How to Master 'The Art of Spending Money'

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Morgan Housel is a partner at Collaborative Fund and author of The Art of Spending Money: Simple Choices for a Richer Life. Here, he tells Kiplinger Personal Finance Magazine that while there's no magic formula for spending wisely, "minimizing regret" can help you make smarter choices.

The title of your new book is The Art of Spending Money. How is spending money an art?
MH: It’s an art because it’s not a science. I wish I could say, here’s how everybody should spend, but I don’t think a formula for how everyone should spend exists. The spending that works for me and makes me happy might be wrong for you, and vice versa.

Some people might find that disappointing, that I’m basically giving an overview of the psychology of spending money. But you have to figure it out for yourself, because I don’t know you or your life experiences. I’m still trying to figure all this out for myself, too.

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That insight, that our different life experiences affect what we think is worth spending money on, is central to the book. How can understanding that help people make better spending decisions?
MH: I’ve had a good life, but like everybody else, I’ve had some challenging moments and I have some psychological scars. If you put me on the therapist’s couch, you could probably pull a thread that ties back to my aspirations today, my desire to earn more money and have some sort of material trophy to signify what I’ve done, to my feelings of inadequacy in my high school years.

We all have some version of that. Given our different pasts, it is almost immature to assume other people should like what you like and avoid what you don’t like. Once you see that, it forces you to say, look, I should not copy what Jim and Sue are doing with their money because maybe that’s not right for me. I have to take an individualist approach.

You also say that you have to already be happy for more money to make you happier. What do you mean?
MH: Research shows that if you are already content, you have friends and are healthy, having more money is like rocket fuel, because you can use that money to spend more time with those friends and do the projects you want to pursue.

But if you’re not — if you’re unhealthy, you’re in a bad marriage or you don’t like your job — earning more money is probably not going to do much for you.

You quote a Dutch philosopher who said, “The appetite for applause counts amongst the lowest of human character traits.” How does this shape our spending?
MH: It’s important to realize that nobody is thinking about you as much as you are. Nobody is paying attention to your cars or your clothes or your jewelry or your house as much as you are.

Even if other people are paying attention, they’re imagining themselves having the jewelry or clothes; they’re not giving any credit to you or admiring you. So the appetite for applause is just naïve. Everyone else is busy worrying about themselves.

Your advice in the book is to minimize future regret. How can people apply that to the way they spend money?
MH: Many years ago, a gerontologist named Karl Pillemer interviewed 1,200 Americans, most of them 80 to 100 years old. Not a single one, looking back at their life, said, I wish I had made more money.

But every single one said, I wish I spent more time with my family, I wish I was nicer to my friends, I wish I took care of my health more. When I try to figure out my work-life balance, that’s something I try to keep in mind.

Your last book, The Psychology of Money, was very successful. Have you spent any of the money you earned from it in ways that have made you happier?
MH: Our spending has gone up quite a bit, in ways I don’t regret. But if I’m honest, it doesn’t make me any happier. It’s not like because we live in a different house now, I wake up smiling.

My daughter and wife don’t love me any more or less. I’m in the same relative health I was five years ago. So the things that actually move the needle on my happiness haven’t changed.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.