At The Money: The Art of Spending Money with Morgan Housel (Might 22, 2025)
Is there an artwork to spending your individual cash? We spend loads of time discussing incomes and investing cash, however how typically do we actually assume deeply about spending it? Morgan Housel wrote a brand new e-book, “The Art of Spending Money, Simple Choices for a Richer Life.” It arrives in October, the place he discusses simply that.
Every week, “At the Money” discusses an essential subject in cash administration. From portfolio development to taxes and slicing down on charges, be a part of Barry Ritholtz to study the very best methods to place your cash to work.
Full transcript below.
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About this week’s visitor:
Morgan Housel is a accomplice on the Collaborative Fund and is the writer of the best-selling “The Psychology of Money” (8 million copies offered worldwide)
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Transcript:
Barry Ritholtz: Is there an artwork to spending your individual cash?
We spend loads of time round these elements discussing, incomes, and naturally, investing cash, however how typically do we actually assume deeply about spending it? I’m Barry Ritholtz and on at the moment’s version of At The Cash, we’re gonna focus on how you need to take into consideration spending your money to assist us unpack all of this and what it means for you.
Let’s usher in Morgan Housel. He’s the writer of “The Psychology of Cash.” The e-book has obtained widespread acclaim and has offered over 7 million copies worldwide. His new e-book, “The Artwork of Spending Cash, Easy Decisions for a Richer Life” arrives in October.
So Morgan, you’ve lined human habits and human nature, what led you to say, I wanna write a brand new e-book concerning the artwork of spending cash.
Morgan Housel: Effectively, thanks, Barry. The, the primary cause was I, I didn’t name this e-book The Science of Spending Cash as a result of I don’t assume that exists. Science implies that there’s like a, a one dimension matches all rule for, for you and I, and that’s not the case.
I name it the artist spending cash as a result of artwork is subjective. It’s typically contradictory. It’s totally different from individual to individual, and that’s actually what spending is. The rationale why I needed to sort out it’s because you simply alluded to this, there’s a lot commentary, a lot ink has been spilled. A lot good ink has been spilled on find out how to make investments, find out how to develop your profession, find out how to earn extra money, little or no on spending cash.
And I believe the explanation why is as a result of it’s assumed that everyone is aware of find out how to do it, which is simply spend extra and also you’ll be happier, you’ll be higher off, and it doesn’t actually matter what you spend it on. Typically you hear somewhat bit nuance of spend on expertise versus issues, however. To me, there was a lot extra within the psychology of spending if you dug into the deep mechanics of envy and jealousy and getting consideration and copying different individuals.
There have been so many good tales to dig in there which may appear, , not precise, probably not deep. This isn’t astrophysics. It’s simply fundamental psychology, nevertheless it tends to be ignored. Significantly in finance the place all the eye is, how do you simply get extra money and also you type of depart it to assumption of what you’re gonna do with the cash after you get it.
Barry Ritholtz: So let’s discuss somewhat bit concerning the science behind a number of the belongings you’re discussing. There’s been loads of educational analysis: Does cash make you happier? At what level are there, does the rule of diminishing returns kick in? What does the science of spending appear like, earlier than we get to the artwork of spending?
Morgan Housel: One of many issues I believe is basically fascinating is that what loads of the analysis reveals is that in case you are already a contented individual, cash could make you happier. However in case you are a depressed individual – or a depressing individual, no matter it could be – that it’ll not, and it’s simple to only type of contextualize this into an actual individual’s lifetime of in case you are in a nasty marriage and also you hate your profession and you’ve got a two hour commute and simply go on down the checklist, you’re an alcoholic, you’re overweight. When you take that individual and also you give them extra money, will they be happier? The reply isn’t any, after all not, as a result of all of these different facets of their life are gonna override no matter cash can do for them.
However for those who additionally take someone who’s in an ideal marriage loves their profession, they’re blissful, they’re wholesome, they sleep eight hours, they’ve a very good set of mates – and also you give that individual extra money, there’s a very good likelihood that they’re gonna use that cash to only leverage what they’re already doing. To spend extra time with the buddies who they already love, to spend extra time getting more healthy and consuming good meals.
And so cash can actually simply. Simply leverage the one that you already are and the approach to life that you simply’re already residing. However I believe lots of people go astray with that when they’re sad, they usually assume, if solely I had extra money, all my issues would go away.
Barry Ritholtz: And one of many fascinating issues within the educational literature that I recall seeing a couple of years in the past was after they draw these charts of cash doubtlessly making individuals happier, Divorce is a huge crimson flag. Individuals in the midst of a divorce or individuals who have not too long ago been divorced, that’s a extremely difficult highway to haul, isn’t it? It.
Morgan Housel: I believe what it comes all the way down to is that having extra money is, is so quantifiable that it, it, we use it as a crutch for all of our issues.
For instance, if I mentioned I might have a greater life if I used to be a ten% higher dad. What does that even imply? What’s a ten% higher Dad imply? Rhere’s no strategy to quantify it, but when I mentioned I might have a greater life if my wage went up by 10%, you may simply quantify that, wrap your head round it. So we chase that and we, we assume that that’s gonna be the answer to all of our ills.
Even when changing into a greater dad may make me a happier, higher individual, however because it’s unattainable to quantify, I simply ignore it and pretended that it doesn’t exist.
Barry Ritholtz: You alluded to impressing others. How ought to individuals keep away from spending cash for. Standing and symbolism versus bringing themselves satisfaction and happiness.
I the primary to say I like good issues. I like a pleasant home, I like a pleasant automobile. I like good garments, I like good holidays. I journey nicely, et cetera, et cetera. I’m not saying stay like a monk by any means, however what’s true is that loads of spending is for social signaling. You simply wanna present different individuals who you might be and the way profitable you might be.
To me, the following layer beneath that’s, nicely, who’re you making an attempt to impress and are they even paying any consideration to you? And that is totally different for each individual, however for me, the individuals in my life who I need to love me, are my spouse, my youngsters, my mother and father, and possibly two or three mates. And I really need their love and affection and admiration. And I would like do issues.
together with with my cash, to assist them and to present them a greater life in order that they’ll love me again. That’s the reality. However after that small set of, , seven individuals or no matter, it falls in a short time from there.
After which there’s one other layer beneath that of like work associates who I like having a very good time with and having a pleasant dinner with. However then it actually collapses from there, and I couldn’t care much less what 99.9% of the world thinks of my home or my automobile or my garments, as a result of they’re not paying any consideration. It’s so simple to overestimate how a lot different individuals are taking a look at your stuff, your home, your automobiles, they’re not paying any consideration.
They’re busy worrying about themselves and fascinated with themselves. And so if you body it like that – it’s to not say don’t use your cash to achieve consideration – it’s use it to achieve consideration from the very small core group of people that you need to love you. There’s an ideal quote from Warren Buffett the place he says, “The definition of success in life is when the individuals who you need to love you do love you.”
I believe you may twist that into considering the way you spend your cash as nicely.
Barry Ritholtz: Within the fashionable period of social media and TikTok and Instagram, there’s loads of influencer flexing they usually’re making an attempt to indicate off their life-style. I recall being on trip at a spot in Puerto Rico and two lounge chairs over was this girl who as a substitute of simply mendacity there and having fun with the attractive solar and surf, learn a e-book, no matter. She was simply consistently taking selfies, doing, and so I lastly needed to say, Hey, what are you doing?
She mentioned, oh, I’m an Instagram influencer…
So that you’re not simply gonna sit back and revel in this. And he or she mentioned, “Oh no, that is work.”
You and I had a dialog a few years in the past that’s so associated to this. I let’s see for those who recall this, the individual driving down the road within the loud Lamborghini or the individual across the nook from you with an enormous home? You’re solely seeing one half of the steadiness sheet. You’re solely seeing their property. We talked about, nicely, did they pay money for that or did they go deep into hock with the intention to purchase a home or a automobile to indicate off for the neighbors? Discuss that somewhat bit.
Morgan Housel: Wealth is what you don’t see. Wealth is the automobiles that you simply didn’t buy and the enormous home that you simply didn’t purchase. That’s what wealth is. It’s cash that you simply didn’t spend that you may now save for both for future consumption or for independence at the moment. That’s what wealth is.
And so I can see your automobile, I can see your home, I can see your watch and your garments. I can not see your checking account or your brokerage assertion. So crucial a part of wealth – actually in my opinion, the definition of wealth is invisible to all people.
And that’s so distinctive in life as a result of for those who take like bodily health. You may see someone’s physique, it’s proper there. And so type of who to admire and who to chase. “Oh, that, that individual’s in nice form. I ought to ask them what they do. I ought to ask them their eating regimen and attempt to mimic what they do.”
However for those who see someone with a mansion or a Ferrari or no matter it’s. You don’t know that they bought that by success. That could be the image of a leverage. They usually, it’s attainable that they haven’t slept in two weeks as a result of they’re questioning how they’re gonna make their subsequent Ferrari lease cost.
And so we have now type of like a faux view of who we’re chasing and what we should always do, as a result of wealth that we’re chasing is invisible.
Barry Ritholtz: So this comes again to the idea of spending as an artwork. And in one of many sections of the e-book you discuss “self-awareness over spreadsheets.” How self-aware can we should be with the intention to be extra suave spenders in the direction of happiness and life satisfaction?
Morgan Housel: I believe each large, large monetary determination spending determination is, is 2 elements: Head and Coronary heart.
Like for those who’re shopping for a home, after all it’s not only a spreadsheet. I inform the story that when my spouse and I purchased our first home, uh, 9 years in the past, we discovered the itemizing on Zillow and we’re like, oh, that, that appears nice. Let’s go test it out. However we’re, that is simply data gathering. We’re, that is simply, we’re simply gonna go have a look at it.
And, uh, however, however we’re not making any selections right here. And we pulled into the driveway and as quickly as we pulled into the driveway, my, my spouse gasped and he or she mentioned, I find it irresistible. And at that time, overlook the spreadsheets, overlook the just like the valuation comps. That’s all arduous at that time.
However right here’s the factor, we don’t remorse that within the slightest. It was, it was an ideal home and we had Christmas mornings with our youngsters. Each of our youngsters had been. You realize, we’re, we’re born not in that home, however we introduced them residence as, as newborns in that home, so many wonderful reminiscences that you may not observe on a spreadsheet.
Barry Ritholtz: I’m laughing as a result of the very first home my spouse and I purchased, I don’t know, 29 years in the past? We pulled into the driveway. I checked out her face and I simply mentioned, Uh Oh. That was the primary home we purchased. The home I’m in for the previous virtually 15 years. We pulled up the driveway and similar as your spouse. She’s like, wow. And I’m like, uhoh, right here we go once more!
Actual property’s an fascinating one too as a result of does shopping for a giant fancy home make you happier? When you phrase it like that, the reply isn’t any. However does spending extra time along with your partner, your youngsters, your folks, your neighbors, does that make you happier? Completely.
And might a giant home make it simpler to have your folks over? Sure. So there’s an oblique path to which, sure, spending cash on an ideal home could make you happier, nevertheless it’s not due to the home, it’s as a result of it makes it simpler to spend time with individuals that you simply admire and love.
Barry Ritholtz: So let’s carry this again to a theme that I’ve seen in all your writings, all your books I’ve identified you for what number of years? 15 years nearly (Sounds proper) going again, going again to Vancouver, peace of thoughts as the final word spending return. Inform us about that.
Morgan Housel: I believe it’s totally different for each individual. There are, there are definitely individuals on the market that will go loopy in the event that they weren’t wired and in the event that they weren’t pushing themselves to the max on daily basis.
However the overwhelming majority of individuals, together with myself, what I would like out of cash is an easy life. Now, easy doesn’t imply low cost or frugal. Easy might be extravagant, nevertheless it’s easy within the sense that you’re utilizing cash as a software. It’s not. It’s not utilizing you, it’s not conducting your habits or your actions. I need to use cash as a software in my life to leverage who I wanna be.
And for me, and I believe you and plenty of different individuals that’s like, uh, like doing the very best work that I can, however having full management over my schedule, doing loads of studying, working after I need, with whom I would like for so long as I would like, being in management over my time. That’s what I would like out of cash. Utilizing it as a software relatively than it utilizing me to say, “Morgan, that is how you need to spend your cash. It’s best to get these individuals’s consideration. That man’s automobile is quicker than your yours. So it is advisable to improve.” That’s when cash is utilizing you relatively than you’re utilizing it.
Barry Ritholtz: Good strategy to sum this up and to finish. Morgan Housel’s new e-book, “The Artwork of Spending Cash, Easy Decisions for Richer Life,” arrives in October to wrap up. Spending cash can carry you happiness for those who go about it the proper means. When you’re not simply flexing and exhibiting off. When you’re spending time with family and friends and family members.
When you’re utilizing cash as a software to attain sure goals, nicely then have at it. Exit and spend cash. Simply don’t publish all the things you do on Instagram. I’m Barry Ritholtz. You’re listening to Bloomberg’s on the Cash.
