Morgan Housel (2:50)

Well give you three different answers. If that's cheating a little bit, I'll allow it. The first is that I travel really well and I pay for travel things that most people would consider to be frivolous wastes that I consider non negotiables. I spend a lot of my time on the road. I usually travel every week. And to me the one it's not even a luxury when you travel that much. Flying first class and doing uber black and staying at the nice hotel with the big upgraded room that becomes like survival when you're traveling as much as I do. So that is non negotiable to me. That's one element. The other that's more general over time is that I'm much more willing now to pay up for the quality item that I think will last longer. That could be anything from a washer and dryer to clothes, whatever it might be. If there's a next level up that I think this one's going to last a couple of years more. Great. Now let's do that.

Host (likely Joel or a How to Money host) (3:43)

Does that mean you own a speed, A Speed Queen?

Morgan Housel (3:46)

You know, we just got new washers and dryers. I looked into the Speed Queen and almost did it. We didn't get them. There's lots of reasons for that. But I did look into that and those look like amazing things. The third one that I think is the most important to me, and this is definitely cheating on your answer, but it's the most important to me by far is that I spend money on independence. What do I mean by that? I save money, but I've never viewed it as saving money. I view it as purchasing independence. I that when I put transfer money into my brokerage account, my savings account, whatever, I don't view it as I'm saving for the future. I view that as right now, today, in this moment, and tomorrow when I wake up, I have more independence than I did prior. And that is something that I benefit from right now. That is not delayed gratification. It's the most important thing in my life is that I wake up every morning and say I can do whatever I want today. And I have that because I've saved money since I was a teenager. And so that is cheating. To your question, it's not spending on anything. But philosophically I've always viewed it as spending on the most important thing that money can buy, which is independence.

Host (likely Joel or a How to Money host) (4:54)

Is it, is it possible to overdo it by trying to buy your Own independence. Like, you're like, where maybe you're trying to squirrel away acorns because maybe out of fear of the unknown what could happen in the future, and you're banking so much and you're not taking advantage of your independence. Or maybe, like, does it conflict with, like, the die with zero mentality?

Morgan Housel (5:15)

Yeah, you. You said the key words there, which was, you're not actually taking advantage of your independence. So if you are squirreling a bunch of money away in the philosophy of independence, which I think is good, but you still work in a job that you don't like, you live in a town that requires a long commute, you worry about this, you worry about that, then you're not actually independent. You're not actually taking advantage of what that is. And. But if you're using your independence to say, look, I'm either going to retire when I want to or work in this job that pays a little bit less, but I love it, and live in this city that costs a lot more, but I have a shorter commute, and I love that. And I'm going to take the time off when. I'm going to take time off when I want to, and I'm going to stop worrying about this and stop worrying about that and sleep better tonight. That's actually taking advantage of your independence.

Host (likely Joel or a How to Money host) (6:02)

Okay? Writing a book about saving money makes sense to me. You know, Americans are not great at that. When you look at the average savings rate of Americans versus, like, so many other countries around the world, you see that, like, man, we just. That's not our thing. But our country, like, we're really good at spending money, I guess, at least in the sense that we spend a lot of it. Why did you feel like writing a book about spending made sense?

Morgan Housel (6:27)

I think it was. It was two things. One, it was. If you had asked me five years ago, Morgan, what is your philosophy on investing and earning and saving money, I could have talked to you about that for hours. I thought so much about that in my own life, my own personal life. But if you said, what is your spending philosophy in my own life, I would have drawn a blank. I really hadn't thought much about it. And it dawned on me the irony of that, that spending is the ultimate purpose of money, whether it's today or 50 years from now, whether it is you or your heirs or charities that you give to, it doesn't matter. It's the ultimate purpose of it. It's spent something on it. And I had spent no time whatsoever thinking about this topic and looking into it, wanting to learn more about it, being kind of stunned that nobody else had really dug into this that deeply in. In. In books and literature that I could really dig into. So it felt like this giant void in the financial sphere that I wanted to figure out for myself. I didn't go into this as saying, I'm the expert on spending. Let me impart my wisdom on you. I really went into this being like, I'm trying to figure this out for myself. And just like, what I've always done. I've never been interested in formulas that tell you how to do something. Here's how to invest, here's how to spend, because everybody's different. But I wanted to dig into the psychology of these topics. So for spending, it was the psychology of envy, of greed, of social aspiration, of jealousy, of contentment. That's what I really wanted to dig into. Because how you and I spend our money might be very different, but how you and I think about jealousy and why we think about jealousy tends to be very similar over time across cultures for different people. So if I can dig into those topics, that, to me, was just interesting in my own life, and that's where this book came from.

Host (likely Joel or a How to Money host) (8:17)

Yeah, I mean, that's one of the things I've appreciated about your work is it just hits another level instead of, like, advice how to. It really is touching on the common threads of human existence and reality, the things that we butt up against every single day. And so, I mean, you're right. Like, we're talking right now to people who live in Iowa who make $45,000 a year, and Los Angeles who make $400,000 a year. And, like, recently heard from a listener who's selling a business for, like, $300 million. Like, everyone is in a different sort of situation in terms of, like, percentages and amounts, but we combat all of those feelings right every single day. So, yeah, that's one of my favorite things about kind of how you tend to tackle things. What do you think it takes to transform our minds to think differently about money? Especially, let's say, for a lot of people, their spending habits are causing pain. They're. They're realizing that, hey, the way I'm spending money is. Is leading me to a lack of savings, a lack of freedom. Right. How do you then start to deal with maybe the reality of what's going on with your spending?

Morgan Housel (9:27)

I think for most people, it takes a pronounced effort to understand the difference and to follow the difference between the internal and the external benchmark. Are you spending Money on this thing because it makes you happy. It's giving you and your family a better life, a better quality of life. You enjoy it or are you doing it because it is a yardstick of social status that allows you to compare yourself against others? It's always one of those two, the internal versus the external. And I think if we're honest, most of us want to live a life of internal benchmarks. I want to have more money and spend more money so that myself and my family are better taken care of and we're happier and we're more comfortable and we're in better health and that's what I want to spend my money on. But so much of the modern economy, you mentioned this earlier, like Americans are very good at spending, but so much of it, I would say the majority of it is a status driven endeavor. And status seeking is not always a bad thing. I do it, you do it like it's, it's unavoidable in a world that is competitive and we're trying to send signals to other people. But so much of spending money is, let me show my status to a group of strangers who are not even paying any attention to me whatsoever. They don't even care. And until you spend all of your day working to earn money, to spend money on things, to impress people who are not even paying attention to it to begin with. I heard this quote, I think it's originally attributed to Winston Churchill. But many people have said this over time that in your 20s, you care about what everybody thinks of you. You worry about what everybody thinks of you. In your 30s you say, I don't care what anybody thinks of me. And in your 40s, you finally realize the truth, which is that nobody was thinking about you all along. And I think a lot of people will eventually realize at truth over time that no one's thinking about you as much as you are. Maybe your spouse, your children, a couple of your friends and coworkers are paying attention to you and spend a lot of time with you, but the vast majority of other people could not care less whatsoever. And so once you grasp that difference between internal versus external, are you doing this for you or for the performance of other people? That I think is the biggest philosophical shift to put your spending on, on a healthier path.

Host (likely Joel or a How to Money host) (11:35)

I think the, the most compelling chapter in the book for me was the chapter on identity. Some people in the personal finance space, they, they really have made their financial goals, their financial progress like this core part of who they are, right? If I'm hitting These metrics, if my net worth is growing this amount every year, if I'm maxing out this account, then that informs who I am. You don't want that money to essentially be an identity metric for us though. Why is that?

Morgan Housel (12:02)

I want to use money as a, as a tool to live a better life. But once it becomes an ingrained part of your identity, it is using you, it's controlling who you are. And this happens in very innocent ways. I think there are people, let's say in the fire movement, financial independence, retire early, like in general, a really cool thing and a really great idea that I think has given a lot of people a lot of happiness and purpose. But once you establish yourself as a card carrying member of the fire community, you're kind of tied to that. And I have known several people who've done this who saved like maniacs in their 20s, retired when they were 31, and by age 31 and a half were bored out of their minds because they realize they really underestimated how much of working and being productive was important to their soul and their happiness. But these are card carrying members of the fire community. You know what happens to their ego and their identity if they go back to work? It's crushed, it's ruined. They've attached themselves to that. Everybody understands in politics how dangerous it can be. Once you really firmly attach yourself to a political philosophy, it like you're, you're, you're almost off sourcing all of your critical thinking to others at that point and you're just saying whatever my tribe believes, that's what I'm gonna believe. Everybody can see that happens in sports as well. It's very obvious. It's less obvious when it happens with money, but it happens all the time. But when people attach themselves to a YOLO spending philosophy, to a value investing philosophy, to a tech investing philosophy, it seems like a, like not even a harmless thing to do. It seems like a very beneficial thing to do. But anytime in life where you say I am a blank, whatever that blank might be, it's tying to your identity. And at that point it's very difficult to let go of it. I think why this is important is because not only are individuals different person to person, but you change throughout the course of your own life. I'm a very different person today, and I have different financial beliefs today than I did 10 years ago. And I'll have different financial beliefs 10 years from now just because I'll be in a different phase of my life. Hopefully I'll learn new things about the world that will update my views over time. And, and so that's why, again, when you assign yourself to any kind of financial identity, it becomes very difficult to detach from that and to evolve as a person.

Host (likely Joel or a How to Money host) (14:27)

And that's what, like, you look back to the hyper frugal blogs of the early 2000s, and there's a lot you can learn from that. And there's a lot of really cool stuff and suggestions and ideas and stuff that you can glean from some of those blogs. But then also, at some point, frugality just isn't a sufficient identity in terms of how you approach money. And at some point, maybe you want to grow beyond that and maybe you're like, actually spending in certain ways proactively makes me a happier person. I think one of the, my other favorite things you wrote in the book, and it actually made me feel a lot better because I feel very inconsistent in my money habits. Like, my best friend who I do the podcast with, he is like, super disciplined and I'm a little more erratic at times and I'm less of a budgeter. He has his spreadsheets back for 14 years, and I've got a lot of margin built in. But I'm also, I'm just like, oh, yeah, random concert over there, let's go. And you, you, you wrote that the people I know you said who have used money best have inconsistent spending habits. So that kind of made me feel a little bit better. But what, why is that?

Morgan Housel (15:29)

Well, it's, there's two ways. I'm, I've, I've always been like that as well. I've always been a big saver, but I've never had any kind of budget. And it's always just whatever looks good to me, like, great, let's just go buy that. And, yeah, and so that, that's always been there. But really what I mean by, by inconsistent is I think if, if you show me your income and I can guess exactly how much you're spending on homes, cars, clothes, jewelry, travel, then you're, you're, you're probably not thinking independently. You're probably just doing what society tells you you should want. I think a true independent thinker, just, for example, just making this up, if you told me your income was, you know, you know, if, if, if, if I were looking at how you spent your money over time, a true independent thinker would be like, wow, you spend 20% of your money on concerts and none on travel. Like, that's like just something weird like that.

Host (likely Joel or a How to Money host) (16:17)

Yeah. And so you're marching to your own drummer.

Morgan Housel (16:21)

Yes. You're, you're, you're doing things because they make you happy, not because this is what society told you to do. And so I really love and admire the billionaire who drives an F150. Not because they're cheap or frugal, just because that person clearly just doesn't value cars like somebody else would. And, and there's so many different examples like that you have someone who spends a ton of money on clothes and none on cars. A ton of money on fancy restaurants and none on clothes. Whatever it might be, they're doing it because they like it, not because it was some kind of rubric that society told them to follow.

Host (likely Joel or a How to Money host) (16:57)

Do you think to find what that is is like experimental spending? How important is that? What is that? What does that look like in practice to, to kind of test things out instead of buying into the narrative, like, I guess I should buy a new car every four or five years and saddle myself with one of those car payments. What does it look like to kind of test out different spending models to see what fits you?

Morgan Housel (17:19)

I think it's a combination of experimenting that's definitely part of it. And also a strong propensity to just not care what other people think about it. And so I've done this myself. When I travel a lot for work, I'm fortunate that I can expense almost any restaurant that I go to. But I'm not, I'm not a fancy food guy. So in a situation like that, I'm like, I'm going to Chipotle tonight because. And I couldn't care less what anybody thinks of that. That's what's going to make me happy in that moment, and so be it. So it's a combination of experimenting and not caring. The experimenting part is really interesting too, I think. I think there's lots of little experiments you can do of, like when you're renting a car, like do a big upgrade, see what it's like to drive a BMW 7 Series or a Porsche or something like that and see what it feels like. And my guess is of people in this situation will be like, the BMW that I rented was the most amazing experience I've ever had. I should definitely buy one of those. Or the opposite. They'll be like, I don't know. It was, it was not nearly what I thought it would be. I'm actually totally fine with my Honda Pilot back at home. It'll be one of those two things. But it's very difficult for you to predict which side of that you'll be on until you experiment with a million different things. Different restaurants, different clothes, different travel, whatever it might be.

Host (likely Joel or a How to Money host) (18:32)

I was obsessed with my friend's Rivian or just with Rivians in general. Then I rode with my friend in his Rivian and I was like, I'm over it. I'm super happy with my 20 year old car. It's nice, but it's, I'm just not. There's other things that light me up a lot more than that.

Morgan Housel (18:47)

We've had so many of those experiences. We just bought a new car two weeks ago and it was the absolute classic. Anyone could have seen this coming. The first 48 hours my kids were like, this is the coolest car ever. This is so great. And, and, and, and by day three, they're like, whatever, it doesn't matter at all anymore.

Host (likely Joel or a How to Money host) (19:05)

You know, they feel the same way about old cars though. Like I upgraded my car, it's still a 20 year old car, but I got a nicer like old cool Toyota 4Runner. And my son just thinks it's the raddest thing ever. Like he's talked about Rivian's, but he, like, he likes the 4Runner now. Yeah. And so it doesn't even have to be all that splashy for your kids to think it's cool. What about the role of emotions? I think often, like when we're talking about money and finances, emotions, you're supposed to be robotic. Take emotions out of the equation. That way you're gonna handle things with precision. But you, you don't demonize emotion and the role that emotion plays in, in how we spend in the book.

Morgan Housel (19:40)

Yeah, I think, I think it's unavoidable, particularly for huge things that you're spending money on, like buying a house. Let's not pretend that you can or should pick a house based off of a spreadsheet where you're like, oh, let's just put it like, we want this many bedrooms and this square feet and then we just go find the house that matches that spreadsheet. It never works like that. It's always, you pull up to the driveway and you, you or your spouse is like, oh, it's beautiful. I love it. Look at the barbecue. Oh, the neighbors look so friendly. That's like, it's those emotions that you cannot capture in a spreadsheet that do it for you. And it's, it's almost unavoidable. It's unavoidable. Now you don't want to be all, you know, all of that when you're making a big purchase. But I think a good purchase should be like half heart and half spreadsheet. That's probably a good balance of what you're looking for for big purchases. Especially like nobody should pretend that when you're buying the engagement ring for your, for your girlfriend that, that is just an unemotional, heartless spreadsheet endeavor. Like all these, the big purchases. Not, not, not at the grocery store, but the things that you're. That are actually going to move the needle, which is like education, house, car, childcare. Those are always very emotional and we shouldn't pretend otherwise. And so we should just acknowledge and kind of embrace with both hands the emotions that come with it.

Host (likely Joel or a How to Money host) (20:58)

All right, I got more I want to get to with you, Morgan. I want to talk about spending money today versus saving for tomorrow. And I also want to, I don't know, is there a spiritual component to what we're talking about here? We'll get to that and more right after this.

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Host (likely Joel or a How to Money host) (21:30)

Get started@fidelity.com future expenses charged by your investments and other costs and fees associated with trading or transacting in your account. Apply Fidelity Brokerage Services Member NYSE SIPC I'm talking to Morgan House. I'm talking about the art of spending money. Morgan, you're not a psychologist that I know of. Unless you're like undercover psychologist, but you play one on TV a little bit. It's something that you for sure are interested in. But how deep do the roots of our current day spending habits go when we're talking about. It feels like there's a lot of unearthing that needs to happen just to figure out what's going on under the surface. So there is like some psychological work that needs to be done to figure out why we are tempted to spend in the ways that we do.

Morgan Housel (22:17)

I think in many ways the, the, the culture that we have around spending and money has been with us forever. It's, it's like money is a very established and easy way to track social hierarchy. I can compare my net worth to yours. I can compare the square footage of my house to yours and it's apples to apples. Whereas if you and I were trying to compare like who's funnier, who's a better dad. That's very difficult to compare each other. Money is very easy. So it's always been like that. It has definitely evolved and progressed in the last 50 years. I saw this really interesting study that if you go back and ask college students in the 1950s, what do you want out of college? Why are you here? What do you want out of your bachelor's degree? The most common answer by far was a strong philosophy for how to live a good life. That's what students went to college for. And if you ask students today, why do you go to college? What is the purpose of your degree? Overwhelmingly like 90% people like to make money to get a good job. That's it. So that has really evolved over time from like the philosophy of having a good life and being a good spouse and a good parent and a good citizen has moved into just, I just want to make a lot of money. And that's, that's effectively it. I don't know if that's bad good or bad, but it has changed and evolved over time. I think at least part of that is that we are so much. It's so much easier to compare yourself to others today than it used to be. Because go back to the 1950s when those college students were saying that who they compared themselves to back in the day were other college students and other kids in their tiny little town in Iowa. That's who they're comparing themselves to. Whereas today everybody compares themselves to a curated highlight reel of the top moments of the top people in the world on social media. On social media. And so it's much easier today to actually be doing pretty well, to be like, look, you have a median income and you live in a median size house and you drive a median car like you're doing great and in that situation feel like you are desperately falling behind relative to everybody else. And so I think when that, when it's easier to compare yourself to other people and money is the ultimate measurement of how well you feel, have, how well you think you're doing in life, it just becomes this cult, this like religion of money that I think describes where we are today.

Host (likely Joel or a How to Money host) (24:37)

So we're using the wrong measuring stick for sure. When we make money, the end all be all and not just what money can do to facilitate all these other beautiful things that we can, we can do in our lives. I'm curious too. There's so much like psychological, behavioral, historical part of the work you've done. Is there any spiritual component to this for you? Because when you think about what a good life looks like. Like you are kind of broaching spiritual ground at times. Does that factor into how you think about spending money and helping other people think about spending money?

Morgan Housel (25:08)

Well, well, I think the only formula that I lay out in this latest book is what I think is a formula for a pretty nice life, which is independence plus purpose. I think it's whatever that might mean to you. It's hard to imagine a good life without independence plus purpose. And purpose is the biggest, you know, you have to figure it out for yourself. For some people, it's work. For some people, it's family. For some people, it's religion. And so whatever that purpose is for you, it's that that's so important. And I have seen, and this is maybe not surprising to people, so many very wealthy people who have all the money they could ever spend, all the financial independence that anybody could ever want, and no purpose, zero purpose that they're doing it. They sold their business. They don't really have much family life. They don't really have anything else that they're going for. And that is an empty life. I think that is an emptier life than having no money, no independence, but tons of purpose, a family who loves you, a community who adores you, that kind of thing. And so I think that's where it falls into the story. Spending equation. Is that like that? That's the equation that I'm trying to solve for in my life, independence plus purpose. And you can see how money can be part of both of those things, but it's only a small component of it. And that's where things like family and community and morality and spirituality come into the equation right there.

Host (likely Joel or a How to Money host) (26:30)

Certainly, somehow the money listeners are at this point where they're, like, pretty close to financial independence. They're on their way. They've at least got a decent chunk of margin. But then there's a lot of people who listen to this podcast, and they're like, that's the goal, right? I want this sort of freedom this time. Freedom. The, you know, many, many years of saving, investing, compounding that, it now allows me some of that independence that Morgan's talking about. How do you then square talking to somebody like that who's like, that's kind of where the trajectory I'm on, but I'm not there yet. How do you square the value of spending dollars today on things that bring you joy versus trying to work harder to buy that independence?

Morgan Housel (27:11)

I think it's. It's. It can be a pretty dangerous philosophy to Be like, I'm going to live a very low lifestyle so that I can save and therefore one day live a high lifestyle. Like, almost certainly that's. That's not going to work. And here's here. Here's my version of this. I've always been a huge saver from the time I started making money when I was 16 years old. And if I go back to those years when I was 16, 17, 18 years old, if I saved 100 bucks, that was like, heroic. That was so much work. That was like weeks and weeks of manual labor to save $100. And I invested that money in index funds. And let's say because I did that, that money is now today worth $500, which is probably about right. $500 means nothing to me today. It does. Absolutely moves. No needles whatsoever. So then the question is, was that a waste back when I was 17 and worked so hard and invested for an amount of money that means nothing to me today, Was that a mistake? I think my answer to that is no. Because what that taught me, what that did for me back when I was 16 years old, was it taught me saving skills. And it would be foolish for me to think that I could have just spent with abandon back then. And then once I was 35 years old and started making a lot of money, I could just flip the switch and become a saver. It just doesn't work like that. Like, it taught me skills back then that I could then put into use once I started earning much more money. So it was not a waste whatsoever. But I think inherent in that is, like, it's almost impossible for people to just flip a switch and say, I'm going to be frugal now so that I could be a big spender at some point in the future. That's just. That's just not how it's going to work. And so for a lot of people who might have that mentality that you said of, like, look, I'm saving a lot of money so I can get to this place, you're not going to be able to make any kind of profound shift in your thinking. You're probably going to be the same person 10 years from now that you are today. And what. What a lot of these people do, and this isn't necessarily bad, is they have a goal and say, once I hit $1 million in net worth, I'm going to retire, whatever it might be. And then they get there and they're like, well, how about 2 million? Okay, maybe it's 4 million. They just keep, keep pushing on because they can't. And I think it's very hard for anybody to make a fundamental shift in who you are. And so I would encourage people, and this is what I've tried to do for myself, is to try to, yes, have financial goals. I have financial goals and net worth goals that I want to get to as well. But I want to live a good life today for myself and for my family and not sacrifice that. Be on a journey that puts me on a path to where I want to be in the future. Have goals to strive for, but never have it come at the distinct sacrifice of right now.

Host (likely Joel or a How to Money host) (29:52)

Yeah, that's where for me, the craft beer equivalent thing is so powerful because it's like, let's, it can be whatever it is, whatever that is for you as an individual out there listening. Right. It's pick two or three things where you're like, I'm going to spend kind of in a crazy way on that thing where other people might be like, that's ridiculous. You just bought a $30 bottle of beer and you make $45,000 a year and you're doing that once a week. I mean, or a fancy gym membership, whatever it is that really lights you up, but then like cutting back in those other areas that don't matter to you. And I think that's the problem is that we're like often mindlessly spending in so many ways. I think this is really what you're getting at in a lot of ways, just based on what's happening around us in society. Well, I guess that's normal. And then adopting that, that quote unquote normal societal mindset, spending in ways that just don't light us up, don't really matter when we would have been better off either saving more of those dollars or spending more on the things that we've already said that we care about.

Morgan Housel (30:46)

Right. That's, that's, that, that's, that's exactly it. And if you're not doing that, I think you have outsourced your critical thinking to other people who are telling you what you should enjoy.

Host (likely Joel or a How to Money host) (30:56)

So you just said something along the lines, I don't know if I hundred percent agree that like, hey, you're probably going to be the same person ten years from now. Do you think? I feel like I've changed a lot and actually in the way I think about money and handle money and grown a lot because for me it was kind of a nose to the grindstone. Let's be frugal. Let's get to this point. And now I feel very, very differently about how I approach it. And my wife the other day was like, actually, my best friend lives in Hawaii and some of my other friends are going to go visit her. What do you think? Like, this is spur of the moment whim. Should I go? And I'm like, yes, heck yeah, we're spending money on that. And like, 10 years ago I would have been like, oh, no, we can't do that even if we actually had the money. But I think that's like a helpful mindset shift that probably more of us need to go through. That was really helpful for me. How do you think about maybe changing the way you. Maybe loosening the purse strings, feeling a little more comfortable opening up and using the money that you've been able to amass for your benefit, for your family's benefit.

Morgan Housel (31:54)

I 1000% agree that everybody changes. And I'm not the same person now that I was 10 years ago either. What I think is impossible to do is to plan that out ahead and say, once my net worth hits X, then I'll change my behavior. I think you, I think we all evolve and adapt based off of our own experiences, life and the age that we're at and the age our children are at. But I think it's very difficult to say, I'm going to eat top ramen until my net worth, until my net worth hits X and then I'm going to go out and enjoy the fancy food. It's, it's you, you, you have to get there on your own terms and doing your own thing. It's mapping it out. Because I think when you map it out, that's when you are almost explicitly sacrificing today for some imagined joy down in the future. So it's, it's, it's not that we don't change. It's that it's hard to restrict who you are and then assume that you're going to turn a dial at some point in the future and become a different person.

Host (likely Joel or a How to Money host) (32:47)

You've also talked about money becoming a liability past a certain point. What do you mean by that? Because isn't it especially when you think about somebody you know, who's a great saver, great investor, they reach retirement, they've got $4 million. There's a decent chance that they're like, money continues to grow even as they're spending it down. Why would that be a liability for them?

Morgan Housel (33:08)

It can become a liability, personally, when you have the amount of angst of, like, what am I supposed to do? With this. For a lot of people, how that comes into play. And this is the ultimate tiny violin you don't feel that bad for these people. Where it comes into play are people who are like, man, my entire life I told myself that once. And if only I had X dollars in the bank, $4 million at retirement, then I'd be happy, that I would wake up with a smile on my face and I'd get to do the things that bring me joy. And then they get to that level and 9 times out of 10, 9.9 times out of 10, the person realizes that they're not nearly as happy as they thought they would be. That a lot of the hole that was in their life that they were trying to fill had to do with relationships and health and purpose. And they thought that if they just dumped a bunch of money in that hole, it would all be filled up. And that is a very tempting thing to tell yourself. And it could be devastating for people to actually experience in real life. The other area where money becomes a financial asset but a psychological liability is when it changes how other people think of you. Your children, your friends, your spouse, how they look at you and what they expect from you can change in profound ways once you start accumulating serious amounts of money. And you will not find a single ultra high net worth person who doesn't struggle daily with the concept of how do I use my money to benefit my children without turning them into spoiled little jerks. It is. And, and, and the reason that they all struggle with it, the, the, the reason they all struggle with it is because there's no answer to that question. There's no oh, oh here. Just go out and do X, Y and Z and then you can give your kids tons of money and they'll be very appreciative and well balanced people for it. There's no way to do that. And so it's not that these are the biggest financial problems in the world. They're not. But it's too easy to tell yourself that life will be perfect if only I had more money. Without taking into account the psychological, social downsides that can come with it.

Host (likely Joel or a How to Money host) (35:07)

How big of a problem is underspending? Especially like in the personal finance and in the fire community, just not valuing what a dollar can do for you today. From an experiential standpoint, do you think that that's an under considered like risk of the sort of like future thinking mindset? I think like for a while that was, I was just always thinking about this, like this future that I could build and I wasn't living in the reality of today for a lot of years, man. And like, yeah, did that benefit my bank account or my 401k? Yeah, it did, it did. But like, at what cost? Um, and in some ways I have a lot more flexibility because of that now. But yeah. Just how big of a problem is that, that risk of underspending?

Morgan Housel (35:54)

I think it's definitely a problem, but on the spectrum of problems we have in the world, it is, it is. It's almost unmentionable. It's probably the equivalent of people who over exercise and. Is over exercise a problem? Yeah, you can hurt your joints and do all kinds of things, but, like, look, relative to the alternative of, of not exercise, it is. It is, it is. It is the tiniest little problem in the world. And so what percentage of people in America have an underspending problem? It is so infinitesimally small. And of those people, it's the ultimate problem because you're just banking up money that you might be able to spend someday in the future. So I'm not discounting the problem that some people can have with it of money hijacking their personality and taking over their identity and causing them the inability to spend. Especially where you see this as a problem are people who have saved a lot of money for retirement. And they've, you know, they're 65 years old, they got $5 million. Congratulations, you won the game. You can now go comfortably spend thousands and thousands of dollars a month on a great retirement. And they can't do it. They can't bring themselves to do it. And so that is an example of money hijacking your personality. There's also part of this where I'm like, look, if you are 65 years old and you retire, there's a good chance that either you or your spouse or both of you are going to live into your 90s. And so that nest egg, that is a lot of money that you saved up, might need to. To sustain you for three decades. Yeah. And under those terms, it makes sense. You have a little bit of angst, of overspending this, and that is causing you to underspend it based off of what the spreadsheets and the financial advisors tell you that you should be able to do. So some of that makes a lot of sense going into it. But on the spectrum of problems that people have, that is not even in the top 50.

Host (likely Joel or a How to Money host) (37:35)

But it does make me think of your. The chapter in your book the Wealth Without Independence is a unique form of poverty and the inability. Right. To spend the money that we've accrued can. Can feel like a little prison of our own creation.

Morgan Housel (37:52)

It definitely can. And I've experienced that personally myself at times of being like, I don't. I don't. I mean, this is a conversation I have with my wife, like, in the last week of like, are we doing the best job that we can, spending the money that we have? And because there's a lot of times we're like, oh, wouldn't it be cool if we had one of these? And then we all. We always talk ourselves out of it. And, I mean, we do a pretty good job. I think we spend a hell of a lot more money now than we did five years ago. But it can be a difficult thing, I think, especially when you, you know, it's easy when you're 19 years old to be like, oh, you can so easily imagine a world in which having more money would give you a better life. And you'd be like, oh, I'll have a mansion, and that'll make me happy. And I'll have a Lamborghini that'll make me happy and big diamonds, and those will make me happy. And then a lot of times you get those things and you're like, I don't know. It didn't. It either did nothing for me or it did way less than I thought it would for me. You know, easy to dream about the mansion when you're 19. Much harder to care for and take and replace the roof on a mansion when you're 45. You know, that's a. That. That's a totally different world.

Host (likely Joel or a How to Money host) (38:57)

Yeah.

Morgan Housel (38:58)

And so it. It can be an issue that requires again, experimenting with other kinds of. Of spending and being okay with, like, I. I'm perfectly okay again, spending money on my. On independence, by which I mean just not spending it today. And that it gives me pleasure both in the independence I get today and in knowing that it's going to go to, at some point in the future, my heirs or to charity. Like, that gives me a lot of joy and happiness to think about as well.

Host (likely Joel or a How to Money host) (39:24)

All right, I want to get to more. Morgan with you in just a second. I want to get actually really personal, especially as someone who has been really successful. How has more money changed your life? I'll put Morgan on the hot seat right after this. Talk with Morgan Housel Talking about. Talking about spending money. Spending it. Well, spending it in ways that kind of allow you to live a life that gives you meaning. Right. Purpose. Morgan, you've sold I think like 10 million books. Is that right? Something like that?

Morgan Housel (40:01)

That's right, yeah.

Host (likely Joel or a How to Money host) (40:02)

Okay, that's, I mean that's crazy. Especially in the modern era. Not many people read to that the extent they used to anymore. How has that sort of like success and making more money impacted how you spend? Like, especially as someone who is such a good saver and a thoughtful investor. How, what, how's that change you?

Morgan Housel (40:23)

Well, I'll give you it in analytic terms. I think it's probably right that we spend about as much money per month now that we did per year six years ago. That's close to right. It's something like that. And I would say that's great. It's been a lot of fun. My family has a great life now. But I would also. The reason I'm comfortable saying that is because I would also say if you asked me six years ago, Morgan, what would your life feel like if you were spending X dollars that we are today? I would have predicted that it would have felt twice as good as it actually does right now. So it's good, it's great. I have no regrets. It's fun. I don't want to go back. I would not pretend in a million years that it's as good as I thought it would be. And I would even say I'm making these percentages up. But I would say in the last six years my income has gone up very considerably. There have probably been, you know, five parts of my life that have gotten better, two parts of my life that have stayed the same and three parts of my life that have gotten worse. It's probably something like that. So on, you know, on the whole it's gotten better, but it's just not what the dream would have told me it would have been. Forget six years ago, but especially when I was 17, 18. If you had told 18 year old Morgan, hey, by the time you're 40 years old, you're going to be earning and spending X dollars per year, I would have been like, this is it. I was going to wake up every morning laughing with joy. And of course that's not. I'm proud and I have a lower sense of anxiety and stress than I may would have, but it's not what I imagined it would have been. That's not disappointing to me. I think it's mostly just interesting. And there's also an upside to this is when you realize that money is not the solution to all your problems that I thought it was when I was younger, then it forces you to Say, okay, well then what is the solution to my problem? Is it better relationships, better health, those kind of things? And so I spend more time thinking about those topics now because I know, yes, what money can do for me, but more importantly, what it cannot do for me. And so now, for the first time in my life, I'm focusing on things that I think are much more important than money.

Host (likely Joel or a How to Money host) (42:33)

Can I ask what the parts of your life that got worse were?

Morgan Housel (42:37)

Higher expectations from myself and others. My kids becoming spoiled and unappreciative of the absolutely sensational life that they have. That's mostly it. Higher expectations in my own career, higher expectations from other people around me, family and friends and kids. That's. I think that's, that's the majority of it.

Host (likely Joel or a How to Money host) (42:57)

I totally get that. Yeah. And, and as you do well financially, like part of the impetus for me to do well financially was like growing up in a home where money was like super tight and not handled all that well. And I was like, I don't want my life to be run by poor money management. And then you do well with money and then there are other problems, especially, especially with the kiddos who are watching everything you do. Okay, so I know that your ultimate goal is independence. Independence is like this huge thing for you. I'm curious. And we've talked about the importance of doing something with the independence you've earned instead of just leaving that money locked in a vault. What are you doing with the independence that you've earned? How is it impacting you right now?

Morgan Housel (43:40)

Let's say from a big picture. I now only work on the projects that I want to work on. I only write the articles and the books that are interesting to me. I only speak at events that are in cities that I like going to. It's. It's purely optional now. And I just do it for my own enjoyment and thrill. And that's very different than 15 years ago when I was like, I will do anything for anyone who's willing to send me money. That's effectively it. I mean, there's some guardrails around that, but that was effectively it. And so from a work point of view, it's that from a day to day point of view, things I do now that I wasn't doing six years ago, I usually go for a one hour walk every day or I just listen to a podcast. I walk my dog and, and go for walks with my wife much more than I used to. I take a nap around 2pm every day. It's those kind of things where it's like, look, if I'm, you know, that's taking advantage of the independence and it's like there's no point in my mind of having it and not doing those kind of things that I find so valuable in life.

Host (likely Joel or a How to Money host) (44:38)

Yeah. Wonderful. Morgan, this has been a great conversation. Thanks for joining me. Where can how many Listers find out more about you, what you're up to and the new book, the three books.

Morgan Housel (44:48)

I've written, the Psychology of Money, same as ever, and the Art of Spending Money. That's where everything that I've ever thought about put together in this behavioral finance sphere is written down.

Host (likely Joel or a How to Money host) (44:58)

Lovely. Awesome. We'll link to them in the show notes up on the website as well. Thanks again, Morgan.

Morgan Housel (45:02)

Thanks so much.

Host (likely Joel or a How to Money host) (45:04)

Morgan Housel the Goat. It was an absolute pleasure to talk with him and, and I've just learned so much from him over the years that, I mean, I didn't even bring this up. But my favorite quote, I don't know, one of my favorite quotes of all time comes from Morgan from many, many, many years ago when he says to save like a pessimist and to invest like an optimist. And I think that is just such a pillar of money advice. I'm sure how to money listeners who have been listening for a long time have heard me bring up that quote many, many times. And Morgan just has these insights. It's largely because he's so well read and he's so thoughtful that far few people have the ability to come up with. And even just in this conversation, like, so much good stuff. I think my big takeaway was when we're talking about the role that emotions play in how we think about it and how we spend money. And like, at times, I think Matt and I have probably when we talked about home buying, we're talking about not getting out over your skis from an emotional standpoint. And it's really easy. Like, think about the bidding wars of three and a half, four years ago, right, where people were like competing for homes and they're like, I'll pay $100,000 more than list price. And some people now regret it, right? They're in a home that they paid too much for and maybe they'd like to move on and do something else. But they just, it's hard to get out from a decision like that. And what Morgan said was go half heart, half spreadsheet. And I think that's a really, really good approach. That's really good advice because you don't want to, like, take your heart completely out of it. Sometimes you find a house. I mean, I still remember my favorite house that we've ever owned. Not the house we're currently in, it's great. But the last house, and it spoke to me. I remember walking in that house, this 1920s bungalow with the original hardwood floors, the unpainted molding around, and it needed a lot of work. It was in disrepair. But I was like, this is the place. This is home. This giant front porch on a corner where I get to talk to my neighbors every 30 seconds, which is my jam as an extrovert. And so there was a lot of emotion, positive emotion about that house when I saw it for the first time when Emily and I saw it. But the other thing was we didn't leave out the numbers, right? And we were, I remember even paying more than asking price for that. But we thought in, oh, you know what, this is actually a duplex and we can rent out the back. And so part of it was limiting our parameters to begin with and saying, well, we really do want an income producing property, but it has to work for our lifestyle as well. And so that half heart, half spreadsheet is just such a great way to think about big purchases and big spending line items. And I mean, so much good advice from Morgan in this episode. And if you're looking to learn more and you want to learn more about thoughtful, intentional spending, highly recommend his book, the Art of Spending Money. Simple choices for a richer life. And there are so many things that will tempt us this year to spend money, and some of them will bring a meaningful return. Many, many will not. And when we can recognize that on the front end and identify what we care about, what we're intentionally spending money on versus the things that just pull at our wallet because of the culture we swim in and what we see happening around us, the happier we'll be. I love to. You know, when we talked about someone who spends 2% of their money on transportation, 20% on concert tickets, it's an egregious, crazy example. But that to me, I agree with Morgan. That is the kind of person who is deeply thinking about what matters to them. Don't spend 20% of your budget on concert tickets if you can't afford it. If you're going into debt, right? But if you are purposely making those choices and you are dialing back in other areas, more power to you. It makes me think of a recent how to money question where a listener had like six cars, but they were all paid for in cash. And it's like, dude, do your thing. Like, if that is your jam and that's where you're choosing to allocate your money, that's not my thing. But clearly it moves the needle for you, so go do it. So spend with reckless abandon. Don't just cut the quote there. Spend with reckless abandon on the things that matter to you. Cut back in the areas that don't. And I think that is a good recipe for healthy spending in 2026. All right, thanks as always, for listening to the show. Put links to Morgan's books and some other resources up in the show notes@howtomoney.com we'll catch you back here on Friday for a fresh Friday flight. Until next time, Best Friend out.

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