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Understand How and Why You Spend

conspicuous spending doesn't make you happy
❝Before I spend money I ask myself one question: Is this worth my freedom?❞ -Joshua Fields Millburn

I'm walking to lunch when I see the car dealership. I walk in, knowing that somebody will come up to me and start hounding me, but I'm okay with that. It's 2008, and my car is over a decade old and stopped working about a month ago. I work downtown, so I take the bus and don't really need my car, which is why I haven't gotten it repaired. Plus, I'm sick of getting this thing repaired. It seems like every two or three months, I have $700 or $800 worth of repairs. It's time for a new car.

I start looking at 3-year-old used cars. Specifically, I'm looking at compact cars because I literally only need my car for commuting. As I'm going through the process, the salesman tells me that he can get me into a brand new mid-size sedan for the same monthly payment as my car loan on the smaller used car. Before I know it, I'm signing the paperwork to lease a brand new car.

It happened so quickly I don't know how I ended up with a different car than I wanted. The following weekend shed some light on why I spent the way I did. I’m invited to a poker game at the house of one of the partners at work. I notice that everybody else has a nice car. Many of them are luxury cars. That's when it hit me; I wanted to fit in with the people I was working with. Even though I didn't get a luxury car, I did get a newer car than I intended, and it stretched me financially.

I spent money on this purchase to impress the people that I work with, or at least to not be looked down upon by them. Sure, this new car made my life better, but I could have received the same benefit for a lot less money if I let my quest for a status boost go.


We seem to be hardwired to pursue money without understanding how much is enough. It's ingrained in us to continually strive for more without an end in mind.

This could look like never being satisfied with our current salary. This could be wanting to have more money saved. It could also simply be focusing on the acquisition of money above all else.

While many people may not even know that this hardwired pursuit of money is ingrained in them, fewer people understand why they are after money.

For some people, having more money saved comes with a feeling of safety. For others, there's a belief that more money will make them happy. But, since we are social animals, we're constantly gauging our position in the group. Money tends to be our default way to gauge because money can be counted. In contrast, life satisfaction isn't as easily quantified. This leads many to pursue money to show how successful they are or how smart they are.


Understanding why we pursue money is only the first step. Knowing why we are pursuing money only gets us so far. Money is worthless in and of itself. It is only valuable as a means of exchange. In other words, we have to ask ourselves what we get for that money. To do that, we have to ask ourselves why we spend

The reason people spend money falls into several categories. The first is all too common; people don't even know why they spend. They may not even know that they spend money. It's no accident that it is very easy to spend. When we go to the store and use a card, it used to be that we had to sign a slip that showed how much we were spending. This is more abstract than counting out cash or writing the amount a couple of times on a check, but we still saw the amount we were spending. This no longer happens. Now we tap our card or use our phone, and we don't even get a receipt. Other times we have our payment method connected to our account, so there's not even a payment step in the process of buying. I call this unconscious spending.

A second category is when people spend money thinking that whatever they buy will bring them happiness. They spend money, often money they don't have, to upgrade their lifestyle. If they could drive a newer car, they think, then they'll finally be happy. Perhaps they need to move to a nicer neighborhood or into a bigger house. Maybe happiness will come when they update their wardrobe. I call this misguided spending because spending money won't bring lasting happiness.

A third category is when people spend money to boost their status. This can be related to misguided spending insofar as people believe boosting their status will make them happier. People spend their money as a way to telegraph their success or their intelligence. Another way is to spend money to keep up with the Joneses, using money in a way that we think we're supposed to do because our peers are doing it. I call this conspicuous spending, meaning, spending that other people will see.

The fourth category is when people spend money to make their lives easier and better. These are the people who spend money on experiences rather than things. These are the people who use their money to buy time. These are the people who are charitably inclined, not because they want people to see them putting the money in the collection plate, but because it makes them feel good to give to others. I call this inconspicuous spending, or spending in a way that other people don't know about (unless you tell them).


It's pretty common for people to think that money will bring them happiness. This could be money they're bringing in, like their salary or how much they have in savings. This could also be how they spend their money. And this works up to a certain point. If your basic needs aren't being met, then yes, more money will make you happier because you will be getting more of your needs met.

After your basic needs are met, however, making and having more money only slightly increases happiness. There are two ways to interpret this. The first is that the increase in happiness isn't worth the amount of time we need to spend making the money. Our time and energy would be better spent in other ways that will bring us more happiness - giving us a bigger bang for our proverbial buck. Another way to interpret this is that money doesn't actually bring about more happiness, but rather happiness brings in more money. Happier people are easier to get along with; happier people are more likely to be optimistic and spot opportunities that others won't. In other words, happiness can by money.

The bottom line is that pursuing money for happiness isn't going to bring happiness. A stack of money won't make us happy. One of the reasons is that we adapt very quickly to whatever is going on in our lives. We revert to our baseline level of happiness. People who were unhappy before winning the lottery, for example, are unhappy a couple of months after winning the lottery. People who were happy before becoming quadriplegic will be happy a few months later.

As soon as our income doubles, that makes us happy for a short while, but we quickly become used to living in this new financial neighborhood. Then we fall back to our normal level of happiness and set our sights on making more income so that maybe we can get in on that happiness that we thought we would get. And the cycle continues, around and around on the hedonic treadmill, never really getting anywhere.

People on the hedonic treadmill are caught up in a goal-focused life. They have their eyes set on a particular outcome, and once they get there, they realize happiness was fleeting, and they need to set a new goal. The process involved in getting there is seen as nothing more than an obstacle.

On the other hand, people who focus on systems instead of goals enjoy the process no matter the outcome. People who live their lives to reduce the chance of regret at the end of their life use their money in ways that will make their lives richer. They use their money on purpose with purpose.


All of our behaviors around money are driven by hidden subconscious beliefs called Money Scripts. Money Scripts are beliefs that we have about money that were primarily developed in childhood. We learn how money interacts with our lives and what we're supposed to do as a result.

There can be an infinite number of Money Scripts, but they generally fall into four categories - Avoidance, Worship, Status, and Vigilance.

Money Avoidance Money Scripts are beliefs about money being bad in some way. Money is either too stressful and will bring pain, people with money are bad people, or money and love are incompatible. This leads to people avoiding their financial situation.

Money Worship Money Scripts are beliefs about money making our lives better. The inherent belief is that money will solve our problems. Scripts that fall into this category are related to the pursuit of money for internal reasons. They are about making our lives easier and better.

Money Status Money Scripts are beliefs that money should be used as a yardstick. Money is how we measure success. Like Money Worship, Status scripts are related to the pursuit of money. Unlike Worship scripts, however, Money Status scripts are related to the pursuit of money for external reasons.

Money Vigilance Money Scripts are beliefs that money should be saved and not spent. Of the four categories, vigilance scripts are sometimes considered the best category because it leads to increased savings and less spending. However, having too many beliefs in this category can lead to a fear of spending or someone who resembles Ebenezer Scrooge.

Understanding your Money Scripts helps you understand the beliefs you've internalize about money. This can shed some light on why you spend money the way you do. You can't change a belief you don't know you have.


Chasing and spending money to increase social standing won't make you happier. Showing others how much you have is a game you should try not to play. There will always be somebody better than you. There will always be somebody with more than you. You can't simply use one variable, money, as a gauge of success and life satisfaction. Instead of looking up at all the people who have more than you are better than you and trying to catch up, try looking back to see how far you've come. Be grateful for what you have. Be grateful for where you are.

Everyone has different values. You should not be judged through the lens of somebody else's values. Likewise, you should not judge others through the lens of your own values. We're all playing our own game. You can continue pursuing the things that are meaningful to you while remaining grateful for how far you are. Understand your financial purpose and life purpose and use your money to design a life that will bring you happiness.

Understanding which beliefs you carry around helps you understand why you do what you do. It also helps you challenge any believes that may be unhelpful. Understand what money's purpose in your life is. Money is a tool to help you live your best life possible.

You only have one life. Live intentionally.

Until next time,


If you know someone else who would benefit from reading this, please share it with them. Spread the word, if you think there's a word to spread.

Related Money Health® Reading
References and Influences

Ben-Shahar, Tal: Being Happy

Ben-Shahar, Tal: Happier

Ben-Shahar, Tal: Happier, No Matter What

Emmons, Robert: THANKS!

Emmons, Robert: Gratitude Works!

Hanson, Rick: Hardwiring Happiness

Harris, Sam: Waking Up

Reivich, Karen & Andrew Shatte: The Resilience Factor

Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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