How to spend it, wisely

Personal finance literature typically focuses on topics like saving, debt reduction, investing, and wealth accumulation.

- SANJAY KUMAR SINGH

Morgan Housel, whose first two books collectively sold more than 11 million copies, has chosen a topic for his third that is highly relevant amid growing prosperity: How to spend money wisely.

People, says Mr Housel, rarely make grave spending mistakes when trying to meet basic needs. Misjudgments arise once they graduate to the realm of discretionary spending.

Even after leaving deprivation far behind, many engage in a mindless, unending scramble to accumulate and consume more, assuming this will translate into greater happiness. The author warns that such an approach risks leaving people in their later years with regret at having neglected the pursuits that might have nourished their souls and brought lasting fulfilment. The panacea, he suggests, is to make well-thought-out choices that minimise regret at the end.

A central theme of the book is that most people do not use money as a tool to acquire a happy, contented, and comfortable life. Instead, some turn it into a yardstick to measure how successful they are visa-vis others.

Many spend in a manner they believe is in keeping with society’s expectations. As a young valet at a luxury hotel in Los Angeles, Mr Housel watched someone pay $21,000 in an auction for a chair. Seeing the disbelief on the faces of the valets, the man responded, “That's what you are supposed to do when you are rich.” Mr Housel warns against falling into such conformity traps.