Money is only a tool to make our lives better.
But there are different ways to use that tool: some better, some worse. I thought it’d be fun to rank the worst to the best ways1 of spending money (on non-essential things).
I’m excluding financial things like investing, emergency funds, and paying off debt. Yes, great ways to use money. But not really spending.
I’m also viewing things from a long-term perspective: how to spend money to maximize long-term satisfaction? Of course, if we ask “how to maximize fun today?” it’d be different.
To be clear, I’ve never been a fan of telling people how to spend their money. In his new book, Morgan Housel says that spending money well is art, not science. Everyone is different — different ages, goals, circumstances, and loves in life.
The following is merely what I’ve learned and what is true for me. Sharing here in the hope you might find something useful.
10. Buying Harmful, Addictive Experiences
Friends actor Matthew Perry was worth $120 million when he died.
He’d struggled with drug and alcohol addiction for most of his life. Been in and out of rehab 15 times. And then came that fateful day in October 2023 when he overdosed.
All the money in the world can’t save you, if you lose control to your vices — whether it’s alcohol, drugs, prostitutes or gambling.
Keyword: lose control. I like my fair share of poker and crypto memecoins. But there’s a line to draw between “sinning a little” and “actively harming yourself.” If you can’t figure out where that line is — and many people can’t — spend your money elsewhere.
9. Buying Anything Using High-Interest Loans
I like a little debt. The low-interest kind.
Managed well, it accelerates and improves your standard of living. Best example: would you wait till you’re 60 so you can afford to buy your house in cash, or take a home loan when you’re 30?
On the other hand, I can’t think of any non-essential spending that justifies using high-interest loans (e.g. personal loans, credit card debt.) Yes, this is privilege speaking. But also, if you’re reading this, you’re likely at least working class. You have options.
Manage your desires, your lust for things you can’t afford. So you don’t end up under a mountain of debt.
“Not having FOMO is the single most important financial skill.”
– Morgan Housel –
Besides, even if you can’t help it, 0% installment plans2 are super common today. If you “have to” buy the latest iPhone with debt, at least keep it interest free.
8. Buying Stuff To Impress People You Don’t Love
A saying which has been true for a hundred years:
“We buy things we don’t need with money we don’t have to impress people we don’t like.”
On the other hand, Warren Buffett defines success as “how many of the people you want to have love you, actually do love you.”
When viewed through the lens of how much time you actually have with people, you realize the admiration of strangers is somewhat worthless. Acquaintances matter a bit more, friends even more, and loved ones most of all.
At the end, it’s just a small number of people.
This is liberating.
Spend money on stuff you think is cool. Not what you think will make strangers or acquaintances think you’re cool.
What about buying stuff to impress people you like? Better, though be careful you don’t end up trying to “buy love.” And done wrongly, it attracts the wrong kind of people.
You want the people you love to love you. Not your money.
7. Buying Anything Because You’re Supposed To
“Buy a house because renting is throwing money away.”
“Drive this car so people think you’re successful.”
“Get that Masters because everyone your age gets one.”
Growing up, every piece of financial advice I read painted the dream of home ownership. “They don’t make land anymore,” they said. Today, many people are waking up to the reality that renting can also be excellent — depending on lifestyle and circumstances.
Of course there’s some wisdom in “how people normally do it.” But to get excellent at spending money, you’ll have to figure out what things are uniquely meaningful to you. Have the courage to choose your own path (+you’ll even have more money to spend).
If you want to own a house, great. But do it because you want to, not because you’re supposed to.
Long intentional spending. Short conformity spending.
6. Buying Time
When I was a broke student, I would avoid taking the expressway to save a dollar on tolls.
Sure, it added 10 minutes to my commute but I was fine with that. Now that I’m older, I take the same expressway every time. It’s not just paying for a smoother journey. It’s buying time.
Variations to this principle:
- Paying for expertise: Getting your car serviced at the center, instead of DIY
- Paying for convenience: Fast lanes at the airport
- Paying to remove hassle: Hello domestic helpers, I hate housework
I’m mindful the extreme version of this makes you an asshole: “Time is money! How much do I have to pay to make it go away?” And yes, many of these become more feasible the more money you have.
But all things being equal, you can always make more money. Yet, you only have one life.
We start with ~4000 weeks. Someone like me has ~2000 to go (if I’m lucky). Do you really want to spend your weekends on things you don’t enjoy?
5. Spending on Your Passion
Spend your weekends on things you love. Spend your money on things you love.
Even if some personal finance influencer denounces it as “bad.” (Well, technically anything can be “bad” spending if you’re using high-interest debt, or if it leads to arrogance.)
Example: Something I’ve changed my mind on is phones. You know how judgmental personal finance might question getting a premium phone? Well, what’s the #1 item you use every day?
If it brings you joy — even if it’s on an installment plan — why not get a superb phone?
Other commonly discouraged things like premium coffee, clothes and cars can also be great value for money. As long as you’re doing it for yourself, not to impress others.
If you’re not yet rich, the hack to affording your passion is being intentional. Don’t go shallow, don’t try to go premium on everything in your life. Go deep on just one thing you love.
Ramit Sethi said it best:
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”
4. Levelling up Yourself
Entrepreneur Naval Ravikant once said this about spending:
“Even back when I was broke and I had no money, I always had books. I never viewed that as an expense. That’s an investment to me.”
People like Charlie Munger, Nassim Taleb, Elon Musk and your high school teacher have similarly extolled the virtues of reading. Spending money on good books has insane ROI.
Levelling up goes beyond books of course. Spend money on training. Courses. Experiences that open up your mind, challenge your thinking, and make you wiser. Travel.
3. Charity / Giving Money To Help Others
Professors Michael Norton (Harvard) and Elizabeth Dunn (Uni of British Columbia) are arguably the most influential figures today in the study of money and happiness.
In 2013 — using data from 234,917 people across 136 countries — they found that donating money to charity made people happier.
The 136 countries angle is important. Because prior to this, much of the research done on generosity and happiness was from “WEIRD” (Western, Educated, Industrialized, Rich, Democratic) societies. What about less-prosperous countries?
If you’ve ever lived with poorer-but-more-generous people, you know the answer. The research proves it too. Rich or poor, spending money to help others makes people happier. It appears to be true for all cultures across the world. Looks like it’s fundamentally human nature.
The most astounding aspect from the research: Statistically speaking, giving to charity can boost happiness about as much as doubling one’s income.
Money can buy happiness — if you know how to spend it. And especially if you spend it on others.
2. Getting Healthier
Healthy food. Upgrading your bedroom to improve sleep. Fitness trackers, gym memberships or wellness classes — anything that encourages you to move.
Imagine an extraordinary life — filled with people who love you, meaningful work, and a luxurious standard of living. But cut short due to health issues. What a waste right?
You already know this. I already know this. But we often neglect to spend (commonly said as “invest”) on our own health because we take it for granted. And get distracted by other things.
So it’s a worthy reminder:
“A healthy person wants a thousand things; a sick person only wants one.”
1. Enhancing Time With Your Loved Ones
I like this from two angles. The first: using money to create more time with your loved ones. If you live far from your parents, flying to see them more often. Or moving closer.
The other: making whatever time you have together better. For example, getting Sashimi when you meet your friends. Of course you still love each other, luxury food or not. But the occasional indulgence makes your precious time together even better.
Last January, I brought my dad and family to Mumbai to visit his old medical college and friends. It’s a destination that surprised some people: “India for a holiday?” And as you can imagine, traveling as a group brings typical family-travel stress. But the highs were so much higher than the lows. I will always remember it as some of the best money I’ve ever spent.
A truly rich life is filled not only with day-to-day joy, but also with memories that last a lifetime.
– – –
Footnotes:
- From a legal, “normal,” discretionary spending perspective. E.g. buying illegal stuff and using it for evil is worse than all of these. But that’s not legal, normal, discretionary spending.
- Just make sure your repayments are manageable. Personally, I like keeping FUN money below 10% of my monthly income. Otherwise you could fall back into paying high interest — and that’s a trap some never escape from.
- Re: the good ways (#6 to #1) to spend money, you shouldn’t just do #1 on the list. Do all of them.
- You can also “stack” good ways to spend money. For example, maybe your passion is fine timepieces. Stacking for additional happiness: When buying your next watch (#5), involve your partner in the process as a shared experience (#1). Dad Joke: If you buy a watch, you’re technically also buying time (#6).
- Pic from Pexels: Saurabh Parange