The art of spending money

and the tragedy of not doing so.

Masashi, 76, and Hisako, 74, are married.

They retired with $350,000.

They also have a pension of over $2000 per month.

They were frugal and they saved for retirement.

And they regret it.

Morgan Housel writes about why they aren’t the only ones in The Art of Spending Money.

Learning to save is only half of the equation

Much ink has been spilled over ways to save and squirrel away cash.

Including this blog’s author.

And saving is important!

Without it, you will not have any wealth.

Saving is a necessary pre-condition for making money.

And that’s why the other half of the equation is neglected.

After you save, you have to spend

Retirement is about spending.

Most guides on retirement answer the question of how much to save.

Equally important is the question of how to spend what you have saved.

And it is here that Housel offers his sage advice.

Choose the right spending yardstick

Don’t focus on the dollars.

Focus on what the dollars get you.

I have spent a lot of money going overseas to places like Korea and Japan.

Hundreds of dollars a day to experience a holiday.

A steep cost.

I could have bought a new computer or phone with that kind of money.

But these holidays form the foundation of my family’s shared experiences.

Something that cannot be bought with money alone.

Are you buying status or meaning?

If nobody could see the outcome of your purchase, would you go ahead with it?

If the answer is no, then you are buying status.

If you answer yes, you’re spending on something with meaning.

Do you know why some people take photos of their plane tickets?

It could be because they’re excited to travel.

Or it could be because they want to show off that they’re travelling in business class.

One of them is motivated by meaning.

They would still travel if nobody was watching.

But would the other still go by business class if they couldn’t broadcast that fact on social media?

I’m not so sure about that.

The problem with status spending is that it’s a treadmill of depreciation.

To keep up status, you have to keep spending.

Instead, he advises us to spend extravagantly on things that have meaning.

They’ll keep paying dividends in the years to come.

Buy flexibility

I’ve written before that having choices matters.

The ability to say no is one of the most powerful choices we can make.

When we say no to complexity, we gain simplicity and discipline.

When we say no to status spending, we are saying yes to the things that matter.

And when we say no to the things we dislike, we regain control over our time.

The reason why Masashi and Hisako are unhappy has nothing to do with how they saved.

It has to do with what they chose not to spend on.

They did not spend on their interests, creating memories, and spending time with their families.

As a result, they did not enjoy the fruits of their labour.

To make our sacrifices worthwhile, we have to learn what we should make sacrifices for.

That’s what makes life worth living.