From the bestselling author of 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.; 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.

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Morgan Housel

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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

Can money buy happiness? Yes. Can spending it make you happier? Absolutely. Yet, many of us struggle to unlock its full potential—either by spending on things that don't bring as much joy as they should or by avoiding investments that would truly enhance our mental well-being.

In The Art of Spending Money, award-winning author Morgan Housel offers a refreshingly practical approach to managing wealth while finding deeper meaning and contentment. Instead of cookie-cutter financial advice, Housel provides you with psychological tools to navigate your personal relationship between money and optimizing for happiness. Discover why people often mistake envy for admiration, how to align your expectations with your income, and ways to invest in future happiness while avoiding regret. Learn about the dangers of social debt and embrace the radical idea that the fastest way to build wealth is by going slow.

The Art of Spending Money delves into the complexities that surround money—envy, social aspirations, identity, and insecurity—crucial aspects often missed in traditional financial books. Armed with new insights into money and wealth, you’ll learn to sidestep common spending traps, make smarter investing choices, and wield money to its fullest potential to enhance your enjoyment of life.

Leseprobe
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 peopl…