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At the Money: Smart Spending vs. Not Spending · Masters in Business

• 0:09
  Speaker 1: Some people are constantly exhorting us not to buy this
• 0:13
  Speaker 1: or that thing that might set you back a couple
• 0:16
  Speaker 1: of bucks. We're warned again spending on things these people
• 0:19
  Speaker 1: deem extravagant. Don't buy a sailboat, never buy a new car,
• 0:24
  Speaker 1: never ever buy a sports car. The spending s goals
• 0:28
  Speaker 1: even tell us don't spend five dollars on a latte.
• 0:32
  Speaker 1: Susie Orman insists it'll ruin your retirement. I've looked at
• 0:36
  Speaker 1: the numbers on all of these criticisms, and to be blunt,
• 0:40
  Speaker 1: I find them wanting and notwithstanding of close scrutiny. I'm
• 0:45
  Speaker 1: Barry Ridolts, and on today's edition of At the Money,
• 0:48
  Speaker 1: we're going to discuss how to buy what you love
• 0:52
  Speaker 1: and still live within your budget. To help us unpack
• 0:55
  Speaker 1: all of this and what it means for your bank account,
• 0:58
  Speaker 1: let's bring in Carl Richards. He is the author of
• 1:01
  Speaker 1: the Behavior Gap Simple Ways to Stop Doing Dumb Things
• 1:05
  Speaker 1: with Money. His recent essay, The financial Benefits of Buying
• 1:10
  Speaker 1: what you Love, is exactly on topic for us today. So, Carl,
• 1:15
  Speaker 1: you're known as a pretty modest guy. You don't flash
• 1:19
  Speaker 1: around fancy watches or drive expensive cars. Generally you're not
• 1:24
  Speaker 1: a self indulgent guy. But you went out and purchased
• 1:28
  Speaker 1: a five thousand dollars Moots trailbike, and as you wrote,
• 1:34
  Speaker 1: you said it was one of the best financial decisions
• 1:38
  Speaker 1: you've ever made. Explain, Yeah, for sure.
• 1:40
  Speaker 2: And we can also get into the fact that I
• 1:42
  Speaker 2: do own a big truck, which we know people say
• 1:46
  Speaker 2: is really bad idea. So I'd love you.
• 1:48
  Speaker 1: But you live offen the you live out in the wilderness.
• 1:52
  Speaker 1: For your truck actually touches dirt. It's the people who
• 1:56
  Speaker 1: live in suburbia and the big trucks never leave the pavement.
• 2:00
  Speaker 1: Why are you spending all this money on off road
• 2:02
  Speaker 1: capabilities that you're not using.
• 2:04
  Speaker 2: I'm with you there. We use it routinely and regularly,
• 2:08
  Speaker 2: and it's one of the greatest sources of happiness in
• 2:10
  Speaker 2: my family because of the places we go. So the
• 2:13
  Speaker 2: mountain bike. And by the way, that mountain bike is
• 2:15
  Speaker 2: where you know, it would cost a lot more today
• 2:19
  Speaker 2: if somebody bought the same bike, so the mountain bike. Listen,
• 2:24
  Speaker 2: this idea. It's so crazy to me, this idea that
• 2:28
  Speaker 2: we might know what brings other people happiness and joy,
• 2:33
  Speaker 2: and that it's our job to tell them that it's
• 2:37
  Speaker 2: ridiculous to buy their morning latte or the truck or
• 2:41
  Speaker 2: the bike is just I get equally as upset about
• 2:44
  Speaker 2: it as you do. So the bike, I just had
• 2:46
  Speaker 2: a simple calculation, you know. It was it was cost
• 2:51
  Speaker 2: per unit of fun. Now it's my trail running shoes
• 2:55
  Speaker 2: that I use to help me gain elevation in the
• 2:58
  Speaker 2: mountains almost every day. Those I use. Are there one
• 3:00
  Speaker 2: hundred and fifty dollars running shoe, right, And if I
• 3:04
  Speaker 2: take the amount of fun I get from those, they're
• 3:07
  Speaker 2: one of the best purchases that I ever bought versus
• 3:09
  Speaker 2: maybe for me like a waterski boat, right, a water
• 3:13
  Speaker 2: ski boat that I used three or four times a year.
• 3:15
  Speaker 2: I mean I grew up water skiing on the lakes
• 3:17
  Speaker 2: here in Utah. I think it's one of the funnest
• 3:20
  Speaker 2: things I could ever do. But the cost is so
• 3:22
  Speaker 2: much higher. When I divide that per unit of fun,
• 3:24
  Speaker 2: I don't get the same outcome. So my thought is, like, look,
• 3:29
  Speaker 2: the greatest source of happiness that we have, and the
• 3:32
  Speaker 2: research is pretty clear about this, is memorable experiences with
• 3:35
  Speaker 2: the people that we love. Right, going on a bike
• 3:39
  Speaker 2: ride with my kids or my wife is one of
• 3:42
  Speaker 2: the most important things I could do, So I'm going
• 3:45
  Speaker 2: to spend the money.
• 3:46
  Speaker 1: And you're pointing to something that there's a lot of
• 3:50
  Speaker 1: data from the world of psychology and behavioral finance that
• 3:54
  Speaker 1: experiences are the things we remember and are worth spending
• 3:59
  Speaker 1: money on as opposed to just accumulating bubbles for their
• 4:05
  Speaker 1: own sake, and what seemed people seem to forget about
• 4:09
  Speaker 1: are the purchases that allow us to share time and
• 4:13
  Speaker 1: experience with friends and family totally.
• 4:17
  Speaker 2: And it's important to note those do not have to
• 4:19
  Speaker 2: be expensive. My trail running shoes are not that expensive.
• 4:22
  Speaker 2: And in fact, let me tell you this super interesting story.
• 4:24
  Speaker 2: I grew up. I never traveled anywhere. We didn't. We
• 4:27
  Speaker 2: didn't have any money growing up. I didn't I don't
• 4:30
  Speaker 2: even think I had a passport until I was married
• 4:33
  Speaker 2: and we had this seat. We had this year where
• 4:37
  Speaker 2: because of some speaking engagements in the book launch, we
• 4:40
  Speaker 2: traveled a lot and I took the family to a
• 4:41
  Speaker 2: lot of places. I think we went to three or
• 4:43
  Speaker 2: four different countries, and my son, who was like seven
• 4:46
  Speaker 2: or eight at the time, at the end of the summer,
• 4:48
  Speaker 2: I was like, hey, Sam, what was your favorite memory
• 4:50
  Speaker 2: from the summer, and we had been to Amsterdam, and
• 4:54
  Speaker 2: we'd been to Paris, and we'd been all these cool places.
• 4:56
  Speaker 2: And he thinks for a minute, and he says, do
• 4:58
  Speaker 2: you remember that time? Do you remember that time we
• 5:02
  Speaker 2: just threw rocks for an hour in the pond out
• 5:04
  Speaker 2: behind the house. And I was like, bro, He's like, yeah, no,
• 5:10
  Speaker 2: the time. So it doesn't have to be expensive, and
• 5:14
  Speaker 2: it can be. And if you've got the money and
• 5:17
  Speaker 2: you love an amazing Italian sports car, who am I
• 5:21
  Speaker 2: to tell you that that's not right now. The problem,
• 5:24
  Speaker 2: I think is when we buy things we think will
• 5:27
  Speaker 2: make us happy because everybody else tells us they'll make
• 5:30
  Speaker 2: us happy, and then we discover that we don't really
• 5:32
  Speaker 2: like them. Well, we can talk about how to run
• 5:34
  Speaker 2: experiments around that, but I think this whole thing starts
• 5:37
  Speaker 2: with getting clear about what actually brings you happiness. Well,
• 5:41
  Speaker 2: once you experiment and find a thing, spend the money.
• 5:45
  Speaker 2: For heaven's sakes, what's it for?
• 5:48
  Speaker 1: Huh. So that's one of the things I think some
• 5:51
  Speaker 1: of the Puritans get wrong. They focus on the cost,
• 5:55
  Speaker 1: not the budget. If you can afford us boat and
• 6:01
  Speaker 1: you love sailing, well, go buy a sailboat. It seems
• 6:05
  Speaker 1: that all this finger wagging about spending any money of
• 6:09
  Speaker 1: any sort is really misguided. And by the way, the
• 6:13
  Speaker 1: first boat I bought was a short sale during the
• 6:17
  Speaker 1: financial crisis that I think I paid twenty grand floor
• 6:21
  Speaker 1: split with my brother and could probably sell it today
• 6:25
  Speaker 1: fifteen years later for exactly what I paid for. So
• 6:28
  Speaker 1: it's not just a function of the dollar amount, it's
• 6:32
  Speaker 1: can you afford that that item and what sort of
• 6:37
  Speaker 1: pleasure is it going to bring you and your family?
• 6:39
  Speaker 1: Are we focusing on the wrong things. If you can
• 6:42
  Speaker 1: afford a nice bike and you're going to use it,
• 6:45
  Speaker 1: why not make that purchase.
• 6:48
  Speaker 2: Yeah, it's so interesting. I think there's a piece of this,
• 6:51
  Speaker 2: and I've been trying to unpack this for a long time.
• 6:54
  Speaker 2: I just had a conversation on my podcast fifty Fires
• 6:56
  Speaker 2: about this exact thing, Like, I think there's a a
• 7:00
  Speaker 2: piece of this you pointed to Puritan. I think there's
• 7:04
  Speaker 2: a piece of this that's related to this endless praise
• 7:10
  Speaker 2: and nobility of delayed related to this endless praise and
• 7:16
  Speaker 2: nobility around delayed gratification, And it could even be all
• 7:19
  Speaker 2: the way back to like when I get to Heaven,
• 7:23
  Speaker 2: when I get to heaven, I will be happy. And
• 7:26
  Speaker 2: I think we just need to start realizing, like, look,
• 7:29
  Speaker 2: what's wrong with being happy now? And how can I
• 7:34
  Speaker 2: view something as an investment instead of an expense? And
• 7:37
  Speaker 2: the investment has a return, the return of spending an
• 7:41
  Speaker 2: hour with my son throwing rocks in the lake, right,
• 7:45
  Speaker 2: how do you calculate the value of that return? The
• 7:48
  Speaker 2: return of the fifty bike rides I went on with
• 7:51
  Speaker 2: my daughter out my back door on that bike. How
• 7:54
  Speaker 2: do I even put a number to that return? And
• 7:57
  Speaker 2: what I think we miss is like who cares? And
• 8:00
  Speaker 2: what's so funny, Barry is we all know this, Like
• 8:02
  Speaker 2: it's cliche at this point to say, like on your deathbed,
• 8:07
  Speaker 2: you're not going to be thinking about your bank account, right,
• 8:10
  Speaker 2: You're going to be thinking about the time and the
• 8:12
  Speaker 2: experiences that you had with the people you love. Right,
• 8:16
  Speaker 2: So we know it. I think we just we just
• 8:18
  Speaker 2: have a hard time doing it. And then the last thing,
• 8:20
  Speaker 2: it might be related to some of the fear, Like
• 8:22
  Speaker 2: our whole industry largely is built on fear of the future.
• 8:26
  Speaker 2: Are you saving enough? Are you gonna have enough in retirement?
• 8:28
  Speaker 2: We've built into people this idea that if you're not
• 8:31
  Speaker 2: doing everything you can, you are going to be destitute
• 8:34
  Speaker 2: alone and living under a bridge, right, And so to
• 8:37
  Speaker 2: unpack all of that takes a lot of work.
• 8:40
  Speaker 1: So let's talk about quality. You made reference to the
• 8:43
  Speaker 1: advantage of buying something that's high quality, very well made once,
• 8:49
  Speaker 1: rather than repeatedly replacing a bunch of lesser quality items
• 8:54
  Speaker 1: that don't last, don't go the distance.
• 8:58
  Speaker 2: Yeah, I think.
• 8:59
  Speaker 1: Let us.
• 8:59
  Speaker 2: I think there was an old quote I can't remember itself,
• 9:02
  Speaker 2: just paraphrase. It was something like we can't I remember
• 9:05
  Speaker 2: it was something like we can't afford to buy cheap things.
• 9:08
  Speaker 1: That makes sense. Let's talk cars. I saw this headline.
• 9:12
  Speaker 1: It cracked me up. Buying a new car is like
• 9:15
  Speaker 1: taking forty thousand dollars and setting it on fire. If
• 9:20
  Speaker 1: you can afford a new car and you want to
• 9:22
  Speaker 1: go pick the right car and the right callar that
• 9:25
  Speaker 1: you want, what's the problem buying a new car?
• 9:29
  Speaker 2: It's so interesting to me, Like like that. I have
• 9:32
  Speaker 2: a friend who if it rains outside and you're in
• 9:35
  Speaker 2: his car, your feet get wet, like like the floorboards arrested. Right.
• 9:38
  Speaker 1: I had one of those in college.
• 9:40
  Speaker 2: Yeah, yeah, I mean he loves it and cars are
• 9:42
  Speaker 2: not a thing cares about. In fact, I had this
• 9:44
  Speaker 2: conversation in Morgan Housel. Morgan says he like always he
• 9:48
  Speaker 2: always think it was on the podcast. He always feels
• 9:50
  Speaker 2: like he should be a car guy. He was a
• 9:52
  Speaker 2: valet in la like he always so. Every couple of
• 9:54
  Speaker 2: years he runs an experiment which I just thought was
• 9:58
  Speaker 2: beautiful when he's on a business trip and he's renting
• 10:00
  Speaker 2: a car. Every couple of years, he's like, huh, you
• 10:03
  Speaker 2: know what, it's an extra two hundred bucks for the day,
• 10:07
  Speaker 2: give me the Porsche. And he says it doesn't take
• 10:10
  Speaker 2: him even getting off the lot before he's like, you
• 10:13
  Speaker 2: know what, I admire this thing. It's beautiful, it's amazing,
• 10:16
  Speaker 2: but you know what, it just doesn't give me what
• 10:17
  Speaker 2: I need now. He said, if it did, I would
• 10:21
  Speaker 2: buy it, but it doesn't. And so I think some
• 10:24
  Speaker 2: people it's just not a thing. That's fine. And I
• 10:27
  Speaker 2: think what this all comes down to is getting clear
• 10:31
  Speaker 2: about what's true for you, not necessarily what the Instagram
• 10:35
  Speaker 2: people say or what the scolds say. Either way, run
• 10:39
  Speaker 2: some experiments, find out what brings you value. You may love.
• 10:42
  Speaker 2: I mean, I really want this truck. I want an
• 10:45
  Speaker 2: old truck to drive around, Well, I found out the
• 10:48
  Speaker 2: best way to have an old truck to drive around
• 10:49
  Speaker 2: was buy a new one and keep it for thirty years.
• 10:51
  Speaker 1: Beat the hell out of it. That's exactly right. So
• 10:54
  Speaker 1: to wrap up, when we look at at the world
• 10:57
  Speaker 1: of consumer purchases, there are a few lessons to be learned. Obviously,
• 11:03
  Speaker 1: stay within your budget. If you can't afford something, well,
• 11:06
  Speaker 1: then don't buy it. But if you can't afford something,
• 11:10
  Speaker 1: buy quality. Buy the things that will give you experiences
• 11:14
  Speaker 1: with your friends and family and loved ones. Buy what
• 11:18
  Speaker 1: you love. You won't regret it. I'm Barry Retults. You're
• 11:22
  Speaker 1: listening to Bloomberg's at the Money Norway h