Podcast #1,031: Money CAN Buy Happiness (If You Use It In These Ways)

Podcast Archives | The Art of Manliness

Money can’t buy happiness. It sounds good as a bumper sticker platitude.

But the truth is, money can buy happiness. At least sometimes. In certain circumstances. If we view it and use it in the right ways.

Here to unpack the conditions under which money can buy happiness and facilitate our flourishing is Dr. Daniel Crosby, a psychologist and behavioral finance expert and the author of The Soul of Wealth: 50 Reflections on Money and Meaning. Today on the show, Daniel shares the minimum income level at which money buys happiness, at least in the sense of avoiding pain. We talk about how to purchase material things in a way that increases happiness, while avoiding materialism, and the value of using your money to buy health and freedom. And we discuss the importance of finding an overarching why that guides the way you allocate your money and doing a values audit to see if your purpose and spending habits are aligned.

Resources Related to the Podcast

• Daniel’s previous appearances on the AoM podcast:
  • Episode #222: The Laws of Wealth
  • Episode #511: Mastering the Psychology of Investing
• AoM Podcast #659: Do You Want to Be Rich or Wealthy? (And Why the Difference Matters)
• AoM Podcast #321: How to Think About Money
• “Experiences Won’t Make You Happier Than Possessions”
• Die with Zero by Bill Perkins

Connect With Daniel Crosby

• Daniel on X
• Daniel’s podcast, Standard Deviations
• Daniel on LinkedIn

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Read the Transcript

Brett McKay: Brett McKay here and welcome to another edition of the Art of Manliness podcast. Money can’t buy happiness. It sounds good as a bumper sticker platitude, but the truth is money can buy happiness, at least sometimes, in certain circumstances, if we view it and use it in the right ways. Here to unpack the conditions under which money can buy happiness and facilitate our flourishing is Dr. Daniel Crosby, a psychologist and behavioral finance expert and the author of The Soul of Wealth, 50 Reflections on Money and Meaning. Today in the show, Daniel shares the minimum income level at which money buys happiness, at least in the sense of avoiding pain. We talk about how to purchase material things in a way that increases happiness while avoiding materialism and the value of using your money to buy health and freedom. And we discuss the importance of finding an overarching why that guides the way you allocate your money and doing a values audit to see if your purpose and spending habits are aligned. After the show’s over, check out our show notes at aom.is/soulofwealth. All right, Daniel Crosby, welcome back to the show.

Dr. Daniel Crosby: Man, thanks for having me back.

Brett McKay: So you are a behavioral financial expert who’s written books about how to leverage our psychology so we can invest better. We’ve had you on the podcast to discuss those books. But your latest book, you get a bit more philosophical with your approach to money. You’re trying to figure out how our relationship with money fits into the larger picture of the meaning of life. I’m curious, what caused this shift in focus?

Dr. Daniel Crosby: Yeah, it’s a great question. There’s really a micro and a macro response to this. At the micro personal level, I’m just getting old. I’m middle-aged now. I’m thinking about mortality. I’m thinking about legacy. And I think my first couple of books, I’m proud of them. I stand by everything I wrote there, but they were written in a very calculated, specific way. They were to get me where I needed to go in my career and to make me a subject matter expert in places where I wanted to be viewed as an expert. And mission accomplished, it did that. But now as I age, I’m sort of surrounded by people who have achieved some level of professional success, and I see that their personal lives aren’t always as successful as their professional lives.

And so yeah, a big piece of it is just getting older, considering my own legacy, my own contributions to the world, and seeing myself and my peers achieve some financial and professional success, but not always have the wellness to go along with it, the soul to go along with it. And then at the macro level, I’m just, this is the thing I think about more than anything. I’m a big Viktor Frankl devotee, and he has this great quote about ever more people have the means to live, but no meaning to live for. And I think you’d be hard-pressed to find a better descriptor of the world we find ourselves in. When the US was founded, 85% of the world was living in poverty, what would today be $2 a day adjusted for inflation. And today that number is about 8.5%, which I don’t wanna be insensitive, is still millions and millions of people too high. But the progress that we have made, there has never been a time of greater worldwide abundance than the time we find ourselves in today. Forever, war and disease and famine and all these things have made human life very hard. And while all those things still exist at some level, and we should remain vigilant in fighting against them, we have never been healthier, more peaceful, more prosperous.

And yet when you look in the US, I’m Gen X, Gen X and younger, every single one of those age cohorts describes themselves as very lonely and isolated and living sort of a meaningless life. And so we’ve got this weird problem where we have the means to live, but no meaning to live for. And I wanted to take that on directly.

Brett McKay: Yeah, that is interesting. It seems like it’s a paradox ’cause that prosperity comes with its own set of curses if you’re not careful.

Dr. Daniel Crosby: Certainly.

Brett McKay: Yeah. So what do you do in this book, The Soul of Wealth? You basically, it’s like a compilation of 50 different thoughts, reflections, essays about money and meaning. And in one of them, you talk about how money is a great tool that can fix a lot of problems in life, except for a few. First, let’s talk about the problems that money’s really good at solving. What are those problems that money that, hey, you can throw money at this and it can help you improve your life?

Dr. Daniel Crosby: Yeah. One of the greatest things about modern life that I don’t know is fully appreciated is just how much free time we have. And I know that we conceptualize of our lives as being full to the brim. And I would say the same thing, work and kids and all this stuff. But we have dramatically more leisure time than any previous generation. Now, what we do with that is a different conversation. All the research shows that all that excess free time has basically been directed at TV. But we have more leisure and more free time than we ever have in human history. And that’s a wonderful thing. Money’s also great at buying you wellness, right. It can buy you nutritious food. It can buy you good health care. It can get you a gym membership or a personal trainer. And all of that stuff has a material positive impact on your life. It can buy you self-improvement in education. College grads make over a million bucks more than people who graduate from high school. And they also enjoy lower rates of divorce and heart disease and sadness. So there’s a lot that money can do to help human flourishing that way.

The final thing that I’ll talk about, and one of the things that sort of buys us a great deal of joy, is novelty. Another thing that we’re uniquely positioned to do is just have new experiences. One of the things that’s true of humankind is that we quickly become habituated to our circumstances. Whatever our day-to-day is, that quickly becomes the norm. But going on a vacation, going to a new place, trying a new dish, all of these things introduce us to novel experiences that bring us a great deal of joy.

Brett McKay: Okay. So money can buy us time. It can help us get novelty. We can get healthcare with it. What are some of the problems that money can’t solve?

Dr. Daniel Crosby:Well, the part where it can’t solve problems, I think, is perhaps the more interesting conversation because it’s riddled with half-truths. Even among the things that I talked about money can buy you access to college, but it can’t take the test for you. Money can buy you a gym membership, but it can’t do the bench press for you. And so the things that it can’t help, there’s a lot of half-truths there as well. I think a lot of people treat money as an indent to itself, but money can’t buy you purpose. What it can do is give you the free time to think about your purpose. Gandhi, I’m misquoting him here, but he effectively said, to a poor man, bread is God. Because if you’re so mired in the struggle for those bottom two rungs of Maslow’s hierarchy, you don’t have a lot of time to think about God or self-actualization or love or friendship. And so money can’t buy us purpose, but it can buy us the bandwidth to think about and pursue purpose. Money can’t buy us love. The Beatles were right about that, but we do know that it can buy you chocolate and roses for a date, and it can make you more attractive to your potential mates, as the research shows.

So I think one of the reasons why people conflate money with just the good life itself is because it certainly facilitates the pursuit of many of these things, but ultimately it leaves off and we’re required to sort of take that first step in the dark.

Brett McKay: Okay. So money doesn’t directly buy us the good life, but it does give us access to the things that can make a good life if we avail ourselves to them. And this gets to the larger question the common question people debate, which is can money buy happiness? And the answer is yes, but as you’ve kind of been saying, it’s nuanced. So what does the research say about money’s ability to buy us happiness?

Dr. Daniel Crosby: The first conversation we have to have is, how are you measuring happiness? Because one measure of happiness is basically about needs reduction and sort of the absence of pain. And so I think animal behaviorists would say that even animals can experience happiness. They may not be able to experience purpose, but they can experience happiness, which is sort of the lack of a negative state. So one of the most famous studies is of course, this Kahneman study that people like me and others sort of shouted from the rooftops because it confirmed all of our prior assumptions, which is that happiness with money plateaus around $75,000 a year at the time of the study, which is almost perfectly $100,000 a year today adjusted for inflation.

And that is true of needs reduction because at about $100,000 per year you have enough food to eat. You have a warm place to lay your head. Your kids can go to a safe school. Sort of the basics of life are met and there’s not a whole lot of negative sort of physical moment to moment pain in terms of your needs. So the need reduction measure of happiness is met at a relatively low level of about $100,000 per year. But there’s a more philosophical, sort of more existential way to measure happiness as well, which is just self-appraisal of life. If I say as we did before we pressed record, just like, hey, Brett, how are you doing? Tell me how your life is. Like, how are you doing? And we find with this more qualitative, this more subjective life appraisal, happiness and money are basically up and to the right as far as the eye can see. I mean, they’ve measured it up to about half a million dollars a year in earning. There’s not a ton of people who make more than half a million dollars a year. And so that’s where they stop. But they find that at every income level, people’s life appraisal improves monotonically.

So in a stepwise fashion from zero to half a million dollars a year. So it really matters. Like, are we talking about moment to moment physical pain or are we talking about happiness with respect to how we sort of account for our lives? Another piece of nuance that I would add to this conversation is depending on the study, about 10 to 15% of folks, money doesn’t move the happiness needle at all. And these people it’s widely assumed are suffering from sort of a clinical depression or sort of an emotional state that keeps money from having any sort of impact. So if you’re making more money and it’s not moving the needle in any respect, I think there’s this idea of wherever you go, there you are. You may need to take a different approach to trying to achieve that happiness. And then the last thing that I would say that that I think is maybe the most interesting point of the whole thing is there’s newer research that shows how you spend money materially impacts your happiness.

My favorite piece of research around this has to do with cars. If I go out tomorrow and buy a Lambo to stunt on my neighbors and show everyone how rich I am, that doesn’t buy much happiness. There’s a very sort of high peak for the first couple of weeks, and then that habituation sets in. Quickly, that Lamborghini that was so nice and new, the door gets dinged you get bird poop on the window, you throw your gym clothes there, and suddenly it’s just not so hot anymore. You just kind of get used to it, and the happiness falls off rather precipitously. But there’s research that shows that people who buy a car to join a car club get massive happiness dividends, because really it’s a relational exercise. What they’ve done is, yeah, you spend a lot of money to get an antique Porsche or whatever you did, but now you’re part of the Atlanta Cars and Coffee Club, and you get to meet with your buddies and look at your engines on Saturdays, and you have a social cohort. So there are definitely examples where if you spend money, even splurge on something that gives you relational access or something that’s consistent with how you wanna be viewed as a human being and your personality, there’s a big happiness dividend there.

Brett McKay: Okay, so if you’re spending the money for those bigger things, it’s gonna bring you happiness.

Dr. Daniel Crosby: That’s right.

Brett McKay: Yeah. I’m sure people have seen that research a lot. It’s like, well, if you wanna be happy, you got to spend your money on experiences to maximize happiness. I think that’s true, but I’ve also, like you said, there’s things that I’ve bought in my life, I’ve splurged on that they brought me happiness and they still bring me happiness. I’ve got a few things in mind. Do you have anything, like some items that you bought that continue to bring joy to your life?

Dr. Daniel Crosby: Yeah, there’s a few. For me, I got a nice award from my alma mater last year. And to mark that event, I bought myself a watch. And so when I look at that watch, it’s not crazy, but certainly you could get the time for a lot less. And when I look at that watch though, I’m reminded of my hard work, my accomplishment, the recognition of a university that turned me away when I initially applied there, which was a pretty sweet thing. And I’m very proud of that. My guitars, I have some expensive guitars and I’m a decidedly mediocre guitarist, but having these nice guitars on the wall right here in my office where I’m talking to you encourages me to practice and try and grow and become better and test myself and struggle in new ways.

And then the last thing is something I’m in the midst of right now. You and I were talking before, I’ve lost a lot of weight this year and my clothes were falling off me. I had to get all new clothes. And I’ve really taken the time to try and put together a kind of classic American menswear vibe, really nice fitted stuff, high quality, fewer clothes, higher quality. And every time I see one of those shirts or jackets that wouldn’t have fit me six months ago, I go, Hey, you did it. And it’s a really nice feeling. So I think we have to move towards a more nuanced view of this and spending can really buy you happiness. I’d be curious, what are some of yours?

Brett McKay: First one I can think of, I bought a sauna a couple of years ago, a barrel sauna, and I’d been wanting, I love the sauna at the gym, but then I shifted to a home gym and I would still go, I still paid for like a 10 gym membership, $10. So I could just use their sauna, but it was always crowded. And they’re just gross people in there. They like pick their toenails and the teenagers blasting music while you’re in there trying to like just zone out. So after a couple of years, I finally decided to pull the trigger. I bought a barrel sauna and I love it. My wife loves it. I go in there, right now it’s perfect sauna season. It’s getting cold, starting to get cool at night and just sitting there in the heat for 30 minutes and you go out in the cold and it’s just, it feels good. I’ve had friends over and we’ve had some great conversations in the barrel sauna. So it’s a thing that facilitated relationships.

The other thing, a recent purchase that I made that’s brought a lot of happiness in my life, I bought a wood pellet smoker earlier this summer. And it’s been great ’cause I can grill on it. So do burgers, chicken, things like that. But then I can like smoke brisket, I’ve smoked tenderloins and I’m using that thing all the time. And I think one of the things that does, it facilitates relationships. Like I’ll smoke a brisket or something when I’ve got friends or family coming over. That’s one thing that’s brought me a lot of happiness. And with the cars, we bought a 96 Buick Roadmaster, the wagon a couple of years ago, where it’s got the backward facing seat.

Dr. Daniel Crosby: Oh nice.

Brett McKay: And we did that so we could carpool with our kids’ friends. And it’s been, yeah, I love that thing. Every time I get into it, it’s so fun to drive. We’ve made some good memories in there.

Dr. Daniel Crosby: See, I think all the things you just named are perfectly demonstrative of some of the stuff I’m talking about, right. It’s facilitating relationships.

Another thing we know about money and happiness is one reliable path to that is by getting out of stuff we hate. And I was cringing hard over here when you were talking about people picking their toes in the sauna. So if it frees us from people picking at their feet, that’s something you hate. That’s a good use of money. I joke that I will never mow my lawn again. I mean, I live in Georgia. It’s way too hot. I got a big yard. It brings me a great deal of joy to see that high school kid out there sweating it out instead of me. So getting out of stuff you hate is another big one.

Brett McKay: Yeah. And going to that idea that experiences, if you spend on experiences, that will bring you the most happiness. My experience, not necessarily so. There’s some experiences that I’ve gone on like that was actually, I did not enjoy that. And when I think about like, why did I go on this thing? It usually was ’cause like, oh, some person said you should do this thing. It wasn’t because I actually wanted to go there or do the thing. So yeah, I think if you buy the experience or spend money on experiences just because you wanna impress somebody or you saw somebody on the internet said, hey, this is the greatest thing in the world, you should do it too. And it’s not actually something you’re interested in. You’re not gonna get any joy out of that.

Dr. Daniel Crosby: Well, I think that’s worth commenting on because we live in a weird time, where it’s kind of become socially okay to brag about experiences in a way that it wouldn’t be okay to brag about more obvious material things. People will post pictures of a $25,000 vacation and it’s just, sort of gets filed under, oh, look how beautiful the world is or something.

Brett McKay: Right.

Dr. Daniel Crosby: And I think there’s a lot of mimetic desire around experiences now. And my family and I were talking about going on a trip in November, and I’m like, I don’t really wanna do this. I’m like, I travel all fall. I’m like, I don’t really wanna do this trip. I think I just wanted to show off. And so I think even experiences have been corrupted somewhat in our social media age.

Brett McKay: Okay. So, buying things can bring you happiness. It’s nuanced, this is not an excuse to go spend your money willy-nilly, but it can if you do it right. But one of the dangers of spending money on stuff to find happiness is that you could become materialistic. And there’s actually, the psychologists have studied this and they’ve actually figured out there’s three characteristics of a materialistic person. So, what are those three characteristics?

Dr. Daniel Crosby: Yeah. This was news to me. I was really excited to come across this research and happy to share it here, that the three characteristics, the first is possessiveness. So, this is just around an inclination to control both things and people. So, that possessiveness is sort of the first and perhaps the most dangerous of this trifecta. The second, understandably, is non-generosity. Sort of an unwillingness to share back to the happiness conversation. One of the most reliable paths to happiness with money is by giving it away.

And yet people misapprehend that dramatically, like better than 90% of people think they’ll be happier when they buy something for themselves versus give it away. And that’s flipped in terms of actuality. So possessiveness, non-generosity, and then finally, envy, and especially ugly piece of this envy, in addition to sort of the way we use it in everyday language, is anger at others’ success. Being unhappy when others people are successful. So possessiveness, a lack of generosity and envy at other success are the three. And I cited 259 studies in the book that show that it’s associated with lower wellbeing, lower life satisfaction. And this is true, and you can’t say this about many psychological phenomena, but this is true across demographic and cultural lines. So men, women, all over the world, people possessed of this materialistic triad, just don’t have great lives.

Brett McKay: Yeah. So, if you find yourself acting like a scrooge, that’s probably a warning sign. You need to do something…

Dr. Daniel Crosby: Yeah.

Brett McKay: To fix it. So, how do you stave off the materialism?

Dr. Daniel Crosby: You are visited by three ghosts in the night, no. There’s a couple of things you can do. The first is you gotta prioritize community. Community is sort of an antidote for this. Being other-centered is one of the most reliable paths to meaning when it comes to setting goals and measuring your own success. You’ve gotta run your own race and measure your own success. Again, it becomes very, very easy in our time to benchmark to the wrong stuff and to have a bad reference class. A zillion years ago, you would’ve known about 150 people and you would’ve benchmarked your life and your wealth to someone who lived probably within a mile of you. Now we have instant access through Instagram and everything else to the lifestyles of the rich and famous. And it becomes very easy for us to pick a poor reference class. And that is a recipe for misery.

Another tip is to ground yourself in the moment and really work on that presentness. Materialists are often focused on the future and do a lot to let the beauty of a moment slip by always sort of anticipating that next big dopamine hit. And then the final thing, which is just one of these simple but overlooked things, is to practice gratitude. My wife has a bullet journal, literally, two lines where she tries to write down something good that happened that day. And this simple practice has been shown to give about a 10% bump in wellbeing experimentally, which is equivalent to the bump that folks get from taking SSRIs, which is an insane thing, to say that hey, psych meds and writing what you’re thankful for in a journal have about the same sort of impact on happiness, but gratitude cannot be overlooked. It’s big piece.

Brett McKay: That idea of generosity and just spending your money on others. Going back to the Christmas Carol example, like, don’t be a Scrooge. The antithesis of that, I think is Fezziwig. Remember Fezziwig?

Dr. Daniel Crosby: I do, I read that book every year.

Brett McKay: Yeah. So, it’s like one of my favorite parts in the book where it’s the, it’s he’s doing the Ghost of Christmas Past and Scrooge goes back and he sees his old boss Fezziwig, and Fezziwig put on this big party. And it is just a great time. Everyone’s having a great time. It’s something that Kate and I, we do every year. We like, we just, it brings us so much joy is having a big holiday party we invite our friends too. And it’s just, it’s awesome. ’cause we always think we wanna be Fezziwig. Like Fezziwig was a baller. [laughter] We want to be Fezziwig. We want to provide like, those memories that people have when they’re, ’cause we have a lot of kids there. We want them to be like, Hey, we, this is a great thing that I had a lot of good memories.

Dr. Daniel Crosby: So, that’s one way you can counteract the materialism. Be Fezziwig.

I Love that.

Brett McKay: Don’t be Scrooge. Be generous with your hosting and hospitality. We’re gonna take a quick break for a word from our sponsors.

And now back to the show. So, one aspect of our lives that you recommend that we don’t skip on is our health. And you mentioned this earlier, but in this essay, you started off talking about your experience with a toothache, that really brought this principle home of spending money on your health. What happened there with your toothache?

Dr. Daniel Crosby: Yeah. So I began to have like bad migraines, sensitivity to light, just enormous pain in my head. And I assumed that it was a toothache. I had never had a cavity in my life. I had never had a single dental problem in my life, but I’m like, this feels for the life of me, like a toothache. So I went to my dentist, my dentist looked me over, and he is like, it’s not your teeth. And so the pain persisted. I mean, I could barely get up off the couch. I was like incapacitated by the pain. The headaches were so horrible, sensitivity to light and sound. And so I go on this multi-month, nearly a four month journey of trying to figure out what the heck was wrong with me. And I went to the hospital. I mean, I went to the emergency room once when the pain got so intense.

I went to psychiatrist and sinus doctors and got a CAT scan and got MRIs. I mean, just on and on and on, trying to figure out what this thing was. And it just wouldn’t go away. And the pain got so intense. One day I was just driving with my family and the pain was so bad and I just started crying. I mean, I just started crying in the car. ’cause I’m like, I’m gonna die. I’m gonna die. Like I have some mystery illness. And at this time, at that moment when I’m crying in the car, I would have given you every dollar I had for the reassurance that I was gonna be okay. And for relief from that pain. Well, about two weeks later, I was at a client event down in Atlanta, and we were breaking for lunch, and I bit into a sandwich and the whole side of my face swole up.

And sure enough, it had been my tooth the whole time. My dentist had missed it. I had a crack in my tooth. It was, I won’t go into gory details, but it was enormously abscessed once it broke. And the minute… So, I [laughter] my face starts swelling. I’m looking crazy. I excuse myself from my client engagement. I drive straight to an emergency dental place, get that tooth pulled. And immediately I felt incredible. I mean, I felt a relief that I had not felt in months, but it drove home this platitude. We all know that health is wealth, but a sick person only wants one thing. A healthy person has a million desires, but a sick person only wants one thing. And when you dig into the research around health and wellness and money, you see that there’s this incredibly powerful reciprocal relationship.

Brett McKay: Oh yeah. So, the takeaway there; it doesn’t matter how much money you have, if you don’t have your health, it’s all for naught, pretty much. So, how can people use their money to invest in their health?

Dr. Daniel Crosby: I think one of the most powerful things you can do is control the controllable. You find these statistics where people who are taking care of themselves just do a lot better financially than people who don’t. So, frequent exercisers make 10% more than their no exercise peers with similar educational and professional backgrounds. People who had a mentor make way more than people who don’t. Men who go to therapy make some astounding [laughter] some astounding double digit increase in their pay versus their same education peers who don’t go to therapy. So, there’s all these ways that we see that controlling the controllable, taking care of yourself just leads to not only better health, but better financial health as well. And then, just because of the soapbox I’m on right now with sort of this fitness journey that I’ve been on this year, one of the biggest things for me was to get current information.

The thing that really transformed my relationship to my body was just having daily input on what I weighed, how I was doing, what volume of exercise I was doing. We lie to ourselves in some really big ways. People under-report their calorie intake by between 25 and 50% a day. People overestimate their level of exertion and exercise by 47%. So, a lot of times I think just having information, just monitoring these things and keeping an eye on them, that that knowledge is real power that helps us to not sacrifice a replaceable thing like money with an irreplaceable thing like our health.

Brett McKay: So, it sounds like we should be thinking of investing in our health as more than just investing money. You can invest time in tracking things, and when you do invest money, you can motivate yourself to do so by remembering that it’s actually a good financial investment. It’s gonna pay off actual dividends eventually. And it’ll also improve your health. Going back to the material things that we’ve spent money on or splurged on that’s had a lot of ROI, I’d say my home gym, like over the past decade we’ve built up, there’s been a significant ROI on putting money there. Like, first off, I just enjoy exercise and training, but like the health benefits have, I’m sure been phenomenal.

Dr. Daniel Crosby: Yeah.

Brett McKay: Yeah. Okay. You have an essay that I really enjoyed, it’s entitled, You don’t really want to Be Rich, you want to Be Free. What do you mean by that?

Dr. Daniel Crosby: So in the book, [laughter] in the book, I don’t name this person by name, but I guess I will, on the podcast I’ll be impolitic and name the person on your podcast. I was reading a story about Elon Musk. And so Elon Musk was talking about this standing 9:00 PM Saturday meeting that he has. And he is like, yeah, I was in my standing 9:00 PM Saturday meeting, and I don’t know why [laughter] that piece of information hit me like a ton of bricks, because in that moment I was like, I am richer than this guy. I know that he has hundreds of billions of dollars, but at 9 o’clock on a Saturday, I’m having fun and he’s not. And that is true wealth. And so I think that’s sort of the point of this chapter. One of the things that I talked about in a previous book of mine, The Behavioral Investor, you can demonstrate this with brain scans and other things, is that people value money for its own sake, independent of what it buys, which is a very goofy, backward stance to take towards money.

Because you don’t want money for its own sake. You want what it can do for you. And one of the things that it can do for you is free you up from having to do things you hate or be around people you don’t wanna be around or do things that you don’t wanna do. So, this chapter is all about making money your servant and not your master, and not getting wrapped up in this idea of just more and more, and more. But what is it that I really want this money to do for me? And I think if we’re honest with ourselves, very often, for most people, the highest and best use of wealth is to buy back your life, to buy back your independence.

Brett McKay: Yeah. I mean, I’ve seen, I’m sure you’ve seen this too with your work, people who’ve gotten richer and richer and they’ve just become less and less free because they build those what gilded bird cages for themselves that they can’t get out of. They say, well, I can’t quit this job, or I can’t stop this business that’s I don’t enjoy. Because if I do, then I’m gonna lose everything that I have.

Dr. Daniel Crosby: Yeah. I have seen that again and again. That was a big impetus for writing the book. Just by virtue of my day job, I am proximal to lots of people with really, really, really big bank accounts like sent to millionaires, billionaires. And more often than not, I would say that these folks lack a sense of freedom. They are so wrapped up in the pursuit of more, even in cases where they have more money than they could ever serviceably spend in a lifetime, even in those cases, there is an inertia and a lack of freedom that makes them less free with people with a lot less money who’ve been more thoughtful about its deployment.

Brett McKay: All right. So, if you have an opportunity to buy freedom, do it. You’ll be happier. That might mean you take more vacation. You talk about that. A lot of Americans, I think Americans are really bad at vacation.

Dr. Daniel Crosby: Oh yeah.

Brett McKay: I think most of us don’t use all of our vacation time, but take it, like, take that. The other things too, if you have the means, buy a lawn care guy, buy an hour of babysitting so that you can go on a date with your wife, there’s all different little ways you can buy back some time.

Dr. Daniel Crosby: Yeah.

Brett McKay: Yeah. You also talk about finding a why for your money. This is kinda like the meta meta theme of your book. What does that look like? ’cause I don’t think most people, when they think about their money, they’re not thinking about the purpose of money or like their why. So, how do you go about figuring out your why for money?

Dr. Daniel Crosby: Yeah. I think you’re right. Most people aren’t thinking about this. And one of the things that I wanna do is encourage them to, because the power of tying your dollars to your purpose is so incredible. It almost sounds like science fiction when you read some of the research, but people who had named their dollars. So, not just, account A, B, C, 1, 2, 3, but Brett’s retired to The Bahamas Fund. Something that simple, just labeling it for purpose. One study found that in tough markets, they were 10 times less likely to bail on their investments and go to cash. Another study out of Canada found that when people looked at a picture of their kids before they logged into their bank account, they were twice as likely to save. Morningstar, big financial firm found that, that accounts that were labeled with a specific purpose had 15% more in them than their peers.

So, one reason to do this is just because it elicits a host of good financial behaviors. I mean, it really takes investing, saving, spending, out of the ether, and it ceases to become a video game, and it becomes this real thing that’s tied to life. But in some research that I’ve done since this book, I really have found that there’s sort of three facets to meaning. If we look back over the research, a life purpose has three legs to that stool. And I think if you apply it here, that the three are believing, belonging, and becoming. So, people with purposeful lives, first of all, believing they have a philosophy, a religion, or a moral framework that guides their life. You see this again and again and again and again. Religious people are reliably happier on average. And this is one of those reasons.

They have a moral framework to help them make sense of the good times and the bad times in life. Doesn’t have to be religion, but you need to have thought through your sort of personal philosophy of why things are the way that they are, and let that guide how you spend money. The second piece, the most powerful piece is belonging. Again, back to relationships. If you say you value relationships, are you spending money like, that’s the case?

And then the third piece that people with meaningful lives have is becoming, which is they are growing, they are learning, they’re progressing. So, you need a moral framework. You need a group of people to love and who love you back, and you need a vision of the kind of person you want to become. And if you’ve got those three things, you are on your way. And each one of those three things has a financial component to it. And if you value those things, it should show up in your budget.

Brett McKay: Yeah. You recommend if to people, I like this idea of doing like a values audit of your bank account. If you don’t know what you value or what’s the why of your money, just take a look at your statement from the last month and see where you’re spending your money. And then you can start kind of putting things in the categories like, oh, I spent a lot of money eating out with friends. Okay, well friends seems like friends are important, and saving time is important. But then you might see, well, I’m spending a lot of money on subscriptions that I don’t use. Maybe I can do something better with that money.

Dr. Daniel Crosby: Yeah. That’s exactly right. I love this idea. There’s sort of two things at work here. The first is that your money is your vote. And I mean, I had this conversation with my youngest kid the other day. We always go to the local farmer’s market on Saturdays, and we were buying some spaghetti sauce, and she was like, that’s a lot. That’s really expensive. Like, that’s a lot more than it is at the store. And I was like, yeah, that’s right. But I wanna live in a world where local entrepreneurs who are growing tomatoes in their backyard and working hard can make a living. So yes, it is twice as much as the Prego or whatever, but it brings about an outcome that I care about. And it’s just, it’s a powerful way to think about money is am I spending it in a way that brings about the kind of world that I wanna live in? And am I casting my vote wisely? And the flip side of that is, is the ultimate BS detector. We’ll say, oh, I value growth and spirituality and purpose and relationships. And then, I look at my budget and it’s all Netflix and Doritos, then maybe it’s time for a reckoning. And it just, it’s very easy to lie to yourself about what’s important to you. And money shines a very bright light on what you truly value.

Brett McKay: Yeah. What’s that saying on, I tangently very loosely follow like financial Twitter. And then you’ll see every now and then this big blow up when some financial guy gives a bit of advice and then someone will respond like, show us your books. Show us… What are you doing? ’cause they wanna make sure that like they got skin in the game, they’re actually putting into action what they’re encouraging people to do.

Dr. Daniel Crosby: Yeah. Yeah. And Nassim Taleb wrote about that, Never ask a person their opinion, just ask to see their portfolio. Like, I don’t care about your hypothesis. Like, what are you doing with your money?

Brett McKay: Yeah. Yeah. So, that’s something I do, once a month I go through the bank statement and see what I’m spending my money on. It has a couple purposes. One, it just helps me figure out, okay, my spending my money on anything dumb and can we cut back on that? Or am I spending too much on a certain area? So just you got your eye on the till basically.

Dr. Daniel Crosby: Yeah.

Brett McKay: Then also the same time I’m saying, well, is my spending matching up with our family’s values?

Dr. Daniel Crosby: Yeah.

Brett McKay: And if it’s not, then you can do some correction. I think once a month like that, I think that’s plenty of, you don’t have to do it every day or every week, but like, just do it once a month. It doesn’t take a lot of time. So, something else to talk about, and we’ve had conversations about this, there’s a temptation in some people, not everybody. There’s a certain segment of the population where they just want to keep squirreling away money for retirement. Like they’re aggressive, aggressive savers. And there can be some upsides to that. But the downside is like, you just don’t enjoy your life now and you can’t spend money on other people now. Are there any biases that might lead some people to excessive money hoarding?

Dr. Daniel Crosby: Yeah. There’s a host of them. So, I [laughter] I actually did some research at Orion, my employer, where we interviewed 425 couples. And we asked them, effectively, we did it more delicately than this, but effectively we asked them, what do you fight about when you fight about money? And the number one point of friction among couples was whether money was best used to enjoy today or to secure against an uncertain tomorrow. And it was almost 50/50. And if you think about it, the appropriate response is somewhere in the middle. I mean, both things are important. Like it is both important to use money to seize a moment, because tomorrow tomorrow’s not promised, and we need to be setting aside for that future self and that rainy day. But we found that people tended to be far more decamped into sort of extreme sides of this position.

And so there were a lot of moral judgments around this too. Like if, for folks who find themselves in the ‘save for tomorrow’ camp, they see the other folks as sort of frivolous and unserious. And for people who were in the, “enjoy the moment” camp, they see the savers as sort of fun haters and sticks in the mud. And so the behavioral biases that load onto this are, there’s a few of them. One of them would be loss aversion. We perceive spending as a present loss, and we are two and a half times as upset about a loss as we are happy about a comparably sized gain. So that a hundred dollars hurts worse coming out in retirement than it felt good to save it when we were in the accumulation phase. The other thing is uncertainty aversion. Uncertainty is perhaps the thing which humankind finds most distasteful.

Like we hate not knowing even more than we hate bad news. And then we also engage in anchoring, which is sort of benchmarking to a high watermark. So if we retire with a million dollars, we go, oh, I’m a millionaire. Like I did it. And then when you have to start drawing that down, it’s painful all the way down. So, there’s a couple of ways I think to overcome what is admittedly a pretty thorny problem.

The first is something called bucketing, which is kind of back to this naming it for purpose. There’s a psychological phenomenon known as mental accounting where the way that we label money materially impacts our willingness to save, spend and invest it. So something as simple as saying, here’s my principle, here’s my dividends, here’s my living money, here’s my vacation money, here’s my don’t touch it money, that can give us permission to spend it as we ought to.

Second powerful thing is to just automate the inflows and outflows so we don’t have to think about it. You wanna kind of minimize touches. And so if you can make a good decision once and kind of set it and forget it, that’s powerful. And then finally, kind of ripping off Stephen Covey here, he has this idea that effectively the only way that we can say no to something difficult is to have a bigger yes burning inside of us. And so we need that purpose again. We have to love our grandkids enough to spend that money on them, even though there’s some pain associated with taking it out, whatever the case may be. So, bucketing automation, purpose are all sort of powerful workarounds for what is a very complicated human tendency.

Brett McKay: Yeah. I think that’s, I mean, a lot of times the focus is on people who aren’t saving enough, which is a problem. That’s a problem. But then a lot of, I don’t think a lot of attention is given to people who save too much. ’cause that can become a problem. ’cause then you hit retirement or whatever. And like, as you said, there’s some people who have so much money saved away in retirement, they can’t even like draw it down by the time they…

Dr. Daniel Crosby: Yeah.

Brett McKay: So, they’re left over with a big chunk of money that yeah, they can pass on to their kids and grandkids, but then there’s gonna be like, it’s gonna be taxed. And it’s like, there’s all these other problems that come with that. So it’s, yeah, trying to figure out how to manage that nut you may have squirreled away during your working life. That can be tricky.

Dr. Daniel Crosby: It’s very tricky. And in a real sense, like every dollar that you die with, and look, I get it, you can’t probably, none of us knows when we’re gonna go specifically, but every dollar that you die with is a dollar that you weren’t able to spend in life on time with your kids, time with your loved ones, being generous, being kind, blessing the world. I mean, it’s in a real sense, it’s a missed opportunity. And there’s a great book called Die With Zero, which covers this very thing.

Brett McKay: Well, Daniel, this has been a great conversation. Where can people go and learn more about the book and your work?

Dr. Daniel Crosby: Yeah. The book is The Soul of Wealth. I hope people will go check it out. I’m active on Twitter at Daniel Crosby. I have my own podcast, Standard Deviations, and yeah, just Daniel Crosby, PhD on LinkedIn as well.

Brett McKay: Fantastic. Well, Daniel Crosby, thanks for your time. It’s been a pleasure.

Dr. Daniel Crosby: Thank you.

Brett McKay: My guest here is Dr. Daniel Crosby. He’s the author of the book, the Soul of Wealth. It’s available on amazon.com, at bookstores everywhere. Check out his podcast, standarddeviationspod.com where you get your podcast. Also, check out our show notes at aom.is/soulofwealth, where you find links to resources. We delve deeper into this topic.

Well, that wraps up another edition of the AOM podcast. Make sure to check out our website @artofmanliness.com, where you find our podcast archives. And while you’re there, sign up for our newsletter. We got a daily option and a weekly option. They’re both free. It’s the best way to stay on top of what’s going on at AOM. And if you haven’t done this already, I’d appreciate you take one minute to give review of the podcast on Spotify. It helps out a lot. If you’ve done that already, thank you. Please consider sharing the show with a friend or family member who you think will get something out of it. As always, thank you for the continued support. Until next time, is Brett McKay, podcast, but put what you’ve heard into action.

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