WEBVTT - At the Money: Smart Spending vs. Not Spending

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<v Speaker 1>Some people are constantly exhorting us not to buy this

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<v Speaker 1>or that thing that might set you back a couple

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<v Speaker 1>of bucks. We're warned again spending on things these people

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<v Speaker 1>deem extravagant. Don't buy a sailboat, never buy a new car,

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<v Speaker 1>never ever buy a sports car. The spending s goals

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<v Speaker 1>even tell us don't spend five dollars on a latte.

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<v Speaker 1>Susie Orman insists it'll ruin your retirement. I've looked at

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<v Speaker 1>the numbers on all of these criticisms, and to be blunt,

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<v Speaker 1>I find them wanting and notwithstanding of close scrutiny. I'm

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<v Speaker 1>Barry Ridolts, and on today's edition of At the Money,

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<v Speaker 1>we're going to discuss how to buy what you love

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<v Speaker 1>and still live within your budget. To help us unpack

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<v Speaker 1>all of this and what it means for your bank account,

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<v Speaker 1>let's bring in Carl Richards. He is the author of

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<v Speaker 1>the Behavior Gap Simple Ways to Stop Doing Dumb Things

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<v Speaker 1>with Money. His recent essay, The financial Benefits of Buying

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<v Speaker 1>what you Love, is exactly on topic for us today. So, Carl,

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<v Speaker 1>you're known as a pretty modest guy. You don't flash

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<v Speaker 1>around fancy watches or drive expensive cars. Generally you're not

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<v Speaker 1>a self indulgent guy. But you went out and purchased

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<v Speaker 1>a five thousand dollars Moots trailbike, and as you wrote,

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<v Speaker 1>you said it was one of the best financial decisions

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<v Speaker 1>you've ever made. Explain, Yeah, for sure.

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<v Speaker 2>And we can also get into the fact that I

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<v Speaker 2>do own a big truck, which we know people say

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<v Speaker 2>is really bad idea. So I'd love you.

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<v Speaker 1>But you live offen the you live out in the wilderness.

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<v Speaker 1>For your truck actually touches dirt. It's the people who

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<v Speaker 1>live in suburbia and the big trucks never leave the pavement.

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<v Speaker 1>Why are you spending all this money on off road

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<v Speaker 1>capabilities that you're not using.

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<v Speaker 2>I'm with you there. We use it routinely and regularly,

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<v Speaker 2>and it's one of the greatest sources of happiness in

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<v Speaker 2>my family because of the places we go. So the

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<v Speaker 2>mountain bike. And by the way, that mountain bike is

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<v Speaker 2>where you know, it would cost a lot more today

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<v Speaker 2>if somebody bought the same bike, so the mountain bike. Listen,

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<v Speaker 2>this idea. It's so crazy to me, this idea that

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<v Speaker 2>we might know what brings other people happiness and joy,

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<v Speaker 2>and that it's our job to tell them that it's

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<v Speaker 2>ridiculous to buy their morning latte or the truck or

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<v Speaker 2>the bike is just I get equally as upset about

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<v Speaker 2>it as you do. So the bike, I just had

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<v Speaker 2>a simple calculation, you know. It was it was cost

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<v Speaker 2>per unit of fun. Now it's my trail running shoes

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<v Speaker 2>that I use to help me gain elevation in the

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<v Speaker 2>mountains almost every day. Those I use. Are there one

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<v Speaker 2>hundred and fifty dollars running shoe, right, And if I

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<v Speaker 2>take the amount of fun I get from those, they're

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<v Speaker 2>one of the best purchases that I ever bought versus

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<v Speaker 2>maybe for me like a waterski boat, right, a water

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<v Speaker 2>ski boat that I used three or four times a year.

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<v Speaker 2>I mean I grew up water skiing on the lakes

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<v Speaker 2>here in Utah. I think it's one of the funnest

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<v Speaker 2>things I could ever do. But the cost is so

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<v Speaker 2>much higher. When I divide that per unit of fun,

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<v Speaker 2>I don't get the same outcome. So my thought is, like, look,

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<v Speaker 2>the greatest source of happiness that we have, and the

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<v Speaker 2>research is pretty clear about this, is memorable experiences with

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<v Speaker 2>the people that we love. Right, going on a bike

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<v Speaker 2>ride with my kids or my wife is one of

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<v Speaker 2>the most important things I could do, So I'm going

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<v Speaker 2>to spend the money.

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<v Speaker 1>And you're pointing to something that there's a lot of

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<v Speaker 1>data from the world of psychology and behavioral finance that

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<v Speaker 1>experiences are the things we remember and are worth spending

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<v Speaker 1>money on as opposed to just accumulating bubbles for their

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<v Speaker 1>own sake, and what seemed people seem to forget about

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<v Speaker 1>are the purchases that allow us to share time and

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<v Speaker 1>experience with friends and family totally.

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<v Speaker 2>And it's important to note those do not have to

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<v Speaker 2>be expensive. My trail running shoes are not that expensive.

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<v Speaker 2>And in fact, let me tell you this super interesting story.

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<v Speaker 2>I grew up. I never traveled anywhere. We didn't. We

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<v Speaker 2>didn't have any money growing up. I didn't I don't

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<v Speaker 2>even think I had a passport until I was married

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<v Speaker 2>and we had this seat. We had this year where

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<v Speaker 2>because of some speaking engagements in the book launch, we

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<v Speaker 2>traveled a lot and I took the family to a

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<v Speaker 2>lot of places. I think we went to three or

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<v Speaker 2>four different countries, and my son, who was like seven

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<v Speaker 2>or eight at the time, at the end of the summer,

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<v Speaker 2>I was like, hey, Sam, what was your favorite memory

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<v Speaker 2>from the summer, and we had been to Amsterdam, and

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<v Speaker 2>we'd been to Paris, and we'd been all these cool places.

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<v Speaker 2>And he thinks for a minute, and he says, do

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<v Speaker 2>you remember that time? Do you remember that time we

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<v Speaker 2>just threw rocks for an hour in the pond out

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<v Speaker 2>behind the house. And I was like, bro, He's like, yeah, no,

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<v Speaker 2>the time. So it doesn't have to be expensive, and

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<v Speaker 2>it can be. And if you've got the money and

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<v Speaker 2>you love an amazing Italian sports car, who am I

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<v Speaker 2>to tell you that that's not right now. The problem,

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<v Speaker 2>I think is when we buy things we think will

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<v Speaker 2>make us happy because everybody else tells us they'll make

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<v Speaker 2>us happy, and then we discover that we don't really

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<v Speaker 2>like them. Well, we can talk about how to run

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<v Speaker 2>experiments around that, but I think this whole thing starts

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<v Speaker 2>with getting clear about what actually brings you happiness. Well,

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<v Speaker 2>once you experiment and find a thing, spend the money.

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<v Speaker 2>For heaven's sakes, what's it for?

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<v Speaker 1>Huh. So that's one of the things I think some

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<v Speaker 1>of the Puritans get wrong. They focus on the cost,

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<v Speaker 1>not the budget. If you can afford us boat and

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<v Speaker 1>you love sailing, well, go buy a sailboat. It seems

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<v Speaker 1>that all this finger wagging about spending any money of

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<v Speaker 1>any sort is really misguided. And by the way, the

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<v Speaker 1>first boat I bought was a short sale during the

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<v Speaker 1>financial crisis that I think I paid twenty grand floor

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<v Speaker 1>split with my brother and could probably sell it today

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<v Speaker 1>fifteen years later for exactly what I paid for. So

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<v Speaker 1>it's not just a function of the dollar amount, it's

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<v Speaker 1>can you afford that that item and what sort of

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<v Speaker 1>pleasure is it going to bring you and your family?

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<v Speaker 1>Are we focusing on the wrong things. If you can

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<v Speaker 1>afford a nice bike and you're going to use it,

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<v Speaker 1>why not make that purchase.

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<v Speaker 2>Yeah, it's so interesting. I think there's a piece of this,

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<v Speaker 2>and I've been trying to unpack this for a long time.

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<v Speaker 2>I just had a conversation on my podcast fifty Fires

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<v Speaker 2>about this exact thing, Like, I think there's a a

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<v Speaker 2>piece of this you pointed to Puritan. I think there's

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<v Speaker 2>a piece of this that's related to this endless praise

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<v Speaker 2>and nobility of delayed related to this endless praise and

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<v Speaker 2>nobility around delayed gratification, And it could even be all

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<v Speaker 2>the way back to like when I get to Heaven,

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<v Speaker 2>when I get to heaven, I will be happy. And

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<v Speaker 2>I think we just need to start realizing, like, look,

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<v Speaker 2>what's wrong with being happy now? And how can I

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<v Speaker 2>view something as an investment instead of an expense? And

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<v Speaker 2>the investment has a return, the return of spending an

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<v Speaker 2>hour with my son throwing rocks in the lake, right,

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<v Speaker 2>how do you calculate the value of that return? The

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<v Speaker 2>return of the fifty bike rides I went on with

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<v Speaker 2>my daughter out my back door on that bike. How

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<v Speaker 2>do I even put a number to that return? And

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<v Speaker 2>what I think we miss is like who cares? And

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<v Speaker 2>what's so funny, Barry is we all know this, Like

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<v Speaker 2>it's cliche at this point to say, like on your deathbed,

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<v Speaker 2>you're not going to be thinking about your bank account, right,

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<v Speaker 2>You're going to be thinking about the time and the

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<v Speaker 2>experiences that you had with the people you love. Right,

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<v Speaker 2>So we know it. I think we just we just

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<v Speaker 2>have a hard time doing it. And then the last thing,

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<v Speaker 2>it might be related to some of the fear, Like

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<v Speaker 2>our whole industry largely is built on fear of the future.

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<v Speaker 2>Are you saving enough? Are you gonna have enough in retirement?

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<v Speaker 2>We've built into people this idea that if you're not

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<v Speaker 2>doing everything you can, you are going to be destitute

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<v Speaker 2>alone and living under a bridge, right, And so to

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<v Speaker 2>unpack all of that takes a lot of work.

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<v Speaker 1>So let's talk about quality. You made reference to the

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<v Speaker 1>advantage of buying something that's high quality, very well made once,

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<v Speaker 1>rather than repeatedly replacing a bunch of lesser quality items

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<v Speaker 1>that don't last, don't go the distance.

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<v Speaker 2>Yeah, I think.

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<v Speaker 1>Let us.

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<v Speaker 2>I think there was an old quote I can't remember itself,

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<v Speaker 2>just paraphrase. It was something like we can't I remember

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<v Speaker 2>it was something like we can't afford to buy cheap things.

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<v Speaker 1>That makes sense. Let's talk cars. I saw this headline.

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<v Speaker 1>It cracked me up. Buying a new car is like

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<v Speaker 1>taking forty thousand dollars and setting it on fire. If

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<v Speaker 1>you can afford a new car and you want to

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<v Speaker 1>go pick the right car and the right callar that

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<v Speaker 1>you want, what's the problem buying a new car?

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<v Speaker 2>It's so interesting to me, Like like that. I have

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<v Speaker 2>a friend who if it rains outside and you're in

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<v Speaker 2>his car, your feet get wet, like like the floorboards arrested. Right.

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<v Speaker 1>I had one of those in college.

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<v Speaker 2>Yeah, yeah, I mean he loves it and cars are

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<v Speaker 2>not a thing cares about. In fact, I had this

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<v Speaker 2>conversation in Morgan Housel. Morgan says he like always he

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<v Speaker 2>always think it was on the podcast. He always feels

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<v Speaker 2>like he should be a car guy. He was a

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<v Speaker 2>valet in la like he always so. Every couple of

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<v Speaker 2>years he runs an experiment which I just thought was

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<v Speaker 2>beautiful when he's on a business trip and he's renting

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<v Speaker 2>a car. Every couple of years, he's like, huh, you

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<v Speaker 2>know what, it's an extra two hundred bucks for the day,

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<v Speaker 2>give me the Porsche. And he says it doesn't take

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<v Speaker 2>him even getting off the lot before he's like, you

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<v Speaker 2>know what, I admire this thing. It's beautiful, it's amazing,

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<v Speaker 2>but you know what, it just doesn't give me what

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<v Speaker 2>I need now. He said, if it did, I would

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<v Speaker 2>buy it, but it doesn't. And so I think some

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<v Speaker 2>people it's just not a thing. That's fine. And I

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<v Speaker 2>think what this all comes down to is getting clear

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<v Speaker 2>about what's true for you, not necessarily what the Instagram

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<v Speaker 2>people say or what the scolds say. Either way, run

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<v Speaker 2>some experiments, find out what brings you value. You may love.

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<v Speaker 2>I mean, I really want this truck. I want an

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<v Speaker 2>old truck to drive around, Well, I found out the

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<v Speaker 2>best way to have an old truck to drive around

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<v Speaker 2>was buy a new one and keep it for thirty years.

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<v Speaker 1>Beat the hell out of it. That's exactly right. So

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<v Speaker 1>to wrap up, when we look at at the world

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<v Speaker 1>of consumer purchases, there are a few lessons to be learned. Obviously,

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<v Speaker 1>stay within your budget. If you can't afford something, well,

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<v Speaker 1>then don't buy it. But if you can't afford something,

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<v Speaker 1>buy quality. Buy the things that will give you experiences

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<v Speaker 1>with your friends and family and loved ones. Buy what

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<v Speaker 1>you love. You won't regret it. I'm Barry Retults. You're

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<v Speaker 1>listening to Bloomberg's at the Money Norway h