If The Psychology of Money was about how to accumulate wealth and keep it, The Art of Spending Money answers the arguably harder question: Now that you have it, how do you use it to live a happy life? As with Housel’s first book, the majority of the book is about the psychology surrounding money, but this time focusing more on the way we spend money.
Housel argues that while finance is often taught as a science (math, spreadsheets, ROI), spending is an art. It is deeply personal, messy, and tied to our unique psychological histories. No two people spend money the same way – everyone is influenced by their own circumstances.
Housel draws a sharp distinction between spending for utility (what actually improves your life) and spending for status (what you hope impresses others). He postulates that most "luxury" spending is a plea for respect and admiration – emotions that cannot in fact be bought. "Spending money to show people how much money you have is the fastest way to have less money."
The book reiterates Housel’s most famous maxim: the highest form of wealth is the ability to wake up every morning and say, "I can do whatever I want today." He argues that using money to buy time and autonomy yields far higher happiness returns than buying bigger houses or faster cars. Money you don’t spend and is saved gives you that valuable future flexibility, security and freedom. In addition, some purchases tend to control or influence your state of mind. Think for instance how a scratch on a new car affects you versus one on an old car; or the stress of a bond on a house that stretches your finances versus staying in a smaller but easily financed home.
Another theme in the book is the moving goalpost and social debt. As income rises, expectations usually rise with it, neutralising any gain in happiness. Housel encourages readers to define "enough" – a fixed point where you stop chasing more and start enjoying what you have.
Housel suggests that our spending habits often stem from past trauma or insecurity. Someone who grew up poor might overspend to prove they "made it," while another might hoard cash out of fear. Understanding why you spend is more important than the math of what you spend. "All behaviour makes sense with enough information".
Here are some key takeaways from Housel’s book:
- Before buying an expensive item, ask yourself: "If I were the only person on earth and no one would ever see this, would I still want it?" If the answer is no, you are buying status, not utility.
- Before upgrading your lifestyle, upgrade your safety net. Use money to purchase the freedom of being able to determine what you want to do and when you want to do it.
- Since spending is an "art", you must find your own style. Experiment with small splurges in different categories (travel, convenience, hobbies) to see what genuinely moves the needle for your happiness, rather than following a generic script.
I’d encourage you to read the book as it has many good anecdotes and stories to cement the thoughts of the writer. As Black Friday comes and goes, and we head into the festive season, it is worthwhile to be more thoughtful around one’s spending.