#32: The Art of Spending Money 🤑

updating my money beliefs

When I was fifteen I started my first job as a retail associate at a private school uniform store. Every summer, these rich kids and their moms would grumpily stumble in and repeat their annual cycle of picking out new outfits for the upcoming school year. I did this job because it was the only employer that would actually hire anyone under the age of 16. I was paid the minimum wage of $7.25 and every hour I spent folding clothes while standing on sore feet felt so rewarding. For my strict 30 minute break (one time I got reprimanded for taking a 34 minute break), I set a cap of my hourly wage for my lunch budget. It felt wrong to spend more than I made. That’s how I ended up devouring an entire $5 rotisserie chicken from the grocery store next door for lunch. On multiple occasions. It was such a good deal for a growing boy in search of protein and the free sauce packets from the deli section helped when the chicken was a bit dry.

a good source of protein

By the time I graduated from high school, I had worked four different jobs, all paying around minimum wage. Whether it was emptying out the trash filled with dirty diapers at a gym’s childcare or moving trays of plants in a thunderstorm at the garden center, I learned the value of money by earning it the honest, manual way.

By the time I graduated college (in six semesters), through lining up a few part-time gigs during the semester, I had done seven internships. It might sound impressive, but this wasn’t my preference. The start of every semester would start with getting another round of rejections from the tech, consulting, and business clubs on campus. So I sought out internships instead. My classmates would make new friends in their clubs while I commuted alone into San Francisco three times a week. The silver lining was that I got to see rapid progression in my earning ability from getting a new job every few months. From $14/hr (min wage in SF is now $16.99!) to $53/hr at the end, I got better at trading time for money.

I feel like I’m in a unique position now to make observations about money because of my initial job experience, recently earning a high income from working in tech, and then choosing to quit after a couple years. I have the privilege of enough savings to buy myself some breathing space, but at the same time, there is a ticking time bomb counting down the days. However, instead of an hourglass measuring time in the grains of sand remaining, I measure how many months of blissful freedom I have by the dollars in my bank account. When the food I eat and the bed I sleep in draws from the same pool of resources as what’s funding my newfound liberation, I can’t help but contemplate how I can improve my relationship with money. Here are some of my recent learnings about money:

1. Making money and spending money are two different skills

2. “Worth it” means something different to every person

3. People have very different relationships with money

4. It’s worth spending money to learn to care less about money

5. I actually want money, just not as much as I thought

1. Earning money and spending money are two different skills

Making money requires externally-oriented skills to deliver some form of value to others. Whether it’s code, content, or services, there is someone on the other side of the transaction willing to pay for what you do. On the other hand, spending money is an internally-oriented game that requires you to know yourself and what you want. This is why a frugal janitor can end up donating millions of dollars to charity while we constantly see professional athletes filing for bankruptcy.

Morgan Housel puts it well:

How you spend money can reveal an existential struggle of what you find valuable in life, who you want to spend time with, why you chose your career, and the kind of attention you want from other people. … How people invest their money tends to be hidden from view. But how they spend is far more visible, so what it shows about who you are can be even more insightful.

But what even is the goal of spending money? Is it to maximize savings? Or maybe happiness?

2. “Worth it” means something different to every person

One way to frame the goal of spending money is to feel it was “worth it” as often as possible. Although no one actually tallies up every credit card transaction as worth it or not, we all possess some internal compass; like some kind of worth-it-sorting-hat. While it’s easier for cheap things to feel worth it, expensive things are also just as valid. It just depends on the quality of the pairing between the buyer’s desires and the item or service being bought. This might be why I think it’s commendable when a friend buys front row seats for their favorite artist or subjects themself to hours of pain for a tattoo. In both examples, that’s money well spent because they’re pursuing an authentic desire. On the other hand, we should all be aware of mob mentality or mimetic desire influencing how we spend.

3. People have very different relationships with money

I recently realized that whenever I observe money-related behavior in friends that significantly deviates from my own beliefs, I make a mental note of it. The spread, or variance, in how people treat their money is mind-boggling to me. I have one friend who treats me to meals and another friend who venmo charged me $4 for a diet coke that I got on a late night pizza run. On some group dinners when I cover the bill, some friends like to venmo me proactively before I request and always end up rounding up which I appreciate. I also have friends who text me to clarify a venmo request just to make sure I did the math correctly.

One friend recently discovered her passion for snowboarding and has been going as hard on the slopes as she has on emptying her wallet. From international trips, airbnbs, and rental cars, she racked up an $11k credit card statement in just one month. But this same friend also treated her entire family to a vacation in New Zealand. I was shocked by this friend’s out-of-pocket spending streak, but also found her generosity admirable. To be 100% honest, I have trouble seeing myself in either situation (although I do want to be more financially generous in the future!)

Another big-spender-but-generous friend brought a delicious $45 gourmet pizza to a potluck while everyone else brought something in the $20ish range. Whenever we go out to eat, this friend lets everyone take a bite of his food in an encouraging way. This friend makes over $200k per year, but barely has any savings. A typical month for him involves $4k alone from going out for food and drinks. Maybe there is a correlation between how generous someone is and how freely they spend.

Through random connections and serendipity, I’ve gotten to know some high net worth individuals with assets ranging from the tens of millions to billions. While I wouldn’t say I’m close to any of them, I’ve spent enough time observing to see that while money is no longer a constraint for them, their lives are far from perfect. One individual doesn’t know how to stop working. Another is grappling with the limits of an aging mind and body. It took firsthand observations for me to truly understand the aphorism “money doesn’t buy happiness”. There’s a tendency to over-index on the types of problems money can solve when we’re in a scarcity mindset.

4. It’s worth spending money to learn to care less about money

I wouldn’t say I have a perfect relationship with money, but it’s certainly improved a lot over the years. Trial-and-error spending across the full spectrum of budget-friendly to luxury helped me develop a “worth it radar”. The combination of experiencing expensive things that I didn’t fully enjoy and discovering cheap (or even free) things that I loved has led to a reduced reliance on money for pleasure.

I’ve had the privilege of going on multiple international business trips that were all expenses paid. For anyone in the elite college kid to big city yuppie pipeline, flying business class, Ubering around everywhere, and eating at the finest establishments on the company’s dime is the dream. But that’s exactly what it is - a fantasy. It’s hard to act like you’re on vacation when your mind isn’t. While I am grateful for those nice experiences, I learned that luxury isn’t actually worth it when the entire purpose of the trip is oriented around work.

Exposure to cheap, but awesome things is crucial for caring less about money. After graduating, I spent a month solo traveling in Indonesia and the entire trip cost me $1,500 including a $4/night hostel that I spent two weeks at. Sometimes it’s the simplest free experiences that help to decouple money and value. Things like getting a full night of rest because of not having to set an alarm. Being able to stay in flow state when reading or writing because of not having to check the calendar for the next meeting. Those who have seen an epic sunset will understand.

It’s worth dabbling in luxury and adventuring in frugality to calibrate your sense of what you value. Michelin star restaurants and fancy hotels are less appealing when my favorite meals have been from street vendors and the best sleep has been inside a tent under a canopy of pure silence and darkness.

5. I actually want money, just not as much as I thought

At this point, it might seem like I want to renounce all my possessions to live in the wild where I can watch the sunset every night, but that’s not true. I fully intend on accumulating financial wealth over the next couple decades, but it’s just not the most important thing. It’d be naive to discount the ability for money to support my ideal lifestyle and unlock hidden doors.

The better you know yourself, the more confident you’ll be that your wants are authentic desires. Having true financial goals conjures a deeper sense of motivation than running blind towards this nebulous abstraction called retirement. I know that the life I want to live revolves around access to my hobbies, healthy practices, and living near people I care about. I’d like to raise my family in Hawaii and ski and surf into my 70s. All that is not going to be cheap. But at the same time, I don’t care that much about cars, clothes, or how large my future house is. By understanding my authentic desires and cutting out the inflationary fluff of modern luxuries, I’m able to accept that I genuinely do want money, but also know what enough is.

The purpose of money

Wealth comes in many forms and money is just one. We shouldn’t ridicule or shame someone for wanting money, but we should also recognize that it doesn’t directly buy other types of wealth like health or freedom or relationships.

“Wealth is not a number. I don’t think it can be characterized very well by a number. It is the set of all transformations that you are capable of bringing about.“ - David Deutsch

From earning minimum wage to making six figures to no income now, I’ve seen how uncorrelated my wellbeing and my net worth are. I’ve noticed that the people with the healthiest relationships with money are the ones who are spending honestly. Once you can go beyond the bare necessities, the delta between our financial decisions and our authentic selves is far more indicative of the quality of how spend our money.

“A healthy man wants a thousand things, a sick man only wants one.” - Confucius