“Economy does not lie in sparing money, but in spending it wisely.”
–Thomas Huxley

Last year, I heard something hilarious during a training session for advisors. During a dialogue, we began discussing people’s saving habits. One advisor recalled a client who would call to liquidate large sums for lavish trips, and another advisor piped in, “Yeah, don’t you hate it when people act like it’s their money?”

It took the room about two minutes to recover from that one. It hit at a core conflict in an industry dependent on AUM for both remuneration and status.

As I’ve written before in this column, my golf pal “Teddy the Greek” sums it up this way, “The only money that is really yours is the money you spend. Everything else belongs to somebody else.”

Teddy’s aphorism hits at another core issue: What is the point of saving if you can never enjoy it? It’s one thing to save for rainy days and altogether another to hoard during sunny days and miss opportunities. What you don’t spend, politicians and your progeny will. The question that arises in this discussion is, how do you spend it well? What constitutes a wise allocation of resources?

I recently read a book on this topic, entitled Happy Money: The Science of Happier Spending, by authors Elizabeth Dunn and Michael Norton. This succinct work is stocked with thorough research distinguishing spending that satisfies from that which disappoints. The authors lay out five principles of spending that produce lasting dividends:

1. Experiences are more satisfying than stuff.
2. Abundance ultimately backfires. Making indulgences rarer rather than frequent makes them more satisfying.
3. Buying time is the best investment.
4. Using “reverse credit” (pay now––use later) imbues us with the pleasure of anticipation rather than the buzzkill of paying later for something already consumed.
5. Spending on others trumps spending on oneself.

The Spending Experience
We’ve all seen or heard the story of the couple who saved up for 35 years for an RV-ing retirement dream, and then one spouse was hit by a debilitating condition and the RV never left the driveway. Those who want to avoid this move with urgency to savor all life’s experiences while they can. But it’s also good to have something to look forward to. One must strike a balance, enjoying the present without sabotaging the future, spreading out the pleasures in a way that doesn’t dull the senses.

For a number of years my brother, my father and I have been touring baseball parks in America, from the old Yankee Stadium in the Bronx to the AT&T Park in San Francisco. At first, I wanted to cram as many cities and parks into the fewest days, but my father would object and say, “Let’s just take it slow.” And slow has been good. Efficiency may be a virtue in business, but it can work against the objective of soaking in an experience. We not only have a lot of ball games to smile back on, we have plenty more to look forward to.

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