Money | Get the most out of your money

You don't need to spend much to live a good life. Spend on what matters.

“You don’t get rich by spending the money” is a bit of an infamous quote but it checks out: Many successful people are surprisingly frugal: Warren Buffet just stayed in his “starter house”, IKEA’s founder drove a beat-up volvo all throughout his life and the Zuckerbergs held their wedding reception in their backyard with food from their favorite Mexican grill.

So: What’s actually worth spending money on and where can you cut?

This is not financial advice, this is some guys sharing tips they heard from some other guys and gals and AIs.

The 80/20 of spending advice

Optimize the “big three”

More than 60% of the average budget goes into these categories, and they are all key suspects of hedonic adaptation and lifestyle creep. A better house, car, or food will make you happier only briefly, and most are driven by your peers and your status.

• Housing: Most people spend 30% or more of their income on housing. Question it: What alteratives could you use? My favorite hack: Live with roommates. Less cost and a free social life. We’ll look into buying a house separately later.

• Transport: Do you really need that shiny car? Take an uber everywhere? Book all your flights only a few days prior? Try this: Who of your friends spends the least you think? Could you do the same?

• Food: Eating out and ordering takeaway can consistently eat into your budget but it’s a difficult habit to crack. Experiment with bulk-cooking, ordering groceries online to avoid impulse buys, or hosting potlucks instead of going out.

What actually buys happiness

There are some exceptions to hedonic adaptation. Most notably investing in experiences almost always pays off higher than investing in material goods. Overall, the evidence suggest to spend on the following categories

• Charitable giving: Seems to buy the most lasting happiness. Consider splitting those in “in-the-moment happiness” like gifts to a friend or a local charity and “content happiness” like gifts to charities that have high impact.

• Buy yourself time: The classic example of this is getting a cleaner but there are many opportunities to trade money for time. Maybe do a test to estimate the value of your time, make sure to account for tax etc. Then brainstorm with AI.

• Euzoia-approved: The kind of things we suggest here at Euzoia: A gym membership, an air purifier, and in future posts spending on your education, your friends, and novel experiences. So much to come!

I still remember when I first started donating money to effective charities. It felt like shifting from a feeling of helplessness about the global issues to “doing my part” and the peace of mind that came with it. Donations alone are of course not everything, but for most people probably the best way to have impact. Love the 10% pledge for building a community around that idea.

Christoph

Follow three simple rules

Making the right decisions is hard, building habits even harder. The great thing about financial decisions is that you can automate a lot of them.

• Automate budgeting: When your money comes in, directly send it where it should go: A “bills” acount, a “spending” account, a “savings” account. Then never spend more than you have. Check out YNAB for a more advanced version.

• Wait before you spend: Whenever you get excited about a purchase: Wait. For larger purchases, wait longer. In almost all cases, that waffle toaster looks a lot less exciting a day later. If you still love it, get it then.

• Budget for large expenses: What can you already see on the horizon? Elderly care? Your children’s education? Retirement? A sabbattical? Starting a business? Use AI to help you estimate how much you need to save now to reach these.

Starting points

• Set up some budgets, takes five minutes.

• Try giving to charity. Maybe check out the life you can save.

• Start with one of housing, transport and food. Any obvious gains there?

• Learn how to change

• Bet money on your change

• Discuss this in our community

• Missing something? Add a comment and we’ll add it to next year’s version