By Dr. Jim Dahle, WCI Founder
Morgan Housel is famous for pointing out that everyone says they want to be a millionaire, but what they really mean is that they want to spend $1 million, which is precisely the opposite thing. You become a millionaire by NOT spending the $1 million that you could have spent.
I find money and personal finance fascinating on a professional and personal level, so I spend a lot of time observing the money behaviors, attitudes, and statements of others. I have noticed something that seems pretty obvious in retrospect but may not be obvious to you. Given reasonably comparable incomes, those who build wealth are those who don't buy anything. The math is undeniable: the less you buy, the more you have.
Socrates said, “He that is richest is content with the least.” There is a similar Arab proverb: “The richest person is not the one who has the most but the one who wants the least.” Henry David Thoreau said, “That man is richest whose pleasures are cheapest.” There is a lesson here, and I hope each white coat investor gets the chance to learn it and internalize it at some point in their life. Not in some sort of extreme go-live-in-a-log-cabin-in-the-woods sort of way but in a way that meaningfully impacts your happiness and ability to accumulate wealth.
Let me give you a few examples from my own life that will perhaps illustrate the point.
I recently rented a brand new, $12,000 mountain bike at the Santa Cruz factory to ride for the day. It was a nice mountain bike. But I can honestly say it didn't give me one iota of additional pleasure compared to riding my own $5,000, 7-year-old mountain bike. Yet some people are upgrading to the newest bike every season or two.
I tried to buy a Ford F-250 in December 2021 to replace my 2005 Sequoia. As of August 2023, Ford had not even started building it yet. Did it bother me to drive my old Sequoia for another year? Not one bit. It got me everywhere I needed to go. I don't think it needed a single repair. It pulled the boat around just fine. Nice new trucks are $75,000-$100,000. That can go a long way toward building wealth.
We had a recent trip to Slovenia. We did some climbing and some canyoneering while we were there. While it is fun to see new places and try out new things from time to time, I'm being honest when I say those canyons really weren't any more fun for me than the boring old ones I can do in southern Utah for one-quarter the cost and a whole lot less travel time.
I went to Lake Powell for 5-6 days five times in 2022. I camped three of those times, one time we stayed in a less expensive houseboat, and one time we stayed in a really nice houseboat. Was the really nice houseboat pretty cool? Yes, it was. Is it nice to get on a houseboat and off a sandy beach when the wind starts blowing or the rain starts falling? Absolutely. But if I'm being honest, I enjoyed the three camping trips more than the two houseboat trips, and the overall expense was dramatically less.
Since we're well beyond financial independence and still working and earning more than we ever have, we've had the opportunity the last couple of years to spend with wild abandon. And we do. For sure it's nice not to have any financial stress. But am I any happier than I was when I had to look at price tags? Not really. We don't even spend all that much more than we used to either. We add up what we spend at the end of each month and year, and it's still easily affordable on a single, full-time physician salary.
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Splurge, but Evaluate
People spend tons of money all the time on all kinds of things. You can spend $450 on a dress shirt and thousands on a dress or even just a handbag to go with that dress. Tons of people spend money they do not have to buy things they do not want to impress people they do not even like. But the truth is that the last row of First Class and the first row of Economy Plus provide an awfully similar experience on domestic flights—at a significantly different price point.
It's OK to spend your money. It's OK to splurge. But after you do, spend a moment to reflect on whether it was worth it. I suspect you'll conclude that, a lot of the time, it was not. Whether you're rich yet or not, remember that the secret to wealth—at least once you've developed an income that causes you to read this website—is to stop buying stuff. That money sure piles up quickly when you stop spending it.
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What do you think? What have you purchased that probably wasn't worth it in retrospect? Comment below!