Financial expert Morgan Housel reveals the simple habit that can make your money and your life feel richer.
00:00:00 — Introduction
00:00:26 — Smartest Ways to Spend Money
00:01:32 — Does Money Buy Happiness?
00:02:18 — Figuring Out What We Want From Money
00:03:35 — Can Couples With Different Money Mindsets Work?
00:04:37 — Spending for Utility vs. Status
00:05:41 — When It’s Okay to Splurge
00:07:14 — Money’s Best Use: Buying Independence
00:08:25 — How to Think About Investing
00:10:16 — Biggest Investing Mistakes
00:11:40 — Myths About Money & Spending
00:12:19 — Balancing Spending and Saving
00:13:16 — Simple Choices for a Richer Life
Transcript:
Caroline Woods: Joining me now, Morgan Housel, author of The Art of Spending Money and The Psychology of Money. He joins me here at the desk Morgan, Thanks so much for being here.
Morgan Housel: Thanks for having me.
Caroline Woods: So you’re out with a new book, The Art of Spending Money. I should actually hold the book up. Here it is. Simple choices for a richer life. You talk a lot about the right ways to spend money. So tell us, what are the smartest ways to spend money that will actually make you happier?
Morgan Housel: I think there’s two big things to keep in mind. One is that everybody is so different that there is no universal formula on how to do it. Even when people come up with ideas of spend money on experiences, not on things that can be right for one person in the right way and wrong for the other. People get into a lot of trouble with money, whether it is how they earn it, save it, invest it, or spend it. When they follow advice that is right for somebody and not for them, it’s the most. It’s one of the biggest problems that we have with money, where there is no one single right answer. We want to pretend there is, but there isn’t. Some of the biggest advice is spend more time looking in the mirror, so to speak, to figure out who you are, what you want, what works for you. We’re all a little bit different. The other is that there are really two ways to use money. One is as a tool to live a better life. The other is as a yardstick of status to measure yourself against others by to insert yourself in the social hierarchy. And what a lot of people actually want is not a big house or nice clothes. They want a bigger house than their neighbor and nicer clothes than their friends. And realizing that at some level can be OK and is unavoidable. But (OPEN WITH THIS) if you are always chasing, particularly for the attention of strangers who are not even paying attention to you, that can be a big trap that’s hard to get off of.
Caroline Woods: Yeah, and I think that is also something that’s very hard to not do. But I think even the bigger question is, to what extent does money even buy happiness.
Morgan Housel: Some of the research that we have in behavioral finance is that if you are already a sad, depressed, anxious person, earning more money is probably not going to do a lot for you if you are already a happy, content, joyful person. Earning more money can massively enhance your life. It basically leverages who you are in either direction. And so there is a long list of things that you can purchase money and use money to give yourself a better life that exists. There is an even longer list of what it will not do for you, and I think there are a lot of people who will wake up in the morning with a little bit of a hole in their life, they feel a little bit unfulfilled, and the knee jerk reaction is very often, if only I had more money, these problems would go away. To some extent that can be true. This is not Black and white, but it is too easy to make that assumption when there’s actually bigger things in your life that are causing the problems. That money will not play much of a role in enhancing.
Caroline Woods: How do we even figure out what we want out of money.
Morgan Housel: I think that’s a very important question, because people are very good at knowing what they need. They’re good at knowing what they don’t want. Knowing what you want is very difficult. We are not wired to really know what we want, and part of it is because we will change over the course of our own lives. What I want today is not what I wanted 10 years ago. It probably won’t be what I want 10 years from now, so it’s always a moving target on this. One of the things that I think you should do to try to figure out what actually you find a lot of joy in, is just the most diverse amount of spending that you can.
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