5 Things Rich People Refuse to Buy

One of the richest people I've ever had on money-wise is worth about $3 billion, and his big money advice is to keep driving the Chevrolet. Another guest lost 95% of his net worth overnight. Built it all back, and the only time he gets new socks is when his wife buys them for him. He does not buy his own socks. And Brian Johnson, the don't die guy, spends $2 million a year on his body and told me he basically refuses to spend money on anything else. I'm Daniel Burke, I host a money wise, and I went back through a hundred episodes of Rich People breaking down where their money actually goes. And somewhere in the middle of that binge, I started noticing the same five things come up over and over again, so I started googling, and it turns out there's about 50 years of research explaining why they act like this. Nobody sent these guys the studies. They just ended up in the same spot, and it's what a lot of rich people resonate with, with how they spend their money. So today's episode is five things Rich People won't buy, and the science behind each one. Stick around for the end because there's a version of this that ruins people, and I've had those guests on too. First I want to answer the question that a lot of my friends ask me, which is, why do people come on money wise and even tell you this type of stuff? Well, money wise is brought to you by Hampton, which is a private community of founders, and a lot of the guests that we have on money wise come from Hampton. These are people that are already used to talking about real numbers behind closed doors, how their exit was, what they did with the money, how much they made. They say all these things in their private core groups, which is a group of founders that they meet with every single month, and money wise is kind of framed a little bit like what those core groups are like, except I talk one on one with some of these founders and hide net worth individuals. And so if that's the type of community that you want to be a part of, that you want to check out, go to joinhampton.com. It's a great community, I highly recommend checking it out if you haven't already. Okay, number one, things that Rich People will now spend money on, and it's first class. It's the most common one by far. Flying up front. Our biggest episode ever is called How Rich Is Rich Enough To Fly Private. The guest in that episode was a crazy wealthy guy, and he said I still fly coach unless it's international. I can barely see the value in flying first. He called it his poor kid habit. I love that. I heard the same thing from a guest worth around 120 million who told me that he has friends with way more money who simply cannot imagine not flying economy. They cannot make themselves click the upgrade button. So the science on this one, very interesting. There's a thing called hedonic adaptation. And if you only remember one idea from this video, make it this one. Whatever you upgrade, your brain gets used to. Really, really fast. It's another way to say lifestyle creep or lifestyle inflation. You get a bump, and then you slide right back to where you were before. The famous study here is from the 70s. Researchers went and found lottery winners. People who hit the actual jackpot. Within about a year, they were no happier than their neighbors. The crazy thing about this is that the actual lottery winners scored lower than regular people on enjoying everyday stuff, like breakfast or conversations with friends. Winning the lottery made their normal life worse. Their bar for happiness moved, and it never moved back. And comfort is the fastest version of this type of lifestyle creep. First time you fly first class, you feel like you made it. Third time, it's just a seat. Except now coach, which was fine for your entire life up until that point, feels more like a punishment. You paid four times the fare, but what you actually bought was a worse experience of coach. I think the guys who don't upgrade the seats, understand that. Even if they've never read this study, they realize, why would I pay three to five times the coach seat for a first class seat if it's just not three to five times better? If it doesn't add three to five times the value to my life, why spend the money on it? Number two is new cars. Back to the $3 billion guy. He's never sold a company, and he told me that they'll never spend all the money that he has. His money is going to outlast everyone in the family, and his advice to people coming up is don't go by the Ferrari. Just drive the Chevrolet or the Ford that you already own. And data backs this up in a really funny way. There's this book called the millionaire next door. There's two researchers who spent years surveying millionaires. And the most popular car was a Ford F-150. About half of them had never paid more than 30 grand for a vehicle. The flashy cars were mostly being driven by high earners with almost no net worth. The author's got a phrase for it from a Texas rancher. It became big hat, no cattle. My favorite study on this is when researchers asked drivers how they actually felt during their last commute, and they checked it against what their car was worth. And what's interesting is that there was literally no relationship between happiness and commute and actual value of car. The person in the fancy BMW and the person in the used Civic feel the same on a Tuesday morning, because while you're actually driving, you're thinking about a meeting or your kids or whatever podcast is on. Ideally money wise, subscribe now if you haven't already. The nice car feeling only shows up when you're thinking about the car, which you'll find is basically never. So you pay 80 grand or 120 grand for a G-wagon or some really fancy car. And you get that fleeting feeling for a moment or every now and again. Maybe I don't know four times a year. But usually the actual day to day driving stuff, that actual happiness doesn't change that much from a used Civic to the very expensive fancy car. Number three is stuff. Yes, literally just stuff, meaningless things. The socks guy from the earlier episode, he was a founder and he lost 95% of his net worth overnight. He said, "If I get new socks, it's because my wife decided to buy me new socks." He doesn't spend. He spends only on things which he views as investments. So the question I think the rest of us should ask is, what am I spending money on that is basically the same as lighting cash on fire. There are some researchers at Stanford who put people in a brain scanner and then have them go shopping. When you see a product you want, your reward circuitry tends to light up. There's a bunch of dopamine that hits your brain. And then when you see the price and it's too high, a region called the insulifier. That's a region that processes physical pain. So every purchase is your brain doing a literal tug of war. Want versus hurt. Which brings us to credit cards. MIT ran an auction for Celtic's tickets. Half the bidders had to pay cash and half by card. The card bidders offered roughly double. They were exactly the same tickets but because they were paying with a credit card, they just seemed to be numb to the amount of money that those tickets cost. And there's even more research about this that explains your Amazon habit or my Amazon habit should I say. The dopamine spike of shopping comes from anticipation. Not getting the actual thing that you bought. It peaks before you actually acquire or own that specific item, that thing. That's why the best moment is the package on the doorstep. But then a couple days later you couldn't even figure out or find where that thing that was on the package even went in your house. It immediately comes junk. I think that's why the socks guy filter works. Does this dollar come back to me or is it gone as fast as it came? He's never had to out discipline his own brain because that question that filter does it for him. Is this an investment or is this a waste of money? All right, money wise listeners, quick reality check. It's that time of year when you catch yourself thinking why didn't I start earlier? We knew summer was coming. It always does. And if you keep doing what you usually do, you'll blink and it'll be new years again. Same story, same body, same excuses. That's why today's sponsor is daily body coach. Daily body coach is a premium online coaching service for ambitious entrepreneurs and executives who want their body to perform at the same level as their business. Training is built around your schedule. 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A great example of this is Brian Johnson, who sold brain tree for hundreds of millions of dollars. He spends about 2 million a year now on his own biology, which is a whole episode. I think you should go watch it. He told us on Moneywise that he doesn't spend any money frivolously. He's very frugal. And then he also said he doesn't make any angel investments. None. From a guy who could write hundreds of checks without even noticing it in his balance sheet, he doesn't write any. So I went looking for the actual data on angel investing. The largest study ever done on angel returns looked at over a thousand exits. About half returned less than the money that were put in from angels. And roughly 7% of the deals produced three quarters of all the returns. So unless you're in enough deals to catch one of the 7%, you're paying for a lottery ticket. Literally no different. And as we all know, ideally a lot of us have resonated with this already in our lives. The most expensive asset, the most valuable asset we have is time. And so if you're paying for a lottery ticket that also sells you the money. steals your time, it's a double whammy. There's also a very obvious bias working with angel checks that I hadn't heard before I dug into the research. Opportunity cost neglect. In research-backed studies, people deciding whether to buy something almost never stop and think about what else that money could do. And when researchers just add a reminder, like, "Hey, if you skip this, you keep the $700 for other stuff," people's decisions changed by a lot, which is proof that if you're not met with that resistance, your brain is comparing a purchase to nothing. And the last thing here is the attention piece. There's research on task switching, showing that when you jump between things, a chunk of your brain stays stuck on the last thing. They call it attention residue. Every angel check you write is an open tab in your head forever. And I think that's what Brian Johnson is actually protecting. He obviously has enough money to write angel checks, but he's choosing to protect that bandwidth in his brain, so that he's not inundated with distractions. And I'll tell you, this exact argument whether angel investing is worth it, is one, I've watched and listened to and been a part of inside the Hampton community over and over again. There's over a thousand founders comparing notes privately in their own private core groups, which is a monthly meeting they have with people who know them, who they get to know about their business, their families, their money, their wealth. And they talk through what makes an investment good. Where should I spend my money? Where should I invest it? How should you be dealing with this resistance in a business or these challenges personnel? It's an awesome community. And I think you should look at it if you haven't already. If it's something that resonates with you as a founder or an exited founder, go check it out now at joinhanton.com. I promise you won't regret it. Okay, and the number five thing that rich people say do not spend your money on, this is a weird one, it's kids comfort. Number five is the one that I struggle with personally. I have two kids and a third on the way. And the thing that wealthy people and wealthy parents on money wise are scared of, it's not always losing their money, but it's the money that they have wrecking their kids. It comes up constantly. A lot of times without me even prompting it. We had Dr. Becky on who's a parenting psychologist, and she came to money wise and we have a whole episode about this. And there's details in that episode about parents who could buy any seed on a plane, putting the whole family in coach on purpose. One of them basically said, if their kid melts down at 16 because they're flying coach, they can't even be mad because they learned that behavior and that reaction from the parents. Everyone knows the marshmallow test. Kid waits, kid gets two marshmallows, kid supposedly wins it life. But the follow-up study is the one that wealthy parents actually care about and have talked about on this show. Researchers at Rochester re-did it with a bit of a twist. Before the marshmallow test, some kids experienced an adult keeping a promise. And some experienced an adult breaking one. And the kid and the reliable group waited four times longer. So a kid that was already given a promise from an adult and that promise was kept was actually able to be a lot more patient up to four times as patient. Based on whether a grown-up kept their word 10 minutes earlier. So all that self-control stuff we treat like a bit of a personality trait or something that is genetic, it actually is a lot of times just coming from a kid being raised the right way. They're able to wait if waiting has ever been something that paid off for them. And a kid who's never uncomfortable never gets a wreck. The research on this is pretty brutal. The most cited study of wealthy families found that about 70% of family money is gone by the second generation and 90% is gone by the third. So you have parents who will pay for a tutor without blinking and then stick the family in row 34, which sounds inconsistent until you see the logic in the research. The tutor is still in that kid's head at 30, but that first class seat that you buy the kid is gone a couple hours later. And a lot actually happens in their behavioral psychology and in the way that they grow up and whether or not they become entitled based on if they flew first class. I mean, that's just, you know, spoiling your kids is something you can't really undo, at least not easily. So you always have to think as a parent, what am I doing with my money? And am I making my kids better with that money or am I making their life more snooty? Are they gonna become more entitled or a brat because of what I do with my money for them? So that's the list. The list of five things that rich people say do not spend your money on. One, no first class. Two, no new cars. Three, no meaningless useless stuff. Four, no angel checks and five, the kids fly coach. Okay, so here's a part that I'm actually just gonna kind of pick apart my own episode here because there's obviously exceptions. We've had people on money wise who spend gobs and gobs of money on whatever they want. And if you sit through 100 plus of these episodes like I did, there's an easy way out to say, all right, here's all the things that you don't wanna spend your money on. But we've had guests on where refusing to spend money was the impetus of their episode. And my favorite personally was Ann Mollum. She built and sold solid core for almost $100 million. She's worth around $115 million personally. And she forces herself to spend $200,000 a month. She came on and pushed back onto all of this. She said, I hate when people don't spend on principle. That's just stupid advice. Her whole point was that you can hang on so tight that you strangle yourself with not spending money. And then you did all this work for what? You're not gonna spend money even though you have 100 or 200 or $500 million. And there is research backed science on Ann's side. You've probably heard that happiness flatlines is $75,000 a year. It's the most quoted money stat on the internet. Well, in 2023, the researcher behind it and the researcher who disagreed with him did something researchers almost never do. They teamed up and re-ran everything together. And for most people, more money kept making life better. Well, past $75,000. The flatline only showed up in people who are already unhappy. Money couldn't fix their unhappiness. So the real question here is more about what you spend your money on. And this research on that too, a big study out of Harvard and UBC found that people who used money to buy back time like a cleaner in the house or some delivery or help around your children with a nanny were more satisfied with their lives and people who just bought more stuff. And this all matches what I see on the show. And $200,000 a month isn't sloppy by any stretch. She knows where every piece of it goes. And a lot of it is time and experiences. Meanwhile, I had a guest who exited for $13 million and nearly torched it all. Because in his own words, he didn't have any idea what he was spending. He was cutting tutors and summer homes after the fact when it was almost too late. In hindsight, the socks guy and Ann Mollum look a lot like opposites, but what they're doing is effectively the same thing. Basically spending nothing on the stuff that their brain adapts to. And way more than what might seem reasonable on the things that matter to them. Time, experiences, whatever version of their mission money can buy. So what in the world do you do with all this information? Well, I'm glad you asked. Takes about 10 minutes. Pull up last month's card statement, go line by line and for each charge, ask the socks guy question. Does this dollar come back to me or is it gone? Then one more, stolen from the MIT study. If I'd have to pay cash for this, actually handed over, would I have bought it? Whatever fails both questions is what we should call your quote first class seat. Go ahead and cut it and let the money pile up behind something you won't get used to, something that you'll actually value. Every episode I mentioned in this episode is in the Moneywise channel. The $3 billion founder, Brian Johnson, Dr. Becky and Mollum, I'm gonna drop all the links below and I'll put the studies in the description as well. Last thing, if you run a company doing 3 million or more, or if you've exited a company for 10 million or more, you absolutely need to go check out joinhanton.com. Hanton is a private community of founders who talk all about stuff like what we've discussed today in this episode and it's private. There's core groups, people meet with their people every month, they have people who know their families, who know their businesses, who understand the unique challenges they're facing and building high growth businesses. And if you're building a high growth business right now, and you don't have a community like that, it's like playing the game on hard mode. There are easier ways to do this than Hanton makes those things come to life in the Hanton community. So check it out at joinhanton.com. If you haven't already subscribed to the Moneywise Channel, please do that right now. That really helps me out and I love to hear from my listeners. So if you do have comments or feedback, find me on X at Daniel C. Burke and I'll see you next time. Thank you for listening.