The art and science of spending money

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.

Coming from a poor family and knowing the hard way the issues of not having money I've been obsessed with saving money since I got my first paycheck 8 years ago and I always thought "at the point I would earn current salary + x I will start enjoying life more and stop worrying about money" but that never happened.

8 years have passed and I still have the same thoughts despite earning 15 times more and having no financial problems, my mind just makes it very difficult whenever I have to spend money on something.

> The more you were snubbed while poor, the more you enjoy displaying your wealth.

Man I dunno about this. It does seem like a thing for certain personality types, but I usually see exactly the opposite. All of the people I know who have "made it" from a less wealthy background are the opposite, living with a ton of guilt about their new wealth. I think this is because of having tons of family and friends still scraping by. It is very unseemly to be flamboyantly wealthy when everyone from your past is struggling. Maybe there is another inflection point of wealth, further down the road than the circles I run in, where you can afford to pull everyone else up too. But I'm pretty skeptical of that too. Something that has frustrated me to no end as I've started making good money is that I can't use any of it to improve the lives of people I actually know. They aren't going to take my money! They're doing just fine thank you very much. Even broaching the subject could ruin a relationship.

Growing up poor and then becoming self-made wealthy - nothing like it. My life is so sweet because I am one of those fabled bootstraps people who walked 15 miles to school both ways uphill (paraphrasing).

And what is my favorite thing? I can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want. Unfathomable

A fun article.

> If you develop an early system of savings and living well below your means – congratulations, you’ve won. But if you can never break away from that system, and insist on a heavy savings regimen well into your retirement years … what is that? Is it still winning?

Those two things aren't quite connected though.

If you build a good life living below your means, you can absolutely carry that on into retirement (which you get to do sooner) and that's still winning.

The disconnect is in having two distinct phases - one where you are saving and one where you finally get to be free and spend. If you have this I wouldn't count it as winning, for precisely the reasons the article explains.

I think this is often reflected in peoples unhappiness either within the FIRE community or those looking at it from outside.

> 5. The joy of spending can diminish as income rises because there’s less struggle, sacrifice, and sweat represented in purchases.

This, imo, makes it all the more important to avoid equating being paid with having value and try and make the money side blander. Find this type of joy in other pursuits, the fact you can't just buy being good at the guitar makes your progress more valuable. You can also think about how transactions in a pay-to-win game reduce the value of your effort (is beating this really only worth 50 cents?).

A relevant quote from Arnie:

> A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion. That is why I do what I do.

> All success is simply relative to someone else – usually those around you. That’s important for spending money, because for so many people the question of whether you’re buying nice things is actually, “are your things nicer than other peoples’ things?” The question of whether your home is big enough is actually, “is your home bigger than your neighbor’s?”

This is pathological behavior. Unfortunately, it's ingrained in humans. We are improving the world in a faster-than-ever rate, and the objective difference between wealth classes was never lower than it is now. Not even remotely close. (see the book "Factfulness" for some interesting data)

Yet due to the way the world stopped "being huge", due to social networks and everyone being "approachable" (low degree of separation or whatever), the level of envy is at absolute maximum. This problem was always present in humans and is perhaps the primary reason (well, if we can make the jump or at least connect envy to evolutionary pressure for procreation) we have achieved so much in this world. Not knowing when is "enough" is unsolvable problem, even though philosophers wrote thousands of books on this topic.

People cannot stop being envious even if it leads to unhappiness, almost always.

For myself, if I don't have to worry about bills, buying healthy food, having shelter and I don't have to work 14 hours a day, I consider myself on par with anyone in the world money-wise.

I have two rules to guide me that can be summed up to maximizing the joy of spending:

It's not what you have, it's what you do with what you have that matters. Going with a car example, spending significant income for a nice car that you use for normal transportation like commuting and shopping will bring little joy. On the other hand if you are into motor sports, regularly tour on or off-road, like to restore classic cars, etc, you will get a lot out of a big car purchase.

Spend it on one thing, don't have it for another. It's really hard for me to calculate if something new is worth X amount of my money. So I transform that money into something I already know how much it costs and how much I enjoy it. Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.

Brilliant article, thank you. This should be a classic. Ranks up there with wisdom such as 'don't spend your youth pursuing wealth and wealth pursuing youth.' PS one of the best ways to develop a healthy relationship to money that I've found is to absorb Buddhist teachings on how to avoid the suffering caused by grasping after things. Fixes most all forms of money-inspired unhappiness.

My wife and I have accumulated a few overall principles about money over the years. What's interesting is how they have played out over time. Here are a few of them:

1. Money and debt are amoral financial tools. It's important to be smart about how we use these tools, but neither money nor debt is evil or all that valuable in the moral sense. This is especially important for us, because our conservative background has pretty much taught us from childhood that money == good and debt == bad.

2. Treat money like it belongs to someone else (in our case, as Christians, we acknowledge it, like everything, belongs to God, and we try to spend in a way that honors the responsibility he's given us).

3. Always pay off the credit card at the end of the month. When we got married, I got my first credit card and set the automatic payment to 100%. I only made $40k/year back then, but we have the same rule today, even though our spending power is 5x what it was.

4. Retirement savings. This one's obvious, but most couples can save a combined $13k per year in Roth accounts that can grow tax free for your lifetime. Maximizing this as early as possible in life is extremely important. As your income grows, your next goal is to maximize other vehicles like a 401k. Don't make your kids take care of you financially later in life.

5. Your kids won't be around forever. This doesn't sound like a financial principle until you start thinking about all the trade-offs having kids presents you with. For instance, we're more likely at this point (with 4 kids 6-13 years old) to put in a pool than we are to redo our kitchen. And we're more likely to take on some manageable debt in order to make improvements to our home or give our kids experiences that normally we would take the time to save up for.

Edit: forgot an important one

6. Spend more to buy things that last. Especially if you live in a wet climate. I live in Florida, where everything rusts and rots. 4-5 years ago, instead of buying another gas grill that'll just rust in a year, I bought a Kamado-style grill. It's still in perfect shape, and I use it more often as a result. When we bought patio furniture in 2020, we spent extra to avoid natural wood, which takes regular upkeep and, again, eventually rots anyway. It's still in perfect shape. When we replaced our rotting exterior doors/doorframes, we went with an industrial PVC material. I'll never have to worry about any of those things again.

Loved this article, very spot on.

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.

This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on holidays 60km from home. They died with over 600k euros just in savings (plus 2 apartments). Does this make sense?

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase

I think a lot of financial planners start from a base assumption that their clients will be happiest if they spend their accumulated wealth. That’s not true in my case (at least as far as I can self-analyze).

Whatever we don’t spend isn’t lost potential for us, but rather is future potential for our kids. Taking only the financial sorts of potential, some of that is embodied potential (money spent on education and health); others are concrete figures on finance statements.

We could spend more and seek to “have the check to the undertaker bounce”, but it’s a lot less stressful to my mind to have a low 7-figure balance be the much more likely ending net-worth, giving us a cushion for our later years and knowing that’s enough to be helpful but likely not enough to be detrimental to our kids.

Just finished living with a financial and emotional hoarder.

When a person groans about spending $1,000 on high quality Michelin AS4 tires for an appropriate car, they are being obstinate. Money is to purchase things for life, not the purpose in life. It doesn't take a lot if one sets expectations and standard of living appropriately.

Personally I've learned the corporate rat race is really detrimental to my handicap so I'm going to file for disability and continue to participate in society with my arts and letters. It's not quite UBI but it's close enough for my purposes. I grew up in a wealthy household - again, came up poor and seem obsessed with "investments" and "security" instead of enjoying the food and experiences those monies can buy - so I'm over it.

Yes it's nice to have nice things. I have some maintenance expenses I understand but can be flexible about in the short and long term. Strings, new music, alcohol and cannabis, it's all pretty low-key and low rent. The only thing I really need as a basecamp is electricity, air conditioning, indoor plumbing, food access and storage and cooking, and connection with the outside world by way of phone, car, or internet. That's all. Everything else is basically static and for whatever reason, it's getting more expensive.

"The only way to win is not to play" holds pretty true to me when it comes to US financial system and navigating the aspects of "real" property and life versus synthetic engineering for the sake of jargon. Source: Worked Wall Street muni bonds, derivatives, arbitrage rebate, and asset management ~$4B.

Also anybody have the address to Jack Welch's grave? Gonna get loaded like a freight train and give him the Thomas Kinkade-Walt Disney treatment. What a horrible human being.

Not enough people critically question their day-to-day spending and life assumptions.

I find the easiest way to save money is to avoid competition. Everyone wants a 2 bedroom house within commuting distance of work. I bought a 1 bedroom flat within walking distance of work, converted the kitchen into a second bedroom (moved kitchen to living room), couldn't happier.

Lower middle class kid to now a slightly upper middle class person here. Migrated from small towns to cities. I think this falls into majority category.

Wow! I don't experience even one of those points the author mentions. In fact quite the opposite. It is unsettling to feel even mildly rich or show the world that I am doing well. Maybe I am not in the majority after all. Or the article is so very rooted in western demography.

I’ve sort of adopted the mindset that money comes and goes and we should spend it on things if we reckon we will get enough value out of it. Now, I’m having a daughter soon and feel a bit immature about it all despite earning a decent salary, but I can’t help not wanting to feel like a slave to money especially knowing how many people with far less get by just fine.

Two money aspects that I find useful, which weren't mentioned in the article:

Price per use: if I buy X, how much/often will I use it vs. it's price

Time sacrifice: considering my current hourly wage, how many hours of my life do I need to spend in exchange for this item?

It's very much good advise to optimize spending by not spending where it's useless (no utility, social signaling) and to possibly increase spending where the happiness return is high.

For the people that are frugal for life to the point where it comes at the expense of quality of life, one relief is the tactic "spend to save". Lower your TCO by spending. Pay down loans and the mortgage. Make your home more energy efficient. Replace crappy products with things that last a long time.

It's an undervalued strategy. Extreme savers basically prepare for volatility. They have insecurities about the future. Lowering your future expenses reduces volatility and increases freedom at a later age. You're less affected when bad things happen. You can scale down work by working less hours or a simpler job.

This is one way to not end up as the richest person in the graveyard and it allows you to gradually retire.

That aside, one aspect the article did not address are family dynamics. I do not care about what car my neighbor drives or what he thinks about my car. Yet still one can be affected by "social wealth" within the context of a family.

One may be frugal whilst the other is not. You can guess who wins. The kids need Disney+ and somewhat later a smartphone, as you don't want them to be outcasts.

Society does have (subtle) ways to force you to spend, it's not necessarily flexing or one-upping, rather "fitting in".

Very interesting article. Following the articles logic, you should be able to deduce a country's Social mobility based on the number of exotic items (such as supercars) you see in public. Furthermore, it becomes apparent that Europe has lower Social mobility than the United States. You will seldom see exotic sports car in the streets in Western Europe because most of the wealth are from well established institutions and families.

The goal of saving is to have a lifestyle that you can MAINTAIN during retirement.

- if you save 60% of your income, your lifestyle will be severely damaged and you won't become a spender all of a sudden the day after retirement.

- If you save 5% of your income, then you won't be able to lower your lifestyle once you retire.

Saving 15/20% of income isn't a magic number. But it's something that doesn't damage your lifestyle + it accumulates to a meaningful amount that saves your ass in old times.

Going aggressive in either direction (spending or saving) is not the right mindset, because you won't be able to CHANGE once you adopt a specific lifestyle.

I must be in the minority. I grew up poor (collected pop cans from my local Sun office as an office cleaner and sold them for deposits), so its scar will always be with me.

But when I was younger, someone once said 'money is not the thing; money is the thing you use to get to the thing.'

So now I can switch between being thrifty or being 'careless', depending what I really desire- and this requires constant self-reflection, a constant self-question of would spending this money do anything for my goals (which should include helping others.)

In other word, like that Japanese cleaner lady, I ask myself would spending this bring me joy?

It's too easy to overspend. It's effortless to give people money. It's much harder to earn money. Hence, being frugal is a good idea generally.

I've been struggling with knowing how to spend money now that I have it. I don't even have that much, just slightly above a median salary but that's so much more than I've ever had before. I spent all of college wondering if the current semester would be my last and now I can just pay off my loans in a year if I really want to. It's incredible but also really unjust because I know so many people are experiencing what I experienced but here I am with a bunch of money sitting around not helping people with it. I want to make sure I can really justify every purchase and investment because I know how much the same money could mean to someone else. At the same time though, that's a stressful worldview to have and I also need to make sure I'm living a quality of life that my loved ones are comfortable with. It's a hard balance.

My three children all have completely different attitudes to money despite being very close in age and being raised together. Two spend freely now they earn their own money, my middle daughter saves almost all she earns and knows the price of everything.

Spending is tiresome at old age. Traveling, buying new things, even eating out requires effort. But recently, I found an easy and very satisfying way of spending money - donating to U---ne.

> If you dig into it, I think you’ll see that a disproportionate share of those with the biggest homes, the fastest cars, and the shiniest jewelry, grew up “snubbed” in some way. Part of their current spending isn’t about getting value out of flashy material goods; it’s about healing a social wound inflicted when they were younger.

I thought this was just called nouveau riche.

Rich people always love to say $3 questions don't matter.

But avoiding a latte is how you save a few hundred dollars a year, instead of not being able to save at all. It won't buy you a house, but it will certainly let you hire a Lyft if you have to come in at some crazy time, and you might save your job because of it.

I've been saving money for future smarter self who will know what to do with all the money. Here I am almost a decade later and I am not any smarter. I'm scared sh*less to invest so the 2x annual salary that I managed to save is just rotting in a savings account.

My idea is to spend as an average person would.

I increase my lifestyle only spending interests from bonds/dividends. In this way I have a better life as my net worth increase but not at the same rate.

So if the risk free interest rate is 5%, I don’t only increase my lifestyle of 1$/y for every 20$ earned.

One thing that helped me coming from a background of poverty is realizing that all unspent money is charity, because if you die, it is going to someone else. If you are not comfortable with where it is going when you die, change your will.

I agree with the point that there is a difference between a savings mindset and investment/growth mindset. One should invest in physical and mental health.

But a lot of the advice seems like narrative fallacies.

I agree with the point that there is a difference between a savings mindset and investment/growth mindset. One should invest in physical and mental health.

But a lot of the advice seems like narrative fallacies

There was a lot of depression-era frugality and Macgyver-level fixes in my home growing up. Not necessarily a bad thing, but I feel as if I've unwittingly internalized certain habits ;)

I always wondered - what rich people did before Instagram? What's the point of splurging without getting likes?