Popular financial planning and philosophy author Morgan Housel has a new book out: The Art of Spending Money (2025). Some of you will be familiar with his blockbuster The Psychology of Money (2020). Housel is an excellent writer and thinker and I often start my Saturday drinking a cup of coffee and reading an essay he’s penned. In the spirit of his writing style, here are my ruminations on three of my takeaways from his latest effort.
“All behavior makes sense with enough information,” is his page 1 kickoff and an interesting place for Housel to start. It’s an acknowledgement right out of the chute that we all bring our experiences to our psychology and we should not be too quick to judge others.
Where we stand, after all, has a lot to do with where we’ve been sitting. Once we’ve walked a mile in another person’s shoes, we have a much better understanding of the context of their journey, to employ just two other cliches that get to this point. And don’t neglect the Biblical advice to remove the log in your own eye before focusing on the speck in someone else’s.
In financial terms, this means that we savers should not judge too quickly those who appear to waste money on frivolities or status items with little functionality. There may be abundant functionality for others. As a parent, however, I still want to try to wring this attitude out of my children. I’m sure you do too.
“All happiness in life is just the gap between expectations and circumstances.”
This too is a great truth, one memorialized countless times by countless people. Housel returns to it multiple times throughout the book and it’s worth keeping in mind.
It can be operationalized in an “attitude of gratitude” and similar concepts, and the key is not to get what you want, but to want what you’ve already got. The grass just might not be greener in the high-rent district. The back of the plane arrives at the airport at the same time as the front. (Although in my defense of purchasing the front, we do get off the plane a lot sooner and there’s plenty of overhead space for carry-on luggage!)
My favorite application of this expectations theory comes from actual mental health luminaries.
“Expect it to be difficult,” exhorts Dr. Kevin Elko, a sports psychologist and a highly entertaining spinner of cornpone yarns from the motivational stages he inhabits.
This is the view of not only the man from the West Virginia, but also of the august New Englander, M. Scott Peck, who launches his classic The Road Less Traveled (1978) with these words that I once read to myself every morning:
Life is difficult.
This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult—once we truly understand and accept it—then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.
Back to Housel: Risk and regret: Good advice is never as simple as saying “live for today,” or “save for the future.” The only good advice is “minimize future regret.”
“Live in opportunity,” I like to say, “not regret.” Here’s another I picked up along my journey: “focus on the future, not the past: that’s where you are going to spend the rest of your life.”
To my way to thinking, there are two types of regret, and they are at odds with each other. Here’s an exercise I tormented audiences with from time to time. “Close your eyes and I’m going to ask to recall two different life events. First, I want you to think of something you did and regretted. You may have thought you’d ruined your life. Second, I want to you think of something you didn’t do, and later regretted, perhaps a career move you didn’t make, a person you never asked out on a date.”
You see where this is going. The first, focuses on the stupid things we all do which, if they don’t kill us or earn us long stints in prison, usually transform with time into a funny story. In other words, the regret dissipates over time, like a spilled beer in a swimming pool. The second regret—pining for the shots we didn’t take—tend to grow over time. Which would you rather minimize?
I gave this spiel to my father, proudly concluding it’s wise to do stupid stuff. Be careful, he replied, and of course he’s correct. Still, I believe the point holds.
Housel frames this point in multiple contexts, including the financial tension between the fact that the power of compound interest goes on forever, and “the fact that you are one day closer to death than you were yesterday.” In other words, our money may compound forever, but we won’t always be able to enjoy it.
This is well captured in the lyrics of Pink Floyd, the sun is the same in a relative way but you’re older, shorter of breath, and one day closer to death. This not-so-happy note brings me to the final Housel point.
There is no such thing as unspent money. At first, I thought this insight was kissing cousin to one of the favorite things I tell clients: either you fly first class or your kids will.
It’s not. It’s a refutation of it. Housel’s point is that for aggressive accumulators, such as him, a sizable investment account is a consumption item that buys potential future freedom and peace of mind.
I’ll grant him this, and as an accumulator myself, I pick up what he’s putting down. But this can’t be the end of the story and we’re back to my quip: if I don’t fly first class I’m pretty sure my son or my grandkids will.
It’s a bit of endless regression. Turtles all the way down.
This brings me to another phrase I often employ:
All your money will be spent. It’ll get spent by you, someone to whom you give it directly or indirectly, or some level of government.
We all must ponder our desired order and proportion. I prefer it spent in the order written.
The attitudes, habits and disciplines that create middle-class millionaires make it hard for us to enjoy our millions. This is mine, not Housel’s. It’s a version of Groucho Marx’s insight that he didn’t want to be a member of any club that would have him.
So, we’re back to the question, “for what end is all this struggle?” Let me know if you get this one figured out. I’ll help you get it written into a book and you’ll retire on the royalties and lecture fees. You may meet Dr. Elko in the green room backstage.
Sometimes it just may not be about money. The money, rather, is just a byproduct of another worthwhile process, as gasoline was to the refinement of kerosene. You still may want to find a use for it, such as a 1965 or later vintage Mustang.
Here’s an effective way to find out if you’re only for the money or perhaps a bit of something else. Ask yourself this multipart question, which is a version of the life planning guru George Kinder’s life planning questions: if you acquired all the money that you need for the rest of your and your loved ones’ lives, what would you do tomorrow? What would you be doing in six months, a year, and five years?
I pondered this more than twenty years ago when, early in my career, I was grinding out long days, weeks, months, and years to build my business, the family bills were substantial, and money was scarce. (That’s when I was reading Peck’s paragraphs each morning.) My answer then was that I’d be doing exactly what I was actually doing, bringing the level of financial care to America’s middle class that the elite enjoyed through carefully tailored financial plans implemented with top-tier investments and protected with insurance.
At that time, it was just me and my Toyota Camry, and I was writing on the side to pay the light bill. My answer was I’d do the exact same thing with the same people with three big changes: I’d quit writing for others, I’d use some of the money to hire staff, and I’d reduce my hours so I could be more present at home.
At the time, this answer is how I knew I was spending my time well, climbing a ladder of success that was leaning against the proper wall. I didn’t win the lottery or inherit a life-changing sum of money. I did, however, build a fantastic business. Twenty-five years later, my answer to this question is my reality.
For this, I am grateful. My hope for you is that you, upon reflection, can say the same for yourself.