Book Review: The Art of Spending Money

Whether you agree or disagree with his arguments, Morgan Housel tells entertaining stories, and his latest book, The Art of Spending Money: Simple Choices for a Richer Life is no exception.  What I liked most about this book is it caused me to think.  Mostly, I agreed.  Occasionally I disagreed.  Sometimes I recognized my own ideas, and sometimes I had something new to ponder.  The book flew by.

Most people I know will find that the way they think about spending aligns well with Housel’s recommendations.  The readers who will likely benefit the most are those who give up too much of what matters in their lives to amass wealth.  Such wealth builders are the type of person the financial industry seeks out, and it’s not surprising that writers from the financial industry tend to write for this type of person.  These writers often exaggerate how common it is for the general population to have their type of money obsession.  We all tend to speak from our own experience.

That should be enough for most of my readers to decide if they want to read this book.  The rest of this review are my thoughts on selected interesting sections.

Can money buy happiness?

Research into the connection between money and happiness found a mixed result: people with “low emotional well-being saw no improvement in happiness when their incomes rose above $100,000 per year.  For the middle group of emotional well-being, happiness tended to improve with extra income.  For people who were already super happy, making more money was like a happiness accelerant.”  This explains the widely varying opinions on whether money can buy happiness.

Chasing money

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

I made a decision in my late 20s to stay out of management based on this kind of thinking.  I worked for a Telecom giant, and the jobs in the levels of management visible to me looked terrible.  More money and status were good, but the long hours looked awful.  Even worse was the abuse these people got from their own managers.  I felt like I was supposed to want to rise up in the company, but I didn’t want to, and I refused promotions until my management stopped asking.

Luxuries

“When I find something I love—a restaurant, a trip, a drink—I tend to ask about how I can turn it into an occasional treat versus a constant new addition.”

This is an interesting idea.  I’ve understood that I can’t go to the same restaurant more than once a week without getting somewhat tired of it, but the idea of restricting myself to once a month or less to keep it special is not how I’ve thought about it.

Status vs. utility

“Utility being hijacked by status is so common in everyday life.  Think about the burden of maintaining a house that’s bigger than you need, or the stress you feel from buying a nice car you can barely afford.”

I see this in others, but, if anything, I lean too far toward utility.  I hate to get rid of clothes when I’ve finally broken them in.  What's the big deal if they’re faded or have a few holes?  Even when I buy a nice car, I don’t wash it.  I could pay a little more attention to how others see me, but many people would be better off to focus much more on utility.

Independence

“Saving for the future creates independence today.”

This is true.  Most people would do well to save more to reduce the control others have over their future.  My trouble with this type of advice is that those who need it the most tend to ignore it, and those who already spend too little embrace it.  It’s difficult to reach the right people.

Envy

“Today, everyone is effectively your neighbor, where social media turns envy and comparison into an Olympic sport.”

Keeping up with the Joneses has always been part of life, but I hadn’t thought about how social media makes it so much worse.

Feelings and big decisions

“No one should pretend that you can make life-changing decisions that will massively impact you and your family and treat it like a math problem you can solve in a spreadsheet.  Spreadsheets don’t care about your feelings.”

It’s true that feelings are an important part of big life decisions.  But so are the numbers.  I own a house rather than rent largely because of feelings.  But I do understand what this choice costs me.  I stick with my choice because I know I can easily afford it.

Sometimes we can incorporate softer parts of a decision into a math calculation.  For example, I used to treat getting stranded on the side of the road because of car trouble as though it costs $500 (plus any towing and repair costs).  I even assigned this cost if I thought getting stranded was likely over some period of time.  This helped me factor in feelings and inconvenience into making better choices of when to replace a car.  Today, the cost I assign to getting stranded is so high that I replace cars much sooner.  It’s better to estimate costs that are hard to be precise about than it is to pretend their cost is zero.

Conclusion

Not much about this book is controversial to the majority of people who have a healthy relationship with money.  Those who overspend may get some benefit, and those who pursue money above all else will definitely get their views challenged.  Along the way, readers will get some entertaining stories.