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.
Some Examples
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.
More information here:
10 Reasons Doctors Spend Too Much Money
Multimillionaire Family Tracks Spending for a Year: They Spent How Much?!?
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!
I own no boats and no motorized vehicles other than our cars: a 2021 Mazda CX5 and a 2013 Honda van. We plan to buy the Mazda off lease this year with cash because it’s a nice car and it has only 20,000 miles.
We rent bikes on vacations with biking, and boats have not been needed. I see a lot of boats that sit for 11 months and get used once or twice a season, although some avid boaters are on the water more often.
I’d like an old vintage truck for fun, but the very occasional need to haul something is now taken care of via a used 11 foot trailer. Instead of another chunk of insurance, maintenance, and repairs, one can rent a truck if needed. I doubt I’d be using it often and the fun would fade. I sold my 2013 Jeep Rubicon and put the money in our retirement accounts. I actually had to pay taxes on excess depreciation when I sold it for $28,000 in 2021.
I think it’s true. Want less, spend less, retire earlier. We have substantially downsized and spend some of the savings on vacations. Our expenses in the McMansion partly drove the need to work a lot. I calculated that the McMansion costs required an extra decade of work in comparison to our “starter home.”
At present, our biggest expense is still taxes.
Curious as to how much your McMansion was vs your “starter home” you live in now. We live in a 330k 1500sqf 3/2 starter home that’s maybe worth 500k now. But if we moved into something that fits our family better we’d be looking at 750k minimum post covid inflation.
The McMansion cost about $500K to build in 2003. We purchased the 4.5 acres of land in 1999 for $90,000. It was the biggest lot in the neighborhood and was over 4000 square feet.
The “retirement apocalypse compound” cost $280K in 2016, before the pandemic housing price boom.
The “original starter home” was $103K in 1994. The 8% mortgage payment was ~ $800 with taxes of $1000 a year. At that time, it was below the median home price in that area. We rented that one out from 2003-2019, then sold it. Per Zillow, that 1970 3BR, 2.5 BA 1900 sq. ft. home is now worth $175K and most of that price appreciation happened from 2020-2023….after we sold it.
The quotes you shared are packed with so much truth:
“He that is richest is content with the least.”,
“The richest person is not the one who has the most but the one who wants the least.”
“That man is richest whose pleasures are cheapest.”
I enjoyed reading your examples. This comment though made me pause, “I don’t even look at the price of things I buy most of the time now.” I doubt I could purchase something without looking at the price, even if I was a billionaire. I guess that is my “frugalness” speaking 🙂 Thanks for sharing your thoughts/post.
Excellent read. I think a few “counter examples” of splurges that come to mind (if you can even call it that, since you obviously never say splurges are ALWAYS worthless) for us have been:
-Direct flights- some upgrades to premium economy or business depending on price. Saves so much time for travel days and even “recovery” afterwards.
-A new $40k Subaru- nice to have some “luxury” features we did not have before with older cars. Plus, a car double (or triple) that price arguably doesn’t have that much more.
-Nicer vacation rentals- mainly larger houses to have space for our kids to have their grandparents, cousins, and aunts/uncles to meet up for a week. Also great for everyone to have their own ensuite bathroom too.
This post also brings a couple recent encounters to mind.
1. I know a guy married to a family medicine doctor who noted within last year the wife spent nearly $150k on luxuries “because I work hard and deserve it.” The spouse was trying his best to get the family to agree to a budget, since they were going into debt once again (student loans had been forgiven recently, now consumer debt was the issue). New Tesla, business class flights, $20k on a Hawaii trip, $10k on cosmetic procedures… the guy was wondering “how much will ever be enough?”
2. We have relatives who really like to travel as much as possible, and are able to do so by investing the absolute bare minimum once recommended to them by a financial advisor (mind you, this “magic number” was before they bought an expensive house and made plans to grow their family more). I’m sure others are different, but it doesn’t seem appealing to have only 12 hours to spend in Madrid before the next stop on a weeklong sprint across Europe. I also wonder if their habits will change in the next decade once they see their retirement accounts are not what they could have been.
The budget/mid tier option is the big jump up. Never going to Europe is a bigger deal than flying economy vs business. Never going to Lake Powell vs camping vs luxury houseboat. Fortunately most doctors can afford the mid tier option, except some things like space travel.
I am a dirtbag at heart but some things are worth the money:
1. Darn Though socks. Will change your life.
2. Good hiking and climbing shoes
3. A Tesla. The autopilot has changed driving for me for ever. Not having to pump gas and the feeling of not burning gas are worth every penny.
4. A decent house close to everything with a very nice backyard for gardening.
I am still my own pool guy. Plumber, handyman, landscaper, palm and tree prunner. Don’t drink and don’t dine out much. My best vacations are climbing trips to drivable areas (which cost almost nothing).
Nice post Jim!
Carlos, I believe you are referring to “Darn Tough” socks from Vermont and their lifetime warranty. I agree
One of the best purchases I made was a summer “home” in southern Utah. The home was a 50 year old trailer on a lot. I spent 20 summers hiking, biking, camping, boating, canoeing, backpacking, canyoneering, and just basically traveling and having fun. The home cost about 12K in 1994. I have since moved to a summer home in CA – a real 2BR cabin.
See https://shawnpheneghan.wordpress.com/2022/04/29/the-pro-fun-tours-twenty-utah-summers/
Summers in Southern Utah? Ugh. Definitely a shoulder season kind of place.
You are wrong. I lived at 8000 feet. Rarely saw temps over 85. Saw frost in July. When I tried to stay later (late september/early october) it was just flat cold.
Ha ha. Fair enough. There aren’t a lot of 8000 foot locations in Southern Utah though. Given 3 degrees per thousand feet, I agree that 8000 feet in Southern Utah is a great place to be in summer.
The Markagunt Plateau. The Paunsagunt Plateau, The Aquarius Plateau, The Abajo Mountains, the La Sal mountains. The Tushar mountains, Pine valley mountains Fish Lake mountains and more
Southern Utah offers a great deal of high mountains.
I’ll have to spend some more time exploring them. Most of my time in Southern Utah has been spent under 4,000 feet.
Very common sense observations. The more expensive stuff isn’t always nicer.
I agree a key question, as described above is, is it a good value? (Written as my retired husband is driving our 2007 Ford Escape with 130K miles, headed to Chicago to visit family, where we will stay at their home, and we packed our own food to eat en route) I’m FP, on track with retirement savings, good income, debt-free, married well. We just don’t care about spending money on a lot of things. Will happily drop some dough on hobbies, if it’s a good value – for us, a quality item or experience that is likely to yield what we want.
Agreed with most everything you said but there absolutely is a big difference between last row of first class and first row of economy plus on international flights. Well worth the ability to lay flat.
Agree to a certain degree BUT as you’ve state in previous posts we can’t have it all and one must be selective in our spending. For me, it’s fancy vacations and flying long-haul biz but it means I’m not also buying (or interested in buying) fancy clothing/shoes/watches/toys/cars etc. Have you thought of staying at Amangiri near Lake Powell? I’m looking forward to staying there on my future Utah/Arizona road trip and yes I can also be comfortable at a Courtyard but I think the experience would be less memorable.
Amangiri? Courtyard? I’m not sure you understand the geography around Lake Powell. The places I stay are 30-60 miles away from the nearest road. I mean, I guess if someone wanted to stay in a marina and go out on the lake every day that sort of thing would be an option, but I tend to strap an extra 70 gallons of gas on the back of the boat and go far enough that I have the place mostly to myself.
Yes I’m well aware of the geography of the region (and I’m also travelling with my mom)…we just have completely different travel styles and yours isnn’t cheap either. Each to their own but I suspect your wife might enjoy Amangiri even if it’s not your style….at the end of the day we are fortunate to be in a financial position to do/buy what we want!
We’ll have to try one out sometime, but probably not in that location.
Good post. Similar to what I have been saying on here for years.
Just because something is expensive, it is not necessarily desirable.
Many expensive things require massive advertising campaigns to gin up demand.
Stop and ask yourself before you buy an expensive vacation what really matters? Time with your kids? You do not need to fly 5 people first class to a 5-star resort on a different continent for that. Airbnb or other decent, not fancy, lodging will put you all together. You can talk, play games, hike, swim, depending on where you go. There are innumerable places with spectacular views right here in the US. For many, such sites are in easy driving distance.
But place is a background to the time you will spend with friends or family.
Want vigorous outdoor activity? Available, for cheap or free, at tens of thousands of places in the US. You could not run out of options in a lifetime.
A brand new Mercedes S class will take you to the grocery store and carry your food home. So will a used Camry hybrid. In terms of performance as a transportation device, there is little to choose between them. I assume the S class will go faster but the Camry will take you up to the speed limit. The Camry will be cheaper to maintain and insure. I do not know what a top of the line S class costs new, but I suspect it is many times the price of a Toyota.
The same applies just about everything else that hyperconsumers buy. A simple meal of fresh vegetables and baked chicken is almost certainly BETTER, as food, than a $600 night at a fancy restaurant. Food is for maintaining health. Food that works counter to health should not be eaten at all.
You can get a healthy dinner for two for far less than $60. Why pay more ten times as much for something you should not eat at all?
Ignore the advertising.
Ignore the enthusiast sites.
Look for things that provide happiness. It is not churning endlessly on an ever more expensive hedonic treadmill.
Climb off that treadmill and take a walk, read a book, listen to some music. Not “spend thousands on tickets, transportation and lodging to attend an ear-splitting pop concert”, but “pull out your inexpensive earbuds and listen to something that engages your intellect and your soul.”
“Being happy” is not the same as “spending a lot of money.”
Great post Afan. You stated a lot of good points.
Just wanted to add one other thought about vacations. There are studies suggesting experiences contribute more towards happiness than material items, and I honestly think cultural experiences contribute substantially to personal growth. There’s nothing like sitting in a family Maasai dwelling to have your kids (and yourself) really understand that humans all around the world live differently, and are still living a worthwhile life. Not to mention developing a world citizen mentality and true environmental appreciation while seeing wildebeests on the Serengeti. These experiences leave a deep impact. That said, even international experiences have tiers of expense, and frankly the lowest safe tier provides the most local contact, as well as being most cost-effective, in my opinion.
As I read the comments it occurs to me a bit of old time Protestant bragging about who is frugal,
and what has ‘true value’ ….the cabin is no more moral or better than the first class ticket, …..
It is foolish to justify what you spend money on in comparison to others………..
the point is to think before you spend…..regardless if it a pair of shoes or a hotel room….. or delux vacation
to south of France…..
Make the wisest and best value choice you your life, understanding that rarely do material items or experiences
bring true happiness
A cabin in the woods sounds pretty awesome!
Make mine ~2,000 square feet. Thanks.
As you get older, ease of travel is worth the money… direct flights, business/first class… yes please.
Also, here’s a tidbit of wisdom for the folks… travel is always better if you can get someone else to pay for it! LOL!
I’ve been to the Arctic, Antarctica, Ghana, Kuwait and a bunch of other places, one way or another, on my Uncle Sam’s dime. 😉
Yet another post where a financial “advice” blogger who makes a ton of money and spends way more than many primary care physicians ever could tells the rest of us to spend less money. Saving money might be something the author is good at, and it helps that he makes a whole lot of money, but spending money is something he is real good at, too, based on past posts by this author describing his family’s spending. (e.g., even in this article above, he describes a $5,000 bicycle. Five-thousand dollars? For a bicycle? A real thrifty guy, huh? Spending restraint, huh? But hey, you the reader, stop spending so much money, don’t you want to be rich?!!!)
Take what you find useful, leave the rest.