The Art of Spending Money

“Personal finance is more personal than it is finance,” says financial advisor Tim Maurer

I’m always struck by the contrast here of what people want versus what they aspire to

Observe what actually makes you happy and maximize that

True happiness is when you stop asking what else you need to be happy

Never focus on what money can do for you without a clear understanding of the cost of acquiring more of it.

One way to fight back is respecting the idea that occasional treats can generate more joy than perpetual luxury.

When you realize how powerful expectations are, you put as much effort into keeping them low as you do into improving your circumstances.

Buying things for their utility gives you the ability to express your own identity, while chasing status often makes you conform to others’ identity.

Maybe regret is the best definition of risk. When dealing with money, risk isn’t how much you might lose. It’s not even necessarily how you’ll feel when you lose it - over time, a lot of painful experiences turn into cherished lessons. Real risk is the regret (or lack thereof) that might come years or decades later.

A parable: A teacher stands before her class and says, “Here’s a math problem. There are ten sheep on a farm. One sheep runs away. How many sheep are left?” A student raises his hand and says, “Zero. There are no sheep left.” “It appears you don’t understand math,” the teacher says. “No, it appears you don’t understand sheep,” replies the boy. The urge to watch other people and copy what they’re doing without asking questions is so powerful, so pervasive, and explains so much of modern life.

I’ve never viewed my savings as idle money. I’ve never even viewed it as saving up for a purchase in the future. I view every cent of savings as a ticket toward a greater degree of financial independence, which is my true goal. If I move $500 into my savings account, I view that as having purchased $500 of independence. It has almost no different meaning to me than if I had purchased a $500 television - the money is “spent” in either scenario, just spent on different things that offer different value. And I spend frivolously on independence. ... That whole idea - trading money for time, rather than trading it for stuff, because having more time is going to provide greater joy in your life - is probably the most overlooked aspect of spending money, because to most people the extra time and mental clarity you get from independence and savings doesn’t feel like “spent” money.

I aspire to “no thank you, I’m not interested in that, I respectfully disagree and I’m free to ignore you” money. Note: Precisely my aim

Bragging is the inverse of how satisfied you are with life. It’s one of the most reliable psychological formulas around. In the movie Broadcast News, Tom Grunick asks, “What do you do when your real life exceeds your dreams?” Aaron Altman replies: “Keep it to yourself.”

the fastest way to get rich is to go slow. ... Like so many things in life, speed gets all the attention but slow has all the power.

Paul Graham has a saying: Keep your identity small. “The more labels you have for yourself, the dumber they make you,” he writes. “If people can’t think clearly about anything that has become part of their identity, then all other things being equal, the best plan is to let as few things into your identity as possible.” Anytime in life you say, “I am a…” - regardless of what it is - you’ve formed an identity. And identities are so important that people will often go to absurd lengths to defend them.

The best definition of independent thinking is when your beliefs on one topic can’t be predicted from your beliefs on another topic.

The people I know who’ve used money best have inconsistent spending habits. They spend a lot of money on this, and very little on that. They value this, and couldn’t care less about that. They’re independent thinkers, forcing their money to work for them, not the other way around

the best decisions probably happen at the intersection of the two - head and heart. The sweet spot with money is someone who is driven by equal parts rational math and emotional joy

Price is easy to calculate. It’s just whatever you paid initially and sold for eventually. Cost is harder to figure out, because it tends to be a slow drip over time, which is easy to ignore but adds up quickly.

Ramit Sethi says too many people ask $3 questions (can I afford this latte?) when all that matters to financial success are $30,000 questions (what college should I go to?). The latte example I use above often drives financial advisors mad, because they see people wondering if they should cut lattes from their budget when those same people attend colleges they can’t afford, own cars they can’t afford, and live in homes they can’t afford. They obsess over $3 problems while $300,000 problems get far less attention