Here's the secret to spending money with no regrets

By Michael Sincere

Author Morgan Housel has a strategy for your finances that works - regardless of what the economy does

'Once you realize how absurd it is to spend money to impress strangers, you can redirect it toward independence.'

Morgan Housel is a financial writer and partner at the Collaborative Fund. He focuses on investor behavior and how psychology shapes economic decision-making. In his 2020 book "The Psychology of Money," Housel examined why people make financial choices that often diverge from traditional economic models. His latest work, "The Art of Spending Money: Simple Choices for a Richer Life," explores patterns in human behavior that persist across economic cycles.

In this recent interview, edited for length and clarity, Housel shares his views on saving and investing, the rules people should follow before spending, and the most common spending traps.

MarketWatch: You've written extensively about saving and investing. Why write a book about spending?

Housel: I spent almost my entire career writing about investing and how to grow your money. Then a few years ago, I asked myself, "What's my spending philosophy?" - and I didn't have an answer. I could talk endlessly about saving and compounding, but I had never examined why my wife and I spent the way we did. The more I looked, the more surprising it was. There are tens of thousands of books on investing, but almost none on spending. People assume spending is automatic - swipe the card, and you get happier - but it's so much more complicated than that.

MarketWatch: You say people should "spend money artfully." What does that mean?

Housel: When I say "artfully," I mean that spending isn't a science. What works for you may not work for me, and what works today may not work 10 years from now. A personal example: People always say to spend on experiences, especially travel. But my wife and I recently realized that on our last four vacations, the best part was coming home. Maybe travel just doesn't do much for us right now. Others may love it. That's the point - spending is personal. A lot of mistakes come from mimicking advice that fits someone else's values rather than your own.

'We chase happiness when what we should be seeking is contentment.'

MarketWatch: Why is spending money wisely so difficult, even for people who know better?

Housel: Because the pressure is constant - our urge to compete, and the social forces of marketing and now social media. Even after studying this for 20 years, I have to remind myself daily that a lot of the urges I feel - "If only we had this ... if only we lived there ..." - are mind tricks that won't fulfill themselves even if you buy the thing.

MarketWatch: What are the most common spending traps?

Housel: One big trap is waking up feeling incomplete or anxious and assuming more money or more stuff will fix it. Sometimes it helps, but often it doesn't. People confuse happiness with contentment. Happiness is a five-minute emotion. Contentment is different. Many people imagine there's a thing - a house, a car, whatever - that will finally make them say, "I'm good now." But usually, you get the thing, feel happy for a moment, and then move on to the next aspiration. We chase happiness when what we should be seeking is contentment.

'All I've ever wanted out of money is independence. I'm not trying to outperform anyone.'

MarketWatch: In an uncertain stock market, what advice would you give readers?

Housel: All I've ever wanted out of money is independence. I'm not trying to outperform anyone. I dollar-cost-average into index funds and hope to own them for 50 years. I try to maximize endurance, because if you can be average for an above-average amount of time, you tend to do extremely well. Simple works for me because it increases the odds I can stick with it for decades. The more complicated it gets, the harder it is.

MarketWatch: What's the difference between discipline and stubbornness in both investing and spending?

Housel: Discipline is good. Stubbornness isn't. Many investors cling to strategies that worked in the 1980s, even though markets have changed. Even Benjamin Graham updated or abandoned his own formulas in later editions of "The Intelligent Investor," because he knew things evolve. The world changes. Your approach has to evolve with it.

MarketWatch: How should people respond to the financial pressure created by social media?

Housel: Your comparison group used to be neighbors and co-workers. Now it's an endless scroll of people who appear richer, prettier, more successful. It warps your aspirations. I try to keep my own financial goals limited to the roof of my house - my wife, my kids, my parents, my close friends. Those are the people whose approval I actually want. Once you realize how absurd it is to spend money to impress strangers, you can redirect it toward independence and a better life for the people who matter.

MarketWatch: What's the biggest misconception people have about spending money?

Housel: That there's one right way to do it. Ten or 15 years ago, I probably believed that myself. But people have different risk tolerances, joys, skills and motivations. Spending and investing are not physics. There isn't one single correct answer for everyone.

MarketWatch: What's your view of credit cards?

Housel: I think of them like pharmaceuticals. I'm grateful defibrillators exist. I just don't want to use one every morning. Credit cards serve a purpose. If you're laid off and need groceries, they're invaluable. But if you use them as a lifestyle crutch, they can be pernicious. Compound interest spirals fast. I'm not anti-credit card, but using them routinely can be dangerous.

MarketWatch: Should people change their spending approach given today's economic conditions?

Housel: I want a strategy that works regardless of what the economy does. I don't pretend I can predict next year. Usually, when everyone is talking about how bad something is, such as inflation, that cycle is already closer to ending. The key is choosing a lifestyle you can maintain through good times and bad. Downgrades are psychologically brutal.

'A good life is independence plus purpose.'

MarketWatch: What core spending strategies do you recommend?

Housel: In the book, I say a good life is independence plus purpose. Money isn't everything, but it helps. Right now, my kids are my purpose. If I can use money to gain independence and spend more time with them, that's success. Everyone's answer will be different, but it's hard to live well without those two things.

MarketWatch: Has your own spending philosophy changed over time?

Housel: Absolutely. My wife and I spend more than we did five years ago, but we're different people now - different means, different priorities. You can't be rigid. If you lock yourself into rules that won't fit 10 years from now, you'll break them anyway.

MarketWatch: What guiding rules do you follow in your own financial life?

Housel: I want to use money as a tool to give the people I love a better life, and avoid using it as a yardstick for status. We save a lot, but we have everything we need. A middle-class life today is luxurious compared to a century ago. We find pleasure in friends, health, laughing, eating - things that don't cost much.

MarketWatch: After readers finish your book, what do you hope changes for them?

Housel: I hope they become more introspective and more willing to look in the mirror and ask what genuinely works for them, even if it's totally different from what social media tells them to want.

Michael Sincere is the author of several books, including "Understanding Stocks," "Understanding Options" and "Help Your Child Build Wealth."

Read more: Americans' happiness is at a record low. Are we just using our money the wrong way?

From the archives: Morgan Housel turned lessons he learned as a hotel valet into a breakthrough personal-finance book

-Michael Sincere

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