How to Spend More Money and Still Become Richer

I’m well known for pushing a message around saving.

Many times, improving one’s finances starts with learning to better manage the money they already have.

By optimising expenses, questioning consumerism, and spending less on optional extras.

But sometimes people assume that means your spending must remain stagnant or only go down.  That you aren’t allowed to indulge in luxuries or guilty habits, or happily engage in lifestyle inflation.

Wouldn’t that ruin all your hard work?  Won’t you be vilified by the financial community and automatically barred from the FIRE club?

No!

And before you assume I must’ve taken a nasty knock on the head over the holidays, let’s explore a few truths about rich people through the perspective of wealth and spending.

How the rich stay rich

It’s easy to look at those who are incredibly wealthy and be puzzled by their purchases.

Stately mansions with acres of beautiful gardens.  Luxurious round-the-world trips, private jets, high-end brands of everything, and a fine rotation of automobiles that even I raise an eyebrow at.   (Give me a Rolls Royce Phantom over a Lambo any day!)

But the amazing part is not a rich person’s spending, but how they’re able to stay rich despite their spending.

So, what’s the deal?  The answer is quite simple.  Boring even.

The way a rich person stays rich is by keeping their luxury spending to a modest percentage of their overall wealth.

If someone buys a $600,000 car, yet they’re worth $20 million, the purchase represents only 3% of their net worth.

That’s just like a humble millionaire buying a car for $30,000.  Or someone with $100,000 of wealth spending $3,000.

There are a couple of things to note here:

—  It’s easy for a rich person to buy mind-blowingly expensive things without it affecting their wealth or freedom.
— As long as you keep everything in a healthy proportion, you can increase your spending over time while still becoming much richer.

But we can use this little point to our benefit even more.

Spend like the super-rich

Now, you might rightly point out that the rich own assets which are making money for them.

That’s true, of course.  But wherever their money comes from, the reason they’re able to spend a gigantic number of dollars because those dollars are a small part of their wealth.  This is what makes it all work.

Let’s consider this in the context of regular people though.  People with low levels of wealth are often spending massive amounts of their wealth on relatively stupid stuff considering their position.

A $70,000 car when they have $5,000 in the bank.  Annual holidays of $10,000 when they own no home or investments.  Mostly paid for with debt – additional money they don’t even have because it’s already been spent.

How, then, will they ever become wealthy?  They won’t!  Unless they learn to make better financial decisions.

So, it’s not our actual expenses that matter.  It’s how large those expenses are relative to our income and wealth.  Basically, all spending needs to be put in perspective to see if it’s reckless or reasonable.

How can we use this concept?

We can take the same approach as the super-rich.  By keeping our optional spending to a modest proportion of our wealth, we can blow money here and there and it won’t ruin our trajectory to long term wealth.

Whether it’s housing, cars, entertainment, travel, it almost doesn’t matter what you buy.   The principle of saving and investing a good chunk of your money will ensure the outcome is still a solid one.

But this is easier said than done.  Just as some people have trouble saving, others have trouble spending.  Or, more accurately, spending on what could be considered frivolous extras, despite being wealthy.

This is obviously far more more common among the financially motivated folks that read blogs such as this one than the general population.  And it’s something I’ve only heard about from others in the last year or two, but it can be a challenge nonetheless.

The mental struggle to spend more

For someone who has become wealthy through controlled spending and dedicated investing, it can be difficult to let ourselves spend more.  Let’s call this relentless saver syndrome.

Even on little things like eating out more, a nice piece of clothing or shoes we don’t really need.  Our ingrained habits become so strong that it becomes hard to do anything else.

We think about the increased costs from a purchase, the foregone investment returns, or the 25x multiplier effect of lifestyle ‘upgrades’ where an extra $1,000 a year of spending requires $25,000 of investments to pay for it forever.

We worry about the dreaded lifestyle inflation that we’ve fought so successfully against over the years – it’s typically this skill that helped build whatever success or wealth we’d built.

This sounds understandable, and it is.  But when we’re relatively wealthy, have already bought our freedom (or close to it), and there’s still cushy surplus, then  fretting over small stuff is unhealthy.

It’s coming from a position of worry, and a mental position of scarcity.  In this case, you’re still operating like the average person.  But if your finances are in fantastic shape, then you should be operating from abundance.  

You have enough.  You know how to manage and grow money.  And, importantly, you can always make more of it!

Let’s be clear: there is never a reason to be fearful around money.  Not when you’ve built a solid foundation of good habits, knowledge, skills, and income producing assets.

You can begin to operate like a rich person, mentally speaking.

How to enjoy yourself and not worry about money

One useful tactic is, as always, to put things in perspective.

If you’re struggling with relentless saver syndrome, remind yourself this extra takeaway meal or shirt or whatever is so tiny in relation to your overall wealth that it’s basically irrelevant.

A luxurious $500 purchase represents 0.1% of an individual’s $500,000 net worth.  About 10 times smaller than a good day on the sharemarket.

Now, some of you might say I’m going against my own message of ‘small amounts matter’.  But remember the context here: someone who is experienced with their finances, already wealthy, has an ongoing surplus, and finds it mentally difficult to spend money.

Whereas most people who spray money all over the place and haven’t got their financial shit together.  They absolutely need to look at every single expense, question it, scrutinise it, and optimise it.  My view on that has not changed!

Now, for the slightly wealthier folks, I’m not suggesting you create arbitrary percentages for what your car should cost, or your house, or whatever, like the super-rich examples mentioned earlier.  These are silly made-up numbers, which often turn into consumer goals rather than sensible guidelines.

Instead, it’s a mindset shift.  If you find yourself with expanding wealth and things are going well, don’t live in fear around increasing your spending.  The whole point of all this is freedom… including the freedom to relax and spend more if it’s something you deem worthy of your dollars.  Just like you should be open to spending less if things aren’t going as well as you hoped.

I apologise if all this seems like boring common sense to some of you.  But I feel the need to flesh it out as it’s often misunderstood.

The dark side of frugality

Relentless saver syndrome is one of the reasons the Anti-Frugality Brigade comes out to suggest that a focus on saving is bad.  Like it’s a disease or something, and you must only improve your situation by making more money.

The reality, though, is that strong habits can be tricky to break.  Same with spending, or eating, or social media.

But being a relentless saver is not the problem.  It’s an underlying mindset of scarcity and restriction, if that’s what it’s built upon.  Just like if a hardcore dieter’s discipline comes from the pure fear of gaining any fat, rather than the goal of optimum health.

So, in addition to keeping things in perspective which I just mentioned, cut yourself some slack.  If there’s something you’d like to do or buy, and you’ve already thought carefully about it, then do it.

Operate from freedom, not restriction.   From abundance not scarcity.  From strength, not fear.

But equally, if you feel compelled to spend more just because you have it, then stop.  That’s not freedom.  You’re then trying to follow what’s expected of you and considered ‘normal’ for someone with greater means, rather than what truly matters to you.

Healthy ways to spend more money

So what are some justifiable examples of spending more money for those who are wealthy with a growing surplus?  Here’s a few things…

Spending money on convenience to save time.  Getting groceries (and other things) delivered.  Outsourcing certain tasks so you can spend time elsewhere.

Spending money for greater quality.  Clothes that last longer.  Appliances that are more efficient.  A home of a higher standard.

Spending money on travel and experiences.  Visit family more often.  Explore those places you’ve always wanted to go.

Spending money on being generous.  Donating to charities, causes or groups you care about.  Gifting to children or family.

It’s important to balance these things with your own personal ethics around wastefulness, the purpose of money, and remembering certain choices have environmental costs.

Sending more can be a slippery slope towards a consumerism free-for-all.  And that will not increase our quality of life.  In fact, it’s more likely to reduce the meaning in our lives.

How to spend more while getting richer in practice

If you like this idea, there are countless ways you could apply it to your personal finances.   Here’s a few.

1– Become wealthy and keep working.  Use your surplus income to spend more while your wealth keeps expanding.  Ideally, you enjoy your job with this one.

2– Reach FI and leave full-time work.  After this, any additional income earned through part-time work activities can be used for greater spending.

3– On the road to FI, aim to level up your income and use some of this to spend more.  Invest the rest.  If you grow your income faster than your spending, you’ll still be better off.

In all cases, you manage your finances in such a way that there is always a surplus and your wealth continues to expand.

The idea that you can’t spend on certain things, or your lifestyle is always fixed, is absolute nonsense.  Nothing could be further from the truth.  The people who criticise frugality with this framing are being deliberately ignorant or simply lack imagination.

If you spend less first, you can spend a lot more later.  But if you spend a lot first, your future options are greatly limited.  Why?  Frugality helps you to rapidly build wealth and investments.  High spending does not.

A few reminders

Let’s remember that improving your quality of life doesn’t necessarily mean spending more.

In fact, improving your life often means applying personal effort to important areas.  Our health.  Relationships.  Meaningful pursuits and projects.  Helping people.  Learning and bettering yourself.

You can easily live a drastically better life while spending less money.  It’s your focus that matters.

For the people running around thinking that quality of life means the quality of things in your life… these folks have swallowed the consumerism Kool-Aid.

Advertising is one of the most powerful forces in the world in making us think and believe certain things.  It’s actually scary how many things can infect our mind on a week-to-week basis.  Our job is to detect when our thoughts are genuinely our own, and when we’ve just succumb to the manipulative magic of marketing.

Make no mistake, developing a bullshit detector is more valuable than ever before.

Final thoughts

See, I haven’t gone crazy 😁

You can spend more money and still become fabulously wealthy over time.  It’s all about keeping things in proportion and maintaining a healthy dose of perspective.

While this article might seem out of character, I want to make it clear that spending more money doesn’t banish you from the FIRE club.

In fact, if you do it right, you may even become more motivated to increase your earnings, helping you reach your goals faster.

Don’t get me wrong.  I still think freedom is the most important thing we can buy.  After that, we can essentially do whatever the hell we like.

Having massive optionality and control over one’s life is far more valuable than the bullshit consumer highs we typically waste all our time chasing.

But ultimately, spending more on totally optional stuff as your income and wealth expands is completely normal as you become a rich individual.

At the end of the day, the sensible management of wealth is what ensures its permanence in your life.