#61: Idiot Money Maths #2: What is your default unit of spending?
15th November, 2021
Welcome to the Idiot Money newsletter. This week, becoming wiser with money by understanding the usefulness of measuring potential purchases in terms of a known subjective value, not an abstract objective price.
When it comes to using money in a meaningful way, the importance of the numbers, from using price tags as a measure of value, to fretting about growth forecasts, is grossly overblown.
We tend towards tunnel vision on the most misleading numbers (such as an investment-growth forecast, or a retirement ‘number’) while remaining ignorant of the insightful ones (such as the role of the unequivocal accounting record of our life choices in living an examined, wiser, life).
Our spending decisions both express and shape the integral whole of our lives. However, we commonly make them as if they were isolated incidents, using phrases like ‘just this once’ to describe decisions made with alarming frequency. Having a go-to use for a given amount of money bridges this gap and reminds us of who we are choosing to become in the moment we’re choosing to become it.
Having a default use of a given amount of money lodged in the front of your mind – a use that reliably makes your life better, but that you often forget to do as often as you would like – helps you make better spending decisions at the moment you’re making them.
It’s a way to quickly weigh up what a potential purchase means to you.
For example, maybe you consistently bemoan your inability to stick to an exercise programme, and despite previous success with using a personal trainer, concluded that you couldn’t afford one regularly (at £100 an hour, say).
You regularly buy impulsive things that add far less value to your life, maybe because you’re drunk, or on holiday, or both. Having the PT cost at the front of your mind allows you to reframe these things from ‘only £20’ to ‘a fifth of a PT session’.
The point isn’t about buying the impulse thing or not. It’s about helping you to remember the trade-off you’re making when you’re making it.
This isn’t a dictatorial denial of anything (though obviously junk-buying is rarely wise). It’s simply a question. If any question feels like an unwelcome dictatorial demand and inspires a defensive reaction… the problem isn’t with the question.
Idiots see spending as a series of transactions. Clever people see in-the-moment trades. Wiser people see the trades as simultaneous expressions of and shapers of a way of life… opportunities to wire themselves to make ever-more-effective trades by default.
1. Because it’s a simple way of accomplishing the vital-but-vague life-enhancing task of remembering the becoming mode
Money misleads us into believing it will bring us what we want, when in reality it is only a well-disguised substitute. ‘As a man is, so he sees,’ wrote William Blake. If we are to stop being misled by money, we need to start living in a different mode.
A shift into the becoming mode is necessary for the systematic overcoming of self-deception. Tackling decision-making errors one by one is as impossible as eating healthily while still identifying as someone that ‘wants’ cake. However many battles you win, you’ll never win the war.
However, ‘remembering the becoming mode’ is hard. And it’s not something you can ‘nail’ one day and forget about forever more. It’s a lifelong task. Albeit one that gets easier each time.
When constructing the world in which we choose to live, we want to construct one that reminds us to spend more time in the becoming mode. This is where the ubiquity and universality of money can be so damn helpful.
Having a single go-to use of your resources is the simplest reminder to pay attention to your life choices, challenge them, and consequently make them better.
The point (obviously, I hope) is not to pick one use of money and sacrifice everything to that aim. No optimal allocation of resources can ever be looked at in time periods of less than at least a month. This is a trigger to encourage thinking, not another means of avoiding it.
2. Because it’s a means of acknowledging self-deception
It’s near impossible to catch self-deception in the act. That’s sort of the point of self-deception.
To spot it, we need symbols: means of trialling a different way of seeing the world that we do not yet naturally possess, but which we’ve good reason to believe would make life better if we did, because it would contribute to a wider vision, and a more accurate interpretation of who we are, what the world’s all about, and how the two dance together.
Money’s proper place is not as a measure of value, but as a facilitator of a trade: a conversion of one life choice into another.
A great financial planner acts as an ‘alignment coach’ rather than an enabler of accumulation – someone that reminds us to check that our expenditure is expressing the story we actually want to tell. Having a default reminder is a DIY means of playing the same role.
This is far more effective than asking yourself ‘do I really need this?’ – which doesn’t express a trade-off, save between stuff and your bank balance, drives an unhelpful wedge between needs and wants, and encourages living in a world ravaged by a never-ending and very bloody battle based on denial and guilt.
3. Because it’s a reminder to prioritise your priorities
Too much of life is ‘lived’ in the future… if indeed we can really call that living, rather than waiting or wasting.
This isn’t a call for reckless hedonism. It’s for a more meditative approach – remembering to return your attention to how you’re living as you would your focus to your breath in a ‘formal’ meditation session.
4. Because it’s a check of both immediate potential purchases and a check-in on your underlying priorities
The idea of ‘budgeting’, when done properly, begins as a means for examining life choices, but it’s ultimately about using our interactions with money as a tool for seeing more clearly. It’s a means of examining an unequivocal accounting record of our chosen trade-offs which helps heighten our awareness of what is most salient to us: what, through the lens of our current worldview, stands out to us.
I have two.
Firstly, playing squash is one of the most reliable ways of bringing more flow into my life.
Not only playing, but playing well – dancing around the court with maximum intensity and minimum perceived exertion. Playing without thinking about playing.
Squash coaching costs about £35-40 per session. Every session I’ve ever done has improved my ability to flow on the court. It’s made my life better in a marginal, but material way.
I rarely get coaching. Whatever its priority in my head, my wallet regularly expresses other ideas.
Secondly, and rather more importantly, I live better – and I strongly suspect most others do too – when I remember that all expenditure is inherently and inescapably ethical. Because all expenditure is a trade-off that expresses how we want the world to be.
I make better big spending decisions when I remember this.
It’s one thing to read about a comparison between the J. Paul Getty Museum paying $65 million for a painting, thereby allowing the museum’s visitors to enjoy looking at it, and the 1.3m people or so living with cataracts in low-income countries that the same amount could have enabled to look at anything at all, and think ‘much as I like art, that does feel a bit mental’.
It’s another thing to trace a line between that expression of ‘a bit mental’ and your own subtler value choices. But it definitely pays to remember that they come from the exact same place.
The importance of remembering this – to me at least – isn’t because of the benefits of redistributing wealth. To some extent everyone bar the most chronically insecure knows that already.
It isn’t even about remembering that basically all the distribution of wealth across the world is down to luck: of where and when you were born, your innate felicity in the areas – or your ability to learn the skills – the world is willing to pay for, and so on.
Far from everyone knows that already, but because those most in need of reminding are the most likely to tell you to fuck off when you remind them, there’s less benefit in doing so.
It’s important because it challenges the norm of self-interest that shapes so many of our poor financial decisions, and causes so much undue financial stress… and which does so on the slyest of slys.
Everyone in a developed society is constantly being bombarded with messages about how to save money, or earn more money, or look better, or gain status – all of which reinforce the assumption that these are things that everyone is pursuing and that really matter.
The norm of self-interest is an ideological belief, resistant to refutation by the behaviour we encounter in everyday life. Yet we are in thrall to the idea that it is ‘normal’ to be self-interested. Since most of us are keen to fit in with everyone else, we tell stories about our acts of compassion that put a self-interested face on them.
Sociologist Robert Wuthnow found that even people who acted altruistically tended to offer self-interested explanations – sometimes quite implausible ones – for what they had done. They volunteered to work for good causes, they said, because it ‘gave me something to do’ or ‘got me out of the house.’ They were reluctant to say: ‘I wanted to help.’
I don’t believe anyone, making a conscious choice in the moment, would choose to prioritise spraying a few grand’s worth of Champagne around a City nightclub, or having someone open every door for them when on holiday over truly transforming someone’s life, maybe even saving it… but they do.
We all do, usually in far less obvious ways than being a wanker in a Champagne-soaked suit.
I think it’s good to remember to check, at the point of doing these things, whether we really want to be doing them.
Note that I said check, not stop. I’m still astonished by the defensive reactions such a suggestion to check often inspires. If your choice can’t stand a challenge, it’s probably a crap choice, coming from a unwisely wired part of your brain. You should welcome the reminder to choose a better way.
That’s all defaults such as these are. Quick reminders. Of the world you want to live in, and the person you want to become.
Surrounded by the vision-narrowing forces of addiction and unscrupulous salesmen, and the lazy-bordering-on-suicidal sacrifices of our potential to the gods of mimetic desire, our in-the-moment financial decisions are often stained with tragic incompetence. And all for want of a well-prepared reminder.