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The art and science of spending money

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Re: The art and science of spending money

#21

Post by IanCal »

trabant00 wrote: post #4

I have two rules to guide me that can be summed up to maximizing the joy of spending: It's not what you have, it's what you do with what you have that matters. Going with a car example, spending significant income for a nice car that you use for normal transportation like commuting and shopping will bring little joy. On the other hand if you are into motor sports, regularly tour on or off-road, like to restore classi…

> So I transform that money into something I already know how much it costs and how much I enjoy it. Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.

This is a really important idea to me, it's a way of optimising your spending without doing big central planning. If I would get more from doing X rather than Y, why would I do Y at all? You could then repeat that with 10 trips abroad vs some other thing.

You can also compare a relative thing as well. You may need a new car, but can choose between different options. If one is £5000 cheaper than the other - what's the most fun you can possibly have with £5000? Would you rather whatever that list is for you or the more expensive car?

Would you rather have a larger rented apartment or £Z to spend at restaurants every month? Or £Z on track days, or whisky, or having an extra few days off a month?

All of these things can be answered any way and it's totally fine - the key is to identify what provides the most value to you without getting stuck in trying to optimise your entire life as that's (to me) paralysing.

Re: The art and science of spending money

#22

Post by darkwater »

harvey9 wrote: post #20
darkwater wrote: post #11

Loved this article, very spot on. > Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase. This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on ho…

Depends. Do you think they were happy with their lifestyle? I have a friend who is happily collecting his pension, has plenty of cash in the bank, but still works because he chooses to. He's a bit less frugal than your uncles but still lives well below his means.

Happiness for sure is a personal concept but I think they were in general on the "we came into these lives to suffer" boat. So, I think they were not "happy" for a healthy definition of happy, but they probably not even interested in being happy.

Re: The art and science of spending money

#23

Post by elefanten »

darkwater wrote: post #11

Loved this article, very spot on. > Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase. This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on ho…

Depends entirely on what you value. Some speculative propositions:

-Some find less value in material things and worldly experiences as they age, so the expected happiness return on splurging can decline.

-Some find living by a principle of some kind (eg- humbleness and frugality) to be very fulfilling in itself.

-Some value being relatively protected from risk and misfortune, and ultimately there’s no upper limit on risk insulation.

-Some highly value being able to leave something behind to the people, organizations or causes that they love.

-Finally, these motivations can change over time and act in concert to shape the story in ways that might not be apparent when you just examine the visible surface facts.

Re: The art and science of spending money

#24

Post by tehCorner »

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.

Coming from a poor family and knowing the hard way the issues of not having money I've been obsessed with saving money since I got my first paycheck 8 years ago and I always thought "at the point I would earn current salary + x I will start enjoying life more and stop worrying about money" but that never happened.

8 years have passed and I still have the same thoughts despite earning 15 times more and having no financial problems, my mind just makes it very difficult whenever I have to spend money on something.

Re: The art and science of spending money

#25

Post by have_faith »

iammjm wrote: post #17

Two money aspects that I find useful, which weren't mentioned in the article: Price per use: if I buy X, how much/often will I use it vs. it's price Time sacrifice: considering my current hourly wage, how many hours of my life do I need to spend in exchange for this item?

I think these concepts can be very dangerous if applied too liberally. In both examples you need to have a rough understanding of how happy the thing might make you feel, or how much "value" it's going to provide. I can buy A for £50 or B for £100. B is in some measurable way "better" than A, but I can't quantify how much. B being better might make me use it more? it might also be used equally little and be a waste of money.

Growing up poor and becoming comfortable financially as I grow up has only made these sorts of assessments much harder I've found.

Re: The art and science of spending money

#26

Post by have_faith »

looseyesterday wrote: post #8
moonchrome wrote: post #6

Earlier quoted context omitted.

And how are your kids doing? Who's living in a 2 bedroom house solo - that sounds like a lot of maintenance for a lifestyle where you don't need to be spending your time at home.

I grew up an equally-sized 2 bedroom in a city centre and its totally fine. Neighbours have kids in a similarly sized house and are not planning on moving. They are wealthy asians with apartments being standard in their part of the world. The American obsession with terraced housing is bad for the environment and highly inefficient.

> terraced

Do you mean detatched housing? (which takes up a lot more space than terraced). I live in England though where small compact terraced housing (relative to the US) is very common in the housing stock.

Re: The art and science of spending money

#27

Post by 4mitkumar »

monero-xmr wrote: post #2

Growing up poor and then becoming self-made wealthy - nothing like it. My life is so sweet because I am one of those fabled bootstraps people who walked 15 miles to school both ways uphill (paraphrasing). And what is my favorite thing? I can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want. Unfathomable

> ... can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want.

This. Not quite there yet, but still have a decent selection of restaurants where I do not have to look at the right-margin. It is truly a sense of freedom one can only experience in hindsight (not consciously while looking at the menu).

Good for OP.

Re: The art and science of spending money

#28

Post by sokoloff »

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase

I think a lot of financial planners start from a base assumption that their clients will be happiest if they spend their accumulated wealth. That’s not true in my case (at least as far as I can self-analyze).

Whatever we don’t spend isn’t lost potential for us, but rather is future potential for our kids. Taking only the financial sorts of potential, some of that is embodied potential (money spent on education and health); others are concrete figures on finance statements.

We could spend more and seek to “have the check to the undertaker bounce”, but it’s a lot less stressful to my mind to have a low 7-figure balance be the much more likely ending net-worth, giving us a cushion for our later years and knowing that’s enough to be helpful but likely not enough to be detrimental to our kids.

Re: The art and science of spending money

#29

Post by kettleballroll »

trabant00 wrote: post #4

I have two rules to guide me that can be summed up to maximizing the joy of spending: It's not what you have, it's what you do with what you have that matters. Going with a car example, spending significant income for a nice car that you use for normal transportation like commuting and shopping will bring little joy. On the other hand if you are into motor sports, regularly tour on or off-road, like to restore classi…

Just being pedantic here, but: if we take your approach to the extreme, we would only ever pick the one thing that maximizes joy. Eg say one week trips above are the coolest thing you can think of. then you'd compare any potential purchase against it, and it would fall short. So you'd end upmnever buying anything (except tickets for one week trips). Don't get me wrong, your strategy sounds sound, I'm just saying that it's too greedy of an algorithm to apply it thoroughly. A slightly improved strategy would be to instead think of marginal prices: how much would I be willing to pay for X, instead of another piece of Y. Ie, if you already had 10 one week trips this year, you'd not be willing to spend as much for #11 than you'd be willing to spend to go from from 0 to 1 trips or 1 to 2

Re: The art and science of spending money

#30

Post by CraigJPerry »

tehCorner wrote: post #24

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase. Coming from a poor family and knowing the hard way the issues of not having money I've been obsessed with saving money since I got my first paycheck 8 years ago and I always thought "at the point I would earn current salary + x I will start enjoying life more and stop worrying about money" but that never happened. 8 year…

It’s possible it’s not a problem, I’d be inclined to give yourself a break. A lot of the “essentials” we’re supposed to splurge on (big house, cars, expensive food, etc) are often overrated when you look at it from a “does this make my life better” lens.

Investing in yourself - be that skills or life experiences - is worthwhile but you can do even that with a frugal slant.

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