A Better Way To Think About Money
One of the most surprising moments I’ve had in a video game was the day I bought Skyrim.
I’d picked it up Target for 20 bucks, thinking it was going to be a run-of-the-mill dungeon crawler. I slid the disk into the Playstation, sat back, and got ready for a few hours of fun. Twenty minutes into the game, having fought my way out of a dungeon, I turned a corner around a mountain and found myself in a grass-dappled valley wide as the eye could see, mountains tall and knife-sharp on either side. In the middle of this valley there was a city that looked a lot like Rohan from Lord of the Rings. Somewhere overhead, a dragon roared.
Genuinely magnificent.
And all at once my conception of Skyrim as a time-wasting dungeon crawler had been transformed into a childlike excitement to see what there was to do, where there was to go, what monsters there were to kill. How had I not played this sooner?
* * *
There are a few ways to progress in a game like Skyrim. You can choose a race with balanced starting stats and evenly level your skills as the game progresses (using equal sprinkles of magic, swordplay, stealth, and archery as you fight your way through the world). This gives you a character that can basically do it all—but isn’t especially skilled at one thing.
The other path is to do what is called ‘min-maxing’. Instead of aiming for a well-rounded character, you spend all of your effort on a narrow range of skills, becoming extremely good at those—leaving everything else behind.
This was the approach I took in Skyrim. While my dark elf could hardly wield a sword by the time I finished the game, he could cast spells to summon demons, wrap people in powerful balls of flame, and turn himself invisible. I’d gone full mage. It worked.
So, about money.
I think that most people today are not min-maxing their money. And they should. Here is why.
How most people think about money
We might be able to model behaviors about money via a barbell distribution: where most of the datapoints are located on the two extremes. The two sides of the distribution here would be:
• People who spend a lot of money
• People who save a lot of money
If Skyrim was real life, most people would either be trying to spend as many points as possible in all skill areas or spending very few points in any skill areas, saving up for some indefined day in the future. I think ~70%+ of people fall into these groups, except instead of skill points we are talking about real money.
Data backs this idea. Nearly 80% of people are “always” trying to save money, 60% of people overfocus on how much money they have or don’t have, and 56% of people worry about money even when they have enough. These datapoints, especially the first and the third, point to there being a large contingent of ‘savers’ out there.
On the flip side, 36% of people tend to spend more than they can afford, suggesting there are lots of spenders. There is plenty more data here, but I think you may just intuitively agree with me—you know people like this. You probably are someone like this.
Are either of these archetypes really ideal, though?
The saver archetype
As a big saver you’re constantly being careful with your money: counting it, budgeting it, saving it. This mindset is hard to break, even temporarily—which means you’ll notice yourself saving even when you try to cut loose on a vacation, or when you tell yourself a specific kind of expense is okay (just look at stories of people who worked hard to retire early and then realized they couldn’t stop being ultra-frugal).
I don’t think this is a particularly fun way to live. Part of the saver archetype’s philosophy is often delayed gratification: save now so you can have fun later. But this seems flawed, too. It’s kind of like Jerry Seinfeld’s bit about saving time:
“All our lives we’re trying to save time. Get through the red light, cut through the gas station. You kick the underwear up in the air and catch it. You can spend your whole life trying to save time, but then at the end, when there’s no time saved up, you’ll be pretty upset about it. ‘Wait a minute, there’s got to be some extra time for me! I had a no-iron shirt, velcro sneakers, clip-on tie.’ What about all that time I saved?”
Legalistic saving at the cost of enjoying things now is kind of like trying to save time: at the end, when you die with a multi-million dollar portfolio and your entire 20s and 30s spent working long days in a twenty square-foot office to become financially independent, you’ll wonder when you were supposed to enjoy all that money you made.
The spender archetype
The indiscriminate spender is a problem not because they’re spending, but because they are spending on everything. We all know someone like this (if you aren’t that person yourself): a night at the club here, a trip to Europe there, a $700 haul from a designer clothing store, DoorDash twice a day, expensive specialty coffee, trendy furniture, overpriced groceries.
This approach can work if you have an unusually large amount of money. You might not give a shit about how much you’re spending and on what. But if you are a normal person, you’re sabotaging your future self by purchasing things that might not even be making you happy.
How to actually min-max your money
The two common extremes come from thinking about “money” as a uniform object, something you make one decision about and then follow that decision: “I’m going to save,” or “I’m fine spending”. I’d argue that the more relaxing, happier way to think about money is a min-maxing system more similar to how I play Skyrim.
In the game, I decided that becoming a mage looked like the most fun way to play the game. So I spent all of my time and effort leveling up my magic skills and unlocking new spells—and ignored everything else. This meant I had a ton of fun, and I became a powerful wizard.
It’s interesting to think about money in the same way:
• Figure out what purchasable things you care about
• Allow yourself to spend lots on those things
• Don’t spend quite as much in other parts of your life
This lets you fully enjoy the things that matter, and put yourself in a good financial place for the future. It’s an approach incompatible with the ‘always save’ and ‘always spend’ mindsets, and yet I think it is—at least for me—the happiest way to live in a world that is so driven by money. For this to work, you need to be almost unreasonably intentional about it. Otherwise you’ll just be victim to your own whims.
There’s an important distinction between what I’m saying and “Buy whatever you want”, because the former requires discipline and the latter does not.
What I’m saying is that you should, quite literally, write down a list of the things that actually make you happy. You should then, when you can afford it, spend a lot on those things (maybe more than feels comfortable, if you’re a saver type). And then you should be reasonably frugal about other things.
It’s kind of that simple.
* * *
Footnotes
1: If you have ridiculous amounts of money, this may not apply.