Book Summary: “The Art of Spending Money”

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Book: The Art of Spending Money by Morgan Housel
Reviewer: Bobby Powers

My 3 Biggest Takeaways

1. View money in terms of utility, not status.

"There are 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. Many people aspire for the former but spend their life chasing the latter."
"...Spending money to show people how much money you have is a fast way to go broke and an expensive way to gain respect. Disappointment is often the outcome."

2. There is no universal "right way" to spend money.

"All behavior makes sense with enough information." -Unknown
"A lot of spending makes no sense until you peel back the onion layers of someone's personality, identifying the specific thing they're trying to accomplish, or the hole they're trying to fill."

3. Flexibility is one of the most important things you can buy.

"The value of anything is its ability to help you live the life you want."
"If I move $500 into my savings account, I view that as having purchased $500 of independence. It has almost no different meaning to me than if I had purchased a $500 television—the money is 'spent' in either scenario, just spent on different things that offer different value. And I spend frivolously on independence."

"Money is less about numbers and more about stories—stories we tell ourselves about what matters, what makes us happy, and how we measure success." -Morgan Housel

Selected Quotes & Ideas from the Book

"In school, finance is taught as a science, with clean formulas and logical conclusions. But in the real world, money is an art."
"A big, nice house might make you happier, but mostly because it makes it easier to have friends and family over, and the friends and family are actually what are making you happy."
"They wanted to have more money so they could become happier. But money could buy them everything except the ability to not be obsessed with money, which led to constant anxiety, which led to unhappiness."
"People are not rational. They are rationalizing. Once you understand this simple fact, all the oddest human behavior will suddenly make way more sense." -Billy Markus
"Everyone driving slower than you is an idiot, and everyone driving faster than you is a maniac!" -George Carlin
"You think you want nice stuff, but what you really want is respect, admiration, and attention."
Reverse Obituary: "Write down what you want your obituary to say, then figure out how to live up to it."
"The appetite for applause counts amongst the lowest of human character traits." -Jan-Willem van der Rijt
"If your expectations grow faster than your income, you will never be happy with your money."
"It's hard to get really depressed until your dreams come true. Once your dreams come true and you realized you feel the same way you did before, then you get a feeling of hopelessness." -Rick Rubin
"I think we mistakenly think that some kind of outward success is going to change something in us. And it does not. It may make life more comfortable. But it doesn't change who we are..." -Rick Rubin
"Nothing in life is as important as you think it is when you are thinking about it." -Daniel Kahneman
"Never focus on what money can do for you without a clear understanding of the cost of acquiring more of it."
"Everyone is jealous of what you've got, no one is jealous of how you got it." -Jimmy Carr
"The most valuable financial asset is not needing to impress anyone. The ability to not need to prove yourself to strangers is priceless."
"The big question about how people behave is whether they've got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard." -Warren Buffett
"My life was never destined to be quite happy. Inherited wealth is a real handicap to happiness. It is as a death to ambition as cocaine to morality." -William Vanderbilt
Comparison is the thief of joy
- "Envy is inversely correlated with self-examination. The less you know yourself, the more you look to others to get an idea of your worth. But the more you delve into who you are, the less you seek from others, and the dissolution of envy begins." -Lawrence Yeo
- "A study by three researchers once showed that if your neighbor wins the lottery, you are more likely to borrow money and go bankrupt in the future."
"A great irony in finance is that the fastest way to get rich is often to go slow...Like so many things in life, speed gets all the attention but slow has all the power."
"Quick wealth is fragile wealth."
"Money is like gasoline during a road trip. You don't want to run out of gas on your trip, but you're not doing a tour of gas stations." -Tim O'Reilly
"I think what many people really want from money is the ability to stop thinking about money. To save enough money that they can stop thinking about it and focus on other stuff."
"We are built with an almost infinite capacity to believe things because the beliefs are advantageous for us to hold, rather than because they are even remotely related to the truth." -Dee Hock
"Author Ramit Sethi has advice that I love: You should spend extravagantly on the things you love as long as you mercilessly cut the things you don't. His specific example: He loves clothes, but isn't a car guy. So he dresses like a rich man and drives like money's tight."
"The opposite of a good idea can also be a good idea." -Rory Sutherland
"Tend to the small things. More people are defeated by blisters than by mountains." -Kevin Kelly
"So much of success in life is finding the delicate balance of when optimism turns into greed and pessimism turns into fear."