Spending money

Is there more to personal finance than being froogal and investing?

We spend a lot of time talking about the cornerstones of personal finance. Spend less than you make. Invest. Diversify. Protect yourself (life insurance).

But there is one aspect of personal finance we have alluded to, but not outright addressed - how should you spend money.

In a world where everyone is ‘buy now & pay later’-ing a bunch of junk they don’t need, it seems like spending money isn’t an issue.

But it is.

Lets walk through spending, why people are good/bad at it, and what you should spend on.

Spending - A Story

There is an anecdote about Former General Electric CEO Jack Welch. Here is a guy who was CEO of GE for 20 years. He 40x its value from ~$10B to ~$400B through acquisitions and growth. He got a $400+ million severance when he retired in 2001 and had a net worth in the $700 million range.

In April of 1995, Welch had a heart attack and needed a quintuple bypass.

In 2001 he gave an interview with Stuart Varney at PBS and when asked about what was going through his head in April 1995 as he was being rushed to the hospital, his response was:

“Damn it, I didn’t spend enough money,”

Varney asked why that would be his thoughts and Welch replied:

“We all are products of our background, I didn’t have two nickels to rub together when I was young, so I’m relatively cheap. I always bought cheap wine.” After the heart attack he “swore to God I’d never buy a bottle of wine for less than a hundred dollars. That was absolutely one of the takeaways from that experience.”

“Is that it?” Varney asked.

“That’s about it,” says Welch.