  the smaller things like picking up a latte on   Sunday or grabbing a nice meal out with friends. (1:02:25) And there are a lot of things that can   make me happy that cost nothing. You know,  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, you know, I  really can't get enough of either of them. And   both of them practically cost nothing financially. (1:02:46) 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.  (1:03:06) 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,   "A good life is everything you need and some of  what you want. If you have everything you want,   you appreciate none of what you have." End quote. (1:03:31) I'm sure many of you can remember the   feeling of getting your very first paycheck from  a job. When I got my first uh 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.  (1:03:51) 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. (1:04:14) 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. (1:04:34) 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 (1:05:06) 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   uh experience. When you learn to be content  with what you have now, you can appreciate   and savor the occasional treats in life. (1:05:30) Morgan writes, "When you live a   simple and modest life, your occasional experience  with nice things can generate more joy than if you   had those things all the time." So it's quite the  paradox and something I've tried to implement in   my own life to some extent at least as you know  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. (1:05:56) 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. (1:06:14) 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 lack of maturity with related 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. (1:06:37) 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. (1:07:00) Now, the asset side of the balance sheet   in this equation is very simple to calculate.  It's the lottery winners 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.  (1:07:18) 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. (1:07:37) 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 (1:08:08) 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. (1:08:30) This is a really dangerous game to play   as you climb up the social ranks and find  that, you know, there's always someone out   there that has nicer things than you. It's  always the case. But the point here is not   to avoid nice things altogether. You know, 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. (1:08:54) 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. (1:09:15) 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. (1:09:35) 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@theinvestorpodcast.com.  (1:09:57) The premise of our mastermind  community is to give our members opportunities   to network and learn alongside highquality  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.  (1:10:17) 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 weight list to join the community   at thevesvestorpodcast.com/mastermind. Or  again, you're more than welcome to shoot   me an email at clay@theinvestorspodcast.com. (1:10:39) With that, thank you for tuning in to   today's episode on the art of spending money. And  I hope to see you again next week. We don't know   what is going to change in the future in terms  of when's the next recession, what's the next big   technology, who's going to win the next election. (1:10:57) We've never been able to get those   right. But the behaviors that have always  been enduring and always been with us,   regardless of what happens in the future,  regardless of what is the next technology   or the next recession, we know how people are  going to respond to it regardless of what it This