The Art of Spending Money: Simple Choices for a Richer Life - Hardcover

Housel, Morgan

Hardcover

ISBN 10: 0593716620 ISBN 13: 9780593716625

Publisher: Portfolio, 2025

Synopsis

From the bestselling author of The Psychology of Money and Same as Ever, lessons on harnessing the power of money to live a happier life

Most of us don't know how to spend money. We chase things that impress others but leave us cold. Or we save endlessly, afraid to spend on what would actually make life better. We confuse admiration with envy, comfort with excess, and utility with status.

The Art of Spending Money doesn't provide budgets, hacks, or one-size-fits-all solutions. It gives you understanding of how your relationship with money shapes your decisions--and how to reshape it so money works for you.

Morgan Housel's work has helped millions rethink how they earn, save, and invest. Now he turns his attention to the other side of the equation: how to spend. With insight and warmth, he shows why the most valuable return on investment is peace of mind, why expectations matter more than income, and why doing well with money has less to do with spreadsheets and more to do with self-awareness.

This book isn't about getting rich. It's about getting the most out of what you already have--and learning to want what's worth wanting.

About this title

About the Author

Morgan Housel is a partner at The Collaborative Fund. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He lives in Seattle with his wife and two kids.

Excerpt. © Reprinted by permission. All rights reserved.

All Behavior Makes Sense with Enough Information

Most debates about what's worth spending money on are actually just people with different life experiences talking over each other.

An important question I love is: What have you experienced that I haven't that makes you believe what you do? And would I believe the same if I experienced what you have?

It applies to so many things in life. Including money.

The most important topic in spending money, one that's the cause of so much financial frustration and disappointment, is that there is no "right" way to do it. There are no universal laws of what kind of spending will make everyone happy and fulfilled.

What I like spending money on might make no sense to you. My fears might be your joys. Your goal might be the thing I most want to avoid.

There's a saying: Never make fun of someone for mispronouncing a word, because it means they learned it from reading. As a corollary: Never make fun of how someone spends their money, because they learned it from living.

Everyone is a product of their own unique past. To understand why people spend the way they do, you have to dig deep into their life experiences.

My brother-in-law is a social worker. He works with kids from the lowest levels of abject poverty and broken homes who are pushed in and out of the foster system.

A lot of these kids struggle at school. Their behavior is poor. They skip class. They don't pay attention. They get into fights on the playground. They can't focus on the future.

It is easy for people to not only criticize these kids' behavior but shake their head in confusion.

"Why are you acting this way?" "Why can't you understand that if you behave better, you'll have a better future?" "How could you possibly think that's an OK thing to do?"

But there's a saying inside the foster care system: All behavior makes sense with enough information.

Once you understand what some of these kids have dealt with at home-the uncertainty, the lack of security, love, and attention-their behavior begins to make sense. They're in constant survival mode and never learned some of the basic social skills other kids take for granted.

You don't want to encourage or even justify their behavior. But once you see the world through their eyes, you quickly understand why someone would make decisions that seem foreign to you and me.

All behavior makes sense with enough information-including behavior about the different ways we spend our money.

By the late 1920s, America was at the tail end of a full social and economic cycle. The devastation of World War I was followed by a crippling recession. And then, after a decade of misery-finally-people got to relish an economic boom that gave name to the Roaring ‘20s.

Roaring doesn't do it justice-it was an absolute party. For a good five years in the mid 1920s the economy was fueled by cheap debt, a stock market bubble, and bootlegged liquor.

In June of 1928, syndicated columnist Robert Quillen wrote a newspaper headline that in fourteen words describes something so simple and important:

That's it. So much of the late-1920s desire to show off wealth with new cars, new clothes, new toys, was driven by a reaction to the poverty and uncertainty that preceded it.

When you at one time feel held back, then suddenly feel released, a common reaction is to frantically sprint ahead to make up for lost time. Historian Frederick Lewis Allen wrote about the era:

Like the suddenly liberated vacationist, the country felt that it ought to be enjoying itself more than it was, and that life was futile and nothing mattered much. But in the meantime it might as well play-follow the crowd, take up the new toys that were amusing the crowd.

People seemed to justify wild, unsustainable spending because they were making up for being snubbed and suppressed during the dour years. It felt as if they were righting a wrong, like getting revenge. They weren't spending wildly because they crunched the numbers and determined it was the right thing to do. They were trying to heal an emotional wound.

That behavior is timeless, and explains so much.

A close family member grew up extremely poor and in a broken home, snubbed in every way. He then became a successful businessman. When his daughter was preparing to go to college, he told her, "Pick the most expensive school you get into." Sending his daughter to an expensive school was such a powerful symbol of what he had overcome that, in his mind, it was almost as if he preferred to pay the most absurd price he could. High tuition was like a social trophy that made him feel great about the arc of his life.

If you didn't grow up snubbed, or snubbed in a different way, that might make no sense to you. But that's the point: A lot of spending makes no sense until you peel back the onion layers of someone's personality, identifying the specific thing they're trying to accomplish, or the hole they're trying to fill.

How your past influences your spending decisions can manifest in different ways, with opposite outcomes depending on the person. Tiffany Aliche-a former preschool teacher who became a wildly successful financial educator-once said that she suffers from "post-traumatic broke syndrome." It's made it hard for her to spend her newfound wealth. "I was broke for so long, and it was so hard, that I'm afraid of going back there," she says.

If you try to make sense of spending habits-yours or other people's-you have to start with the understanding that people don't just spend money on things they find fun or useful. Their decisions often reflect the social and psychological experiences of their life. And since life experiences vary dramatically from person to person, what makes sense to you might seem crazy to me, and vice versa.

Spending a ton of money on a college degree might feel like a waste to one person, a nonnegotiable requirement to another, and the ultimate sign of climbing the social ladder to another. The same product has very different meanings to different people.

To someone who grew up in an old-money affluent family, a Lamborghini might be a symbol of gaudy egotism; to those who grew up with nothing, the car might serve as the ultimate symbol that you've made it.

No one should pretend that there's one right answer to these questions, because they fill a different psychological need for different people.

A lawyer who works one hundred hours a week and hates their job may have an urge to spend frivolously in an attempt to compensate for the misery of how their paycheck was earned. Never have I seen money burn a hole in someone's pocket faster than an investment banker receiving their annual bonus. After twelve months of Excel modeling until 3 a.m., you have an urge to prove to yourself that it was worth it, offsetting what you sacrificed. It's like someone held underwater for a minute-they do not take a calm breath when they surface; they gasp. A lot of spending is gasping. Related: I have noticed that those most capable of delayed gratification are often those who enjoy their work. The pay might be good, but the urge to compensate for your hard work with heavy spending isn't there.

The important point in all of this: Most debates about what's worth spending money on are actually just people with different life experiences talking over each other. How much you should spend, and why other people spend the way they do, starts to make sense when you accept that people who have lived different lives than you have want different things than you might.

I think it's a sign of deep immaturity to think that because you like spending your money a certain way, other people should too. It's a sign of deep immaturity to think that because you don't value something, no one else should either. That's not how the world works. What's reasonable and fulfilling spending to you might seem pointless to me. What's mandatory to me might seem like a waste to you.

The software engineer Billy Markus says, "People are not rational. They are rationalizing. Once you understand this simple fact, all the oddest human behavior will suddenly make way more sense."

It's why spending money should be viewed as an art, not a science. There are no universal answers on how to do it, or what's worth it. The best we can do is come up with a broad understanding of how varied people's minds can be, and how varied our preferences are for spending money.

Psychologist Lisa Feldman Barrett studies where emotions come from.

The classic view in psychology is that emotions are deeply ingrained at birth, the result of eons of evolution dictating that what's scary or funny or insulting to me should be the same for you-and all humans.

Barrett has spent three decades showing reality is more complex.

"Emotions are not built into your brain at birth," she says. "They are built by your brain as you need them."

From the moment you're born you begin to learn that this thing is scary, that thing is funny, or this thing should make you angry. You're even taught how to respond-contort your face this way when you're angry to get your point across to another person.

The important thing is that emotions are learned. They are a product of the culture and environment we are raised in. Barrett writes:

Concepts like "Anger" and "Disgust" are not genetically predetermined. Your familiar emotion concepts are built-in only because you grew up in a particular social context where those emotion concepts are meaningful and useful, and your brain applies them outside your awareness to construct your experiences.

The wild thing is to contemplate how different people's life experiences can be.

An impoverished child in Africa grows up learning to be scared of different things than a rich child in California. A kid from Manhattan grows up learning to seek joy from different things than a farmer in Iowa. The most basic and seemingly fundamental feelings of joy, fear, shame, and pride vary from culture to culture, family to family, person to person.

Behavior that embarrasses you might make me proud.

What I fear might be a thrill to you.

Your goals might be my nightmares.

And it's not just emotions that vary. What's common sense to one culture can seem absurd and backward to another. Psychologist Jonathan Haidt points out that a twenty-five-year-old son addressing his father by his first name is perfectly acceptable in America but deemed morally wrong-universally wrong-by other cultures. You find similar gaps when asking basic questions about food preparation, hygiene, how to raise kids, and how to treat your spouse. If you define "common sense" as truths that everyone agrees on, you'll find it to be rather uncommon, constrained to scientifically objective things like 2 + 2 = 4. Author David McRaney notes that "consensus realities are mostly the result of geography."

All of this leads to extreme differences in people's views over what is worthwhile risk, a fun little experiment, a harmless guilty pleasure, or a fulfilling need.

Take an extreme example from the author Rob Henderson, who cycled through ten different foster homes growing up and went on to receive a PhD in psychology from Cambridge:

A well-heeled student at an elite university can experiment with cocaine and will probably be just fine. A kid from a dysfunctional home with absentee parents is more likely to ride that first hit of meth to self-destruction. This may explain why a 2019 survey conducted by the Cato Institute found that more than 60 percent of Americans with at least a bachelor's degree were in favor of legalizing drugs, while less than half of Americans without a college degree thought it was a good idea. Drugs may be a recreational pastime for the rich, but for the poor they are often a gateway to further pain.

Back to my brother-in-law, the social worker.

He once told me a story about trying to convince a poor husband and wife about the value in saving even a small amount of money to avoid being evicted from their apartment the following month.

"They laughed at me," he said.

"Oh, you're a future thinker," the husband said, laughing harder.

"A what?" my brother-in-law said.

"A future thinker. You have the luxury of thinking about the future. We don't. Our vision of the future is the next twenty-four hours. Sometimes it's a five-minute window, like where we are going to get the next meal. That's as far ahead as we think."

They were spending every cent they could as fast as they could in part because the entire concept of "the future" was different from what yours or mine might be. There was no common ground on what might be considered common sense.

Tom Gayner, CEO of Markel Group, once told a story about having lunch with his daughter, a public-defense lawyer. Asked about a recent case, Gayner's daughter described a man who walked into a restaurant, ordered a meal, ate it, then tried to pay with literal Monopoly money.

"Was the guy stupid or a jerk or trying to play a joke?" Gayner asked.

"Daddy, he was poor and he was hungry," she said. "My clients are Zen masters of the right-now. There is no past. There is no future. He was hungry."

It's a radical example, but all of us-you, me, everyone-lives some version of it. There are so many instances-among rich and poor people alike-highlighting the idea that your values are equal to your preferences, and your preferences come from trying to reconcile your current needs with the lessons learned from your unique past experiences.

Which brings me to two pieces of advice, both critical to understanding the art of spending money:

1. Don't let anyone tell you what you should or shouldn't spend money on. There is no "right" way. You have to figure out what makes you happy and fulfilled (more on that later).

"Personal finance is more personal than it is finance," says financial advisor Tim Maurer. It's one of the smartest money quotes I've ever heard.

A lot of money problems come from people spending or saving money in a way they think they're supposed to but that doesn't match their personality. They look for a one-size-fits-all answer to a problem that's deeply personal. It's like going through life forcing yourself to be someone you're not.

Most people understand if you like Italian food but my favorite is Mexican food, neither of us is right or wrong; it's just preference.

Edition details

• Publisher: Portfolio
• Publication date: 2025
• Language: English
• ISBN 10: 0593716620
• ISBN 13: 9780593716625
• Binding: Hardcover
• Number of pages: 256