We often use spending in an attempt to gain admiration and respect from our peers. Here’s why it doesn’t work and what we can do instead.
Listen in Podcast Format
It’s odd to say, but I just recently listened to my first episode of the Tim Ferriss Show. This podcast, a wildly popular lifestyle guru show with well over 100,000,000 downloads, is routinely ranked at #1 in various categories. Despite being a card-carrying junkie for life hack content, I was never previously drawn to this platform.
After pulling up the list of nearly 600 (!) episodes, the one that jumped off the page was a March 2022 interview with one of my all-time favorite writers on money, Morgan Housel. Housel’s 2020 book The Psychology of Money succinctly distills down the way our emotions—and rarely logic or reason—dictate our relationships on money. He’s also an engaging and energetic podcast guest. You can listen to the interview here.
You may think you want nice stuff, but you don’t
In this interview Ferriss takes note of a 2015 article Housel posted on the Motley Fool, Financial Advice for My New Son.
One of the key principles Housel discusses in this letter to his son is the notion that we feel drawn to buy stuff—fancy cars, houses, and even Instagram-worthy experiences—in an effort to gain respect and admiration from our peers. It’s a natural tendency to feel accepted by the herd. We’ve been conditioned to believe that these things will bring us recognition and appreciation. But this is an expensive and costly mistake.
Housel goes on to say….
When you see someone driving a nice car, you probably don’t think, “Wow, that person is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Do you see the irony? No one cares about the guy in the car. Have fun; buy some nice stuff. But realize that what people are really after is respect. And humility will ultimately gain you more of it than vanity.
Morgan Housel
In this interview with Ferriss, Housel notes that the origins of this note come from his experience as a young valet at an upscale hotel in Los Angeles. In his job, Housel had the privilege of regularly parking Lamborghinis, Ferraris, and any number of luxury vehicles. Despite being a self-described “car guy,” never once did Housel take note of the status of the driver. He simply envisioned how cool he’d be to have that car.
We think about ourselves
More often than not, people are thinking about themselves. We constantly overestimate how much other people around us notice what we are doing or how we are living. All too often, our peers are themselves too self-absorbed to notice our new house, the elite and expensive college our kids will attend, or the mid-week June conditions in Ten Sleep. And if they do, they probably will only imagine how great it would be if they had those things. And the cycle continues.
Respect will come from selflessly bettering the lives of those in our community.
The sure path to respect: Bettering the lives of those around us
Respect will almost never come from amassing material possessions. Paradoxically, these possessions are more likely to yield envy and scorn, not adulation, from less fortunate (or more self-assured) peers. Worse yet, one might be used for their possessions. This scenario creates a false and vulnerable sense of belonging; an ephemeral spring that can abruptly run dry.
So too are we vulnerable to faux self-worth from social media or our online personas. Because we are so acutely drawn to gain the admiration and respect of our herd, online users are prone to curating content for maximum engagement—likes, comments, shares, etc. This kind of content rarely reflects the full spectrum of the human experience. While engagement in this activity may not be directly harmful to the user’s wallet, the constant titration of dopamine from these platforms can perhaps lead to behaviors of instant gratification. Those behaviors do impact our wallet.
Respect will come from selflessly bettering the lives of those in our community. We can gain respect by being a good and caring friend, by building a business that is a trusted resource, or by making a stranger gut laugh when they are having a garbage day. When we improve the lives of others around us, even if partly for our own pride, we gain lasting respect and purpose. Any scant respect gained through material possessions is surficial and fleeting at best.
Here is what to do to help with spending
So, my suggestion, as always, is to begin by tracking your spending. If you need help getting started, new subscribers of this website get a FREE spending and net worth tracking spreadsheet.
The second step is to evaluate your spending. Be honest: how much discretionary spending is indeed value spending?
We all spend money on throw-away stuff, and my wife and I are no exception. That said, those who achieve financial wellness are less prone to the visibility of riches or the magnetic pull of instant gratification, especially on big-ticket items like cars and houses. Despite everything we’ve come to believe, financial independence has shockingly less to do with income or inheritance than we might think.
Whether through inherent personality or systematic training, many millionaires either intentionally or accidentally leverage Pareto’s Principle to amass large sums of savings, whereby 80% of outcomes (our savings) come from 20% of the inputs (carefully managing spending on life’s most costly categories and not sweating the small stuff).
We can spend freely on what makes life great, and limit or eliminate most other spending. With the rest, we buy autonomy and freedom.
To quote Mr. Housel one final time:
“To me, [it] has always been kind of a sad thing that we are so accustomed and attuned to just wanting to use our money … to go out and buy more stuff when we could be using it for freedom and autonomy.”
Morgan Housel
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