It’s Summer and this normally means that people are traveling and spending on activities which are outside the norm. This also means that we are spending more money than we normally would also. For this reason I’d like to explore lifestyle spending this week. While spending does force us to reckon with tradeoffs. I find that it is easy to simply think that spending is a zero-sum game. If we are not careful, our nature can sell us falsehoods in very non-threatening ways. We can be deceived in various micro ways and not fully realize it.

From my vantage point it’s always interesting to gauge and see people’s response when we talk about spending. Some are confident where every dollar and penny is going. Others have a vague idea that providence, the universe or whatever you please, has offered them a great deal because no one is beating on their door demanding payment. Still others have a lifestyle which they cannot comprehend how their investments can support. IE “it was hard work to get here, and it can’t be this simple to replace.”

Below I’m going to give my observations in the form of the feelings and or emotions I see exhibited by people when it comes to their spending. Namely, Contentment, Confusion, Guilt, Envy. So in the next several paragraphs I’ll briefly address them.

Contentment

This person or couple exude contentment because they understand what they want, what is truly important and if necessary are willing to make tradeoffs to their lifestyle, end of life net worth or both to achieve certain experiences or make good on certain priorities or commitments. They typically don’t know where every dollar is but they do have a range for the biggest fixed expenses and monitor the variable expenses periodically. Most importantly, I’d say that the happiest people I know view everything as an investment. And by everything I mean, everything from a tip at a restaurant to a date with their spouse. The other thing I’ve noticed is that they are more intentional with their time than they are with their money to a degree. At least in the level of detail. This in turn gives them the freedom and confidence necessary to spend their money in ways they find meaningful, enjoyable and fruitful. What I’ve observed in these instances is there is always a tension here though. A tension not created by fear, but a tension created by the tradeoffs which come from great opportunities. These types of households attract incredible opportunities which still cause them to have to make choices.

Confusion

This example is a hard one because the confused person or couple has never fully leveled with themselves or each other on how much they spend and ultimately, they know they spend too much but cannot admit it to themselves. This typically has resulted because of a high income or cashflow which has provided a level of affluence which the saved nest egg will have difficulty replicating. This situation can be taken over by one party and remedied via what feels like stark and austere measures but it is best remedied when the household in question aligns on a plan of action and executes. The best place to start with is all those variable expenses which are being treated like “fixed” expenses. Start back at square one. In our household, if we see a certain expense creep to a percentage which alarms us, we will go on a “fast” of that line item. It’s crazy how expensive impulse purchases or subscriptions can become. What is crazy from the “fast” exercise is more of than not, we don’t miss the line item when it’s gone. Sometimes the fear of doing without is greater than the value gained from a transaction and you don’t realize this until it’s gone. These are all things which we know intellectually but I find that practically, in an automated world, it is easy to forget.

Guilt

Believe it or not I think a lot of us feel guilty every time we spend money because we are paranoid about being prepared for the future or are worried about missing out perhaps. We take pride in spending only on the bare necessities and can turn frugality into a vice. Rather than taking comfort in the simplicity of life we turn it into a game where our pride is really driving the bus and guilt is the currency we use to keep us from spending money.

Envy

Charlie Munger once said he didn’t think the market was driven so much by greed as it was driven by envy. If that is true for investing it is probably most certainly true for spending. Think about it. How many retirement or financial plans are driven by a cohort rather than an individual. How many country club dues are paid not because someone likes golf or the food but because…everyone else is doing it. So much of marketing dabbles at the edges of this too. A celebrity endorses / has an item and now heaven forbid my neighbor has it too…therefore I too must have it. It is all so unoriginal. We desire things and experiences that others have far more often than the adventure of investing in our own likes, dislikes and tastes.

Ultimately, what I’m driving at is so little of our spending is influenced by our first principles and rather driven by unhelpful emotions. Furthermore, spending on what we want has never been easier. We practically think about what we want and we have spent the money. My hearts desire is that those in my sphere of influence find contentment and joy from the wealth they’ve accumulated and that it serves their unique purposes not someone else’s. I’ll leave things there for this week. Thank you again for reading and please know that I’m wishing you and your family continued Truth, Beauty and Goodness on the road ahead.

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