The Best Financial Advice You’ll Ever Hear

Hey, it's friend Mal, and welcome to the Mal Robbins podcast. I've been getting a lot of questions about money. Questions like, "Mal, how do I start saving? How do I invest when I can barely pay my bills? How do I break these bad spending happens? I'm buying so much stuff I don't need. What if I'm not making enough to get ahead? What if I'm deep in debt? Help! I'm just not good with money. I get it, and holy cow, if I've been there. I mean, at one point, I was $800,000 in debt. Maxed out the credit cards, lean on my house, barely getting food on the table. I felt completely overwhelmed, ashamed, lost. Like, I was never gonna dig my way out. And right now, I know so many of you are feeling that way too. Which is why I wanted to introduce you to the person who wrote my favorite book on money. It completely changed my financial life. The book, the psychology of money. Now, this is the book that I've made. All three of my kids read. It's the book that I recommend on the topic of money. And so I called up the author. And today, Morgan Housel is here to give you simple, powerful things that you can do that are 100% within your control. And here's the most important thing you need to hear. You do not need to make more money in order to get good with money. I mean, is that great news? We're gonna start right where you are. Today, Morgan is gonna give you money rules that actually matter, including the number one decision that's keeping you broke. Why every single dollar that you spend comes down to just two choices. You're also gonna learn how to break bad habits, manage your money and exactly what you need to be doing every time you get paid. This is smart, simple, research back, and it works. Whether you're living paycheck to paycheck, trying to pay off your debt, or trying to build real wealth. It is time to take control of your financial life once and for all. (upbeat music) Hey, it's your friend Mel and welcome to the Mel Robbins podcast. I am so excited you're here. I'm so excited for our conversation. First of all, it's always an honor to be together and to spend this time with you. And if you're a new listener or you're here because someone shared this episode with you, I just wanted to personally welcome you to the Mel Robbins podcast family. And I cannot wait for you to meet Morgan Housel and get the best financial advice you'll ever hear. Morgan Housel is one of the most reputable, trusted, and knowledgeable financial minds out there today. Morgan is a New York Times bestselling author whose books have sold over nine million copies. They've been translated into more than 60 languages. His book, The Psychology of Money, was the first personal finance book to truly explain to me that doing well with money is really not about math. It's about behavior. I absolutely love that book. I've read it multiple times. I've given it to all three of our adult kids. I give it out as a gift to other people. It took me a year to get Morgan here on this podcast. And I am so thrilled to tell you that he's not only here, but he is here to release his brand new book, The Art of Spending Money, which tackles a simple but powerful truth. Most of us, including you in May, don't know how to spend money or why we spend money on the stupid things that we do. Well, today we're going to dig into that. Morgan is an award winning columnist at the Wall Street Journal and the Motley Fool. And today he jumped on a plane. He flew across country and he made time in his crazy busy schedule to be here for one reason to give you the best financial advice you'll ever hear. So please help me welcome Morgan Housel to the Mel Robbins podcast. Thanks for having me, Mel. Happy to be here. I am so glad you're here. Thank you for jumping on a plane. I am a huge fan. I got to give a shout out to my husband Christopher Robbins because he was the one who first introduced me to your work, the psychology of money changed my life. I am so excited for your new blockbuster, the art of spending money. And we're going to get into all the takeaways from your mega bestsellers. But I wanted to start by asking you Morgan, if you could speak directly to the person who is here spending time together with us right now and share with them what could be different about their life or the life of somebody that they care about, that they share this episode with, if they take everything to heart that you're about to share with us and teach us today and apply it to their life. I think it would be that your ability to feel wealthy, to feel rich, to be financially independent is absolutely in your control. It doesn't matter who you are, where you're from, how much money you make, what your job is, you can do it. And we, I think we've told ourselves for generations that in order to become rich, you have to have the right educational background. You have to have the right career. You have to come from the right family. And I don't think it's, it's true. It's not about how smart you are. It's about how you think about money. It's about how you behave and behavior is in everybody's control. I don't know why I believe you, but I do. Like, I literally, no matter how in debt you are, no matter how old you are, you can learn. And that's kind of one of the big lessons. I'm going to talk about that I've distilled from your work that has changed my life and my relationship with money in the way I think about money the way I save it, with the way I spend it. It doesn't matter the starting point at all. Lesson number one that I've learned from you is you can get good with money. You believe that. I've seen it time and time again. And there are so many examples of it. Let me give you this example here. An ordinary person doesn't have a good education. Maybe they didn't even graduate high school, let's say. But they have good financial behavior. They can think long-term. They can keep their expectations in check. They're patient. They have those behavioral qualities. That person can do very well. But the person who went to Harvard and got an MBA and went to work on Wall Street has the best education, the best connections, the best experience. That person can easily go broke and they do. Not uncommon for that to happen. And that is not true in other fields. It is impossible to think of an ordinary person who didn't go to high school, didn't go to college, performing open-heart surgery better than a Harvard trained doctor. That's impossible. That will never happen. But it does happen with money. Because it's not about what you know. You don't need to know the secret formulas. You don't need to have secret connections. If you just get your behavior right and your thinking right, you can do well. Patients, keeping your expectations in check, not comparing yourself to other people, using money as a tool to live a better life instead of a yardstick to measure yourself against others by. It's very simple stuff and it's all in your head. And I think it's 99% of what people need to know to do well with money is in your control. Well, I think part of the mistakes that I made for a very long time, particularly before I bumped into your work, is I believed that there was some secret formula, that there was some private club for rich people, that it was about who you know, where you went to school. And what I love about your work is that you basically say, no, no, no, no. You're focusing on the wrong stuff. There are actual behaviors that we can learn that will help you get good with money. Exactly. And they're not that difficult either. They're in your control. It's not to say that they're easy, but they're simple. And so just a couple of the behaviors. If you have an ability to focus internally on your own goals rather than constantly comparing yourself against others, if you can save a little bit of your money, live even slightly below your means, invest that money and be patient. Just those things. That's a kindergarten list of topics that I just gave you. It's not a bunch of Greek formulas. It's not a bunch of Wall Street jipper-ish. It's not a bunch of acronyms. These are very simple things. And that's it. Part of this, too, is redefining what I mean by financially successful. I'm not talking private islands and private jets. But for most people, what they actually want, if you said, what is your ultimate financial goal? They would say, I want to have a stable housing for myself and my family. I want to have a little bit of cushion to fall back onto if I were to get laid off or have a medical emergency. I want to be able to have a dignified retirement someday. I want to be able to spend time with my kids. Those are very good financial goals. And that level of wealth and success I think is within everybody's control. Well, you said you wanted to teach us how to use money as a tool. Yes. To live a better life versus using it as a yardstick to measure yourself against others by. Correct. And that's one of the core things you're going to teach us how to do and why this is so important today. Of course. And it's easier said than done. It is so natural for everybody to compare yourself against others. For me to measure my level of success by not saying, what do I have? But by saying, what do I have relative to that guy? Not how comfortable is my house? But by saying, how big is my house relative to that person over there? To my neighbor, to my coworker, to my siblings? And one of the problems that makes it more difficult today than it's ever been, is that it used to be for my parents' generation, my grandparents' generation. When they compared themselves to other people, it was relative to their neighbors or their coworkers. It was a pretty small group of people. Maybe a couple of people who you saw on TV or heard about on the radio. But now today, just everybody, including myself, their comparison group is the most sophisticated algorithm on Instagram or TikTok. And so no matter how well you're doing, no matter how great your house is, no matter how much money you're making, you turn on Instagram 100 times a day like everybody else. You open it up and there is somebody out there who looks better, happier, more successful, more beautiful than you are. And so this topic, I think, has always been true. It's always been important. It is more important today than it's ever been. The idea of keeping your expectations in check because it's easier today than it's ever been to let your expectations just spiral out of control. I see this with my own kids, my nine-year-old son. When I was growing up, normal people drove old pickup trucks and rich people drove new pickup trucks. That was like the definition in my head. Like, if you had a new pickup truck, like, oh, there's a rich person. My son who's nine, his definition of rich is like a private jet and a private island because he watches Mr. Beast and it's like, oh, sit in the circle and you win a million bucks. It's a completely different level of expectations than even I had 20 or 30 years ago. And so-- And the hardest thing you're going to have is that even though you're one of the most compelling financial experts on the planet, your kids won't listen to your market. No, of course not. Of course not. I think that's really important place to start because you have already dropped so many takeaways and one of them was developing a skill set of looking inside yourself for what matters, rather than looking outside yourself at Mr. Beast or what's on the social algorithm or what your neighbor is driving for that yardstick. But you did mention this sense that you're falling behind. Yeah. And so many people today in particular are feeling like they're falling behind. I mean, we have a 26 year old and a 24 year old and they're already feeling as though, okay, I'm not making enough money and how am I ever going to buy a house and how am I going to pay for a life? If the person listening has that sense that they're falling behind, particularly if you're older and you say it's too late, like I've already blown it Morgan, what do you want them to hear right now? I think there's a couple of things. One is empathy because there are areas in life where particularly a lot of people in their 20s, 30s and 40s are falling behind relative to previous generations, particularly something like home ownership where it was more attainable in previous generations than it has been particularly in the last couple of years. So empathy, this is not me saying, oh, you should just feel better, you should be more grateful for what you have. You actually are doing fine. There is some empathy that has to be involved here. And also for people that thought they were going to be able to retire at a certain age and then the cost of living has gone up so much or medical bills are at a certain state that you're realizing, oh, my God, I don't have enough money to be able to retire. And so it is important to basically go, these are very real feelings that people have right now. And so if we start with empathy, where do we go next Morgan? You start with empathy because if somebody feels like they're falling behind, that's their truth. But I think it's important to realize too that all happiness is just the gap between expectations and reality. All right, so that again, all happiness is the gap between expectations and reality. You have the life you're living, you have your life you expect to live in between there is where you can find some level of happiness. And the wider that gap is, the more miserable you're going to feel. Okay, so let's talk about somebody who is in a situation where they thought they would be further along with their savings and they're starting to panic because they're worried that their money is going to run out before they die or they're not going to be able to retire. How do you use that happiness definition right now if that's the reality? This is not true for everybody. This is not black and white. But there are a lot of these cases, I would say the majority of these cases where the reason that person has not been able to save as much as they thought is because their expectations for many years probably have been spiraling out of control. And they were spending more money than they should have been because they were trying to chase who they wanted to be. Even if it wasn't necessarily the level of lifestyle that they could afford. And so they were renting an apartment that was very nice because they had an expectation that that's where they should be and they were comparing themselves to other people even if it was kind of out of their budget. They were traveling and dressing and eating out in a way because that's who they felt that they should be even if they couldn't necessarily afford it. Morgan, you're calling us out here. I'm calling everybody out. Yes. I've been in this situation too. There's no shame in it. This is a very common thing that I think everyone will experience. And I think a lot of why I got interested in this topic, every book that I've written started with looking in the mirror and being like, when have I been envious? When have my expectations spiraled out of control? No one is immune to this. There's nothing to be ashamed of here. So there's a little bit of, because, you know, just in full disclosure, I entered my marriage with $10,000 of credit card debt that my husband did not know about and then proceeded to hide it from him. But the truth is, I just walked my credit card into stores and bought stuff I didn't need with money I didn't have. And then even if I look at what happened to my husband and I, when I was 41 years old and his restaurants were going under and taking our house and our entire life savings with it, the truth is, we did spend a lot of money we didn't have. We did break up that debt. And I remember several years later, as we were starting to climb our way out, there was a level of relief when I could say to myself, both, I'm responsible for this mess. I can see how I made dumb decisions at the time because I had outsized expectations for how I thought things were going to go. And admitting it to myself in a weird way made me feel like, well, if I've got the power to make dumb decisions, then maybe if I wake up and recognize that, I've got the power to make better decisions. Yes, that's absolutely true. What happens with expectations for a lot of people is, look, if I said, I want to be a 10% better dad, that's a good goal. But what does that mean? What does that even mean? How do I track that? How do I measure that's impossible? But if I said, I want, I'm living in a one-better apartment and I want a two-better apartment. That makes sense. If I said, I want three new pairs of jeans. That's easy to wrap your head around. Money is so quantifiable. It's so easy to just say, right now, I'm making $20 an hour. I want to get to $25. I can measure it so quickly that it becomes this thing where we chase money because it's so easy to measure. And we chase spending because it's so easy to contextualize. And so if you don't have a good idea of what a good life looks like, it's very easy to just say, a good life is one in which I have more money. Because it's so much easier to understand then, how can I become a better dad? How can I become a better parent, a better spouse, a better friend, a better worker? That's hard to wrap your head around. Will Smith had this great, I thought he was so astute and profound. He wrote this in his biography. He said, when he was depressed and poor, he could tell himself, if only I had more money, all my problems would go away. And that gave him hope. I just need to go out and make more money. And once I have more money, all of my depression, all of my doubts will go away. And then he became rich and he was still depressed. And then he said he lost hope because he couldn't say if only I had more money. And so we chase money because it's so easy to wrap our heads around. And we chase it with the idea that it's the solution to all of our problems. Even if it can solve some problems, but not the biggest ones, the whole that you're trying to fill, the psychological hole that you're trying to fill, is probably not going to be filled with money. So the takeaway that I've got from what you just shared, which is much deeper, is that if you're sitting there listening and you're saying, I'm so behind, I'm so behind, I'm so behind, there's two things to do. First of all, you're in the right place because we're going to be learning from you exactly what to do Morgan. And one of the first things you said is it's not too late because there are simple, you even said kindergarten level behavior changes that you can make that will help you be good with money. But the deeper thing to ask yourself is, what is the whole that money is trying to fill for me? And are there things that I can do right now in terms of redefining what it means in my 20s or my 60s to be a good friend or to have a good life or to take better care of myself that don't involve hitting myself over the head about my financial life. Exactly. That's it. Got it. You know, one of the things I want to talk about before we really start unpacking some of the tactics is that at this exact moment in time, it is a really challenging moment when it comes to money, finances, the job market. If you really identify with that sense that I'm actually scared, I'm scared I can't get a job, I'm scared about being able to make it. Where do you start Morgan? I think if somebody says I'm scared about my money, that's their truth, and you have to empathize with that. If someone were to say it is worse now than it was for previous generations, that I think you can push back on a little bit more. And you can say, because you could look back at how people lived in the 1950s and the 1960s and the 1970s and say, look, I empathize with how scared you are today. It is probably not true that we are worse off today than we were in previous generations. One thing that I've always thought is very interesting is if you ask most Americans, when was peak middle class prosperity? When were the glory days? A lot of people will point to the 1950s is what they'll point at as peak middle class prosperity. But what's interesting is that if you looked at how the average middle class family lived in the 1950s and who we are aspiring to want to go back to, it is a quality of life that we would consider abject poverty today. The average middle class family house in the 1950s was about 800 square feet for two bedrooms for you and your four kids. No air conditioning, no washer and dryer, no going down the list of what it was like back then. They were very happy, they were very content with it back then, but it's not a level of contentment that you would have today. And so a lot of what is with finances is that it's not necessarily that these things will make you happier if you were to have more money. It's not necessarily that you would be happier. And that when most people think, oh, if only I had a bigger house, then I'd be happy. And when you imagine yourself taking a fancy vacation, you imagine how happy you would be. The emotion that you're actually thinking about is not happiness, it's contentment. If I imagine myself in Hawaii with my kids next year, and I'm just envisioning that in my head, I can come up with this emotion inside and be like, "Oh, that would be great. I would be so happy with that." But actually the emotion that I'm envisioning is being content with that. It's being in Hawaii and saying, "This is enough. This is all I want. I don't want anything else." What actually happens to people, if they do go to Hawaii with their kids, is they're sitting on the beach and they say, "If only I had stayed at the nicer hotel. If only we had stayed for a couple days longer. If only we had eaten at the nicer restaurant last night. How come those people got a better room? How come they got better beach chairs? And so you're not actually content with the experience that you're having. And so when you realize that what you're actually chasing is contentment, you're not chasing more, you're chasing just, "I just want to be happy with what I have." The first step is realizing that a lot of your money woes and a lot of what you're feeling in terms of falling behind. And a lot of your gap between what you have and what you want is solely a factor of your expectations. What if you don't think you're good with money though? Because for a long time I had a story in my head, I'm just not good with money. I'm bad with money. And let's say you're somebody who's gone through a divorce, you're financially wrecked, you gave all the power to your partner, now you're starting over. Can anyone get good with money for real? You can if you want to. And I think the people who say, "I'm not good with money, don't want to be." They use that as their excuse to say, "Come on, really?" I think they use that as their excuse. This is not a difficult thing to wrap your head around. This is very basic arithmetic. Spend less money than you make, save the difference, be patient. That's what we're talking about. You can explain this to a five-year-old. And so if you're saying, "I'm not good with money," you're making a choice to not get better. Nothing is easier than bad financial habits that you want to have. We live in a society that it's very easy to overspend. A lot of people are willing to give you credit cards, give you debt is very easy to have bad financial habits. And if you want those, that's an easy thing to do. As soon as you actually want it, this is not a difficult thing for anybody. This conversation reminds me of something that I saw a musician say. I wish I could remember who it was, but I saw a musician saying, "Everybody loves it when I tell the story about how I had to live in my car for a year, while I was just starting out, but nobody actually wants to live in their car for me." Nobody ever wants to do it. While they're starting out. And so a lot of these things for people who are in debt, you are one of these people. You can empathize with this, I know. Yes, it's going to be a sacrifice to get out of this. This might require a downshift and lifestyle relative to what you were used to. And so for a lot of people who say, "I'm not good with money," I think what they're actually saying is, "I don't want to make the sacrifice. I'm unwilling to make the sacrifice to do it." And I think that is true. Now what is true, the reason that you like the story about that guy living in the car is because I think people actually love stories or doing this themselves of suffering for a noble goal. I think this is true in so many aspects of humanity that it's not that people, like humans are very willing to suffer and put in hard work and sweat if the goal is noble enough. I'm wondering if the noble goal for getting good with money is so that you'll be content with your life, not so that you'll make a lot of money. To me, the noble goal, what it's always been for myself, and I think this is true from the majority of people, is independence. I have no desire to be rich in the sense of a big, a giant house, flashy cars. I have no desire to live that life. I want to be independent. I want to wake up every morning and say, "I can do whatever I want today." And I'm using money as a tool to foster that. That's always been my goal. Now that's very different from saying, "I want a bigger house," or "I want a house." You know, it's a goal of independence. And my grandmother-in-law, who had no money, was completely independent. She was beholden to no one else's influence but her own, and she lived an amazing life because of it. There are billionaires. There are decabillionaires out there who are completely beholden to the opinions and the influence of other people. And so there are a lot of people for whom money is a financial asset, but it's a psychological liability. It completely controls their identity and who they are. And there's other people who actually don't have that much money, but they have no psychological liability. They're in complete control over their personality and their goals. I've often used this, it's a very imperfect idea, but I think about, if I was on a deserted island, maybe with just me and my family, nobody else could see how I was living. Nobody else could see my house, nobody else could see my car. It's completely invisible to everybody else, what kind of lifestyle would I live? If nobody else was watching, what kind of lifestyle would I choose to live? In that situation, myself, and I think most people would instantly shift from status to utility. I have no interest in status if nobody can watch it. I have interest in utility. And so the kind of house that I would want to live in, the kind of car that I would drive, would instantly shift from what are other people impressed by towards what is actually going to foster a good life for myself and my family. And there are very different things. You can make $100 million a year and feel like you're falling behind if you're chasing other people. There's a great quote from the comedian Jimmy Carr, where he says, "Everybody is jealous of what you've got. Nobody is jealous of how you got it." And that's another one of these points. It's very easy for me or you to look at people who are more successful than we are and say, "If we had that level of success, I would be happier." Because when we look at them, I can see your house, I can see your car, I can see your clothes. I can see the material aspect of your success. I cannot see the hard work and the stress of how you got it and what it took and what it took to get there. So this is one of the problems with envy and financial envy that we have for other people is that you don't have a good sense of what their life was and what else is going on in their life outside of money. And this is why some of the studies that are so hard to wrap your head around, they're so hard to even believe that these are true. The studies that show that people who are wealthy are not necessarily as happy as you would think they would be. But here's the thing. When I hear that study, I'm like, "Who cares? Because I just want to be wealthy." You know what I'm saying? I can't let them be unhappy. I'll be the one person who's wealthy who's happy. I promise you Morgan. Or there's a lot of people who say, "Okay, that might be true, but let me experience it myself." They're like, "Let me get there." Because I think the pull is so profound in our heads that if only I had more money, these problems would go away. It seems like how could that not be true? And I think the people who have experienced it would say, "No, it can be true. Just much less than you thought." As a financial expert with more than two decades of experience of research and writing and teaching this topic, what's the number one thing that keeps people broke? It's this overwhelming sense of keeping up with other people. And this overwhelming sense of other people have more than I do. And they're doing better than I am, and they're happier than I am. And that treadmill has no end. There's no end to that treadmill where you're going to say, "If only I had this much money, then I'd be content. If only I had a bigger house, then I'd be content." Once you're on the treadmill, it goes on forever. And if you're on it, it's almost impossible to feel like you're doing well with money. There's no amount of satiation of, "If you've got to raise, then you'll be okay. If you bought these nicer clothes, then I would be happy, then I would be content with it." You can be content with a pretty low level of material items. Of course, there's a basic need of food and shelter whatnot. Above what you need, you move into the realm of what you want. I think we're all there. Any one of us, if we're being honest with ourselves, can walk into our closet and say there are roughly 12 pieces of clothing that we wear all the time. And the rest of it were all things that I wanted in the moment, or I thought I needed, or I thought would impress somebody if I were going to a wedding, but you didn't actually need it. And that is what keeps people broke. That's it. It's the simplest thing. I think people know it. They may not want to hear it, but they know it. That it's your desire to keep up with other people. Morgan, this is so good. You're even better in real life than you are in your books and your books are amazing. So here's what we're going to do. We're going to take a quick break because I want to do two things. I want to give our amazing sponsors a chance to share a few words. More importantly, I want to give you a chance to share this episode with people that you care about. Everybody needs the best financial advice that they'll ever hear and Morgan is here delivering it today. And one more thing, don't you go anywhere because Morgan's just getting started. And next up, he's going to be sharing the number one decision that's keeping you broke and how you can change that fact starting today. Hey, it's your friend Mel. And you know, when I wrote the Let them theory book, I knew it would help people, but I didn't expect this number one New York Times best seller for 37 straight weeks and counting. Number one on Amazon for almost the entire year, almost 7 million copies sold 63 languages. It's unbelievable. Do you want to know why it's the biggest book in the world? I'll tell you why because it works when you say two simple words, let them your whole life changes for the better. When you say the two words, let me you change for the better. The Let them theory teaches you how to protect your time and energy so you can focus it on what actually matters. Your goals, your dreams, your happiness. So what are you waiting for head to Mel Robbins dot com slash let them to grab your copy today or get one for someone you love. Welcome back at your buddy Mel Robbins today you and I are here with Morgan House and we are breaking down the most important financial advice you'll ever hear. Some organ your mega best seller the psychology of money change my life changed the way I think about money change my mindset about money and I want to read to you on page 41. This is the chapter never enough and you write the hardest financial skill is getting the goal post to stop moving. If expectations rise with results there is no logic in striving for more because you'll feel the same after putting an extra effort. It gets dangerous when the taste of having more more money more power more prestige increases ambition faster than satisfaction. In that case one step forward pushes the goal post to steps ahead you feel as if you're falling behind and the only way to catch up is to take greater and greater amounts of risk. Can you unpack that for us what's funny when you read that I remember writing those sentences I remember where I was when I wrote those specific sentences I was in my basement at a house in Virginia where I wrote this book. I remember writing that and thinking I mentioned this earlier but so much of what I write about is self reflection and it's not that I've mastered these things and I'm just trying to show you how smart I am it's like I wrote that because I've fallen for that trap all the time it's true that the expectations game has has no ending. There's always somebody who is getting richer faster than you and if you're always just seeking validation if you're key to happiness is always if only I had what that person has you're never going to be satisfied with what you have. And the more dangerous thing I think is once you are once you have that mindset that if only I had more I would be happier then it kind of grows exponentially because if you tell yourself I'll be happy once I have $10,000 and you get $10,000 and you're like oh maybe it's $100,000. If I had $100,000 then I'd be happy and then maybe you're fortunate enough to get that money and then it's maybe it's a million it grows exponentially. And so I also think that there is this thing that happens at least it happened for me that as I started to feel like I wasn't under such crushing debt or I got some reward at work a small bonus whatever I immediately up ticked the amount of money or the expense of the thing that I was already buying. And part of that I think is fine. I think people can spend money in a way that's going to make them happier. There are some people who would give you the advice of like it's never going to make you happier just save everything that you can live like a monk and that's not my message. I think you can spend money is in what I found ways of spending money in my own household and I'm like oh that was that was well worth it. But I also back to the expectations thing I grew up around like Tahoe, California. And this was before tech money where Tahoe and trucky the town that I lived in was not very wealthy. It is now because tech money came in but back then it was very much a middle class town. And then I went to college in Los Angeles and I couldn't believe making that shift from middle class mountain town to Beverly Hills kind of area. What it did to my definition of rich as I said earlier it used to be that my definition of rich was a new pickup truck a new a new F-150 was that's a rich person and I moved to LA and it just it just exploded no no matter how successful you are you pull up to a stoplight and even if you're driving a Lamborghini there's 17 others right there and you never feel like you're you're getting enough. And the conditions for happiness so I think we're much greater in that middle class town now I was I did a pretty good job in LA in my own mind of still keeping my expectations and check I think a lot of that was fear I always had a fear that I was never going to make it and so I was saving as much as I could just out of a sense of of a fear. But if I look at everybody else like who was happier it was the people who are living a modest life enjoyed their family had good time with their friends focused on their health and lived what was by comparison to others a very modest life and so I think about that now like what should your aspiration be it's interesting with parents if you ask parents what do you want for your kids particular kids are young most parents will say I just want them to be happy when they're older. And then if you say well do you want them to be rich and successful the parents will probably say well yeah that would probably be great but I just want them to be happy I think parents say that because you know there's a difference between the two you know there's a difference between being rich and being happy you've experienced it as an adult and so even if your kids are middle class doing modest by expectations you know that they can be happy if they're keeping their expectations and check and they're focusing on the things that matter. Well what I love that you keep coming back to is that your definition truly for the word happiness and the way we casually use it is contentment which means you are in the present moment of your life and you are not seeking something more. I have to be okay with where things are and where things aren't how can somebody figure out why they're buying something because I think most of us mindlessly spend money because in the moment we want that thing or we're bored or stressed or whatever like most people don't actually know why they're spending money so how can you Morgan start to become conscious of exactly why you're spending your money on things. I think with every dollar that you spend it's always one of two buckets and you should ask yourself which bucket this falls into is buying this thing going to make me and my family happier or am I buying it to impress other people most of whom are strangers it's always one of those two things if I'm buying food that's for me and my family clear as day if I'm buying new clothes a lot of that might be or new car a lot of that might be my attempt to impress strangers most of whom are not paying any attention to you whatsoever. It's always one of those two things do you want to use money as a tool to live a better life or do you want to use money as a as a yard stick of status to measure yourself against others by it's completely normal and natural to have that but when you realize that that's the game that you're playing that a lot of these aspirations that I have are to impress people who are not even paying attention to me and they're not paying attention to me because they're busy worrying about themselves. They're busy in their own heads what's saying are people impressed with me are people looking at me and that is a huge part of what's going on inside these people's heads is that their biggest aspiration in life is trying to impress strangers who are not even looking to begin with. Well, that was a huge that was one of the big lessons from your work for me which is every dollar you spend falls into bucket one of those two things you're either spending money to make other people think something about you or you're spending money in a way that makes you feel good about you. How do you know the difference between the pair of jeans that you're about to buy that you don't need but they look really cool and you know you think you're going to look good in them and you're also feeling bad about your body so you hit spend. How do you dissect that because I think a lot of us don't understand exactly why we're buying things. I had this experience in college I wrote about it in my first book the psychology of money I was a valet at a five star hotel in Los Angeles. I love this story. It was so much it was such a cool job there's never been a better job I would I would go back and do that job again. Why did you love that job so much? There's two things I got to drive very fancy cars and in the mind of a 19 year old boy parking a Ferrari there's there's nothing better in the world and two I didn't really realize this explicitly at the time but it was my first window into the psychology of very wealthy people. And that to me was absolutely I learned so much during those years age you know 18 to 22. And one of the things I realized and I remember when this hit me during a shift that if somebody came into the hotel driving a Ferrari or Lamborghini. I would stop and look at the car and be impressed but I would never look at the driver and say that guy is so cool. What I would do is I would imagine myself as the driver and I imagine that if I was driving people would look at me and say look at Morgan he's so cool. And one day I was like do you see the irony I don't care about the driver but I want to be the driver because I think people will care about me. And it was this stark realization of like nobody is thinking about you as much as you are they're busy thinking about themselves. And even when people are impressed with your house or your car what they're actually doing is saying if I had Mel's house if I had Morgan's car then people would look at me. And so the idea that everyone is pretty selfish and self centered in that sense where they're not impressed with you they might be impressed with your stuff because they're imagining having your stuff. Once I came to terms with that my desire for impressing other people plunged didn't plunge to zero I don't want to walk around in a burlap sack. I want to impress my co-workers and I want to look professional I wanted you know back then when I was trying to find a girlfriend who became my wife then it was very important. But the idea that no one's thinking about you as much as you are will collapse your aspirations in a wonderful way and it will get you towards contentment. Much quicker than anything else that is such a mind blowing realization because if we're all chasing all this stuff on the outside so that people look at the stuff that we have and then think we're amazing. Yeah. You're proving in that simple example that's not how the human brain works at all they think the stuff is cool they don't think you are everything being a competition for resources it's not it's it's rarely saying. Being impressed with other people not never and this is I think it's the same with your spouse your partner my wife does not care at all what kind of car I drive she doesn't care about what new jeans I bought she couldn't what she cares about is am I a good dad am I a good spouse am I a good friend in my patient and understanding and helpful that's it and I think you can extend that analogy to anything else in your life. Your friends your coworkers your relationship with your children we spend so much time saying if only I had nicer things bigger things better things then that would be better what matters and people know intuitively that this matters is that you are a good spouse a good friend a good parent if you do want strangers to be impressed with you they're not going to be impressed with your car they will be impressed with how kind and caring and helpful you are to them now that's easier said than done to because I think the overwhelming urge. Is yeah Morgan like I might I might believe what you're saying. But I still think this car would make me happy like it's such a powerful thing that we have that it's it's not something that you can just get over immediately and even after doing this for 20 years and writing these books it's not something that I've been able to fully overcome. Another way to prove this point is that I guarantee you in your social circle there is somebody that you know that has a huge house or an amazing car and you would not want and miserable and they're miserable right and so just having all that stuff that you want doesn't make you like them and so I think intellectually you know this but if you have. If you have bad spending habits how do you change them Morgan I think you first have to ask the question why do you have bad spending habits what whole are you trying to fill what has buying these things done to your happiness in the past and if the answer is nothing which is probably the answer trying to fill that whole first trying to answer that question first I think you have to kind of start on the therapist's couch literally or figuratively and take a look in the mirror and being like what am I trying to achieve. Who do I want to become why do I want to be that and why am I striving for these things and for a lot of people it's kind of like a binge spending that has gotten into trouble where it's a stress relief it's a relief valve. And I think what the valve I think in your head what you probably think it is is if I bought these things then my problems would go away and the truth is that that might be true in the moment for spending it's almost never true it's very rarely true that your bitch spending is going to fill any kind of emotional hole that you have. And the other thing is that if you're buying these things particularly on credit you have bad habits you're getting yourself into debt. The new sweater that you bought might give you a day or two of happiness before it's either worn out or you don't care about it much anymore but the paying it off is going to stick with you for years or months or even decades. And so that kind of thing of controlling your future and independence you know every dollar of debt that you have from these poor spending habits is a piece of your future that somebody else owns. It's a piece of your time that you owe to the bank you owe to the lender and the opposite of that is every dollar of savings that you have the reverse of bad spending habits is a piece of your future that you own that you have control over every single dollar that you have is a piece of your future that you own. That's always how I've wanted to think about it and since my goal has been independence I viewed this since I was 17 that every dollar that I save even if it was literally one dollar was one dollar of my future that I gain back. That's always how it felt to me and that's always been my goal for saving and my motivation for saving was I just want to be independent. I just want to wake up and do whatever I want and I feel like my savings has bought that it's not when I save money it's not because I say oh I'm saving up to buy a new car even though there can be that and that can be great if I save a hundred dollars I view that as purchasing a hundred dollars of independence I'm spending that money it's giving me independence today. And I think that can be an antidote to bad spending habits a lot of people will say why save my like they don't really understand the purpose of saving money. Right because if you don't have a lot of money it feels more it feels weird why would I put twenty dollars away from my paycheck because that's all I can afford to do right now all that you can do and so it feels like why even bother I'm as well just yolo to spend and spend all of it. Yes, I think once you shift the mentality from why save a hundred dollars to spend in the future if I just spend a hundred dollars right now why am I putting why am I delaying this gratification if I could have it immediately. If you view it like that then I understand the mentality of yolo spend everything why even save doesn't matter this is going to dead who cares. Once you view it as that hundred dollars you are purchasing today a hundred dollars of independence a hundred dollars of peace a hundred dollars of sleeping better at night then it completely shifts the game. So if I save a hundred dollars that's not delayed gratification that today in this moment today and tonight gives me a hundred dollars of happiness and more content because I feel like I'm more independent than I was before I saved that money and when you get back to I think what most people want out of money. Oh my god most people think that buying the nice cars the flex you're saying independence is the flex there's a great quote from Nassim Talab where he says my only metric of of success is how much time you have to kill. And now you know there's there's obviously a spectrum of that but that's always been I just want independence and you can have independence at a pretty low level of financial income and assets that was my grandmother in law she had nothing and she had pure independence you can be one of the richest men in the world and have no independence completely beholden to the opinions and the desires of somebody else. And there are multi billionaires who are way less independent than my grandmother in law and that I think is a empowering message of like your feeling of being independent is a feeling it's a story that you told yourself it's not there there's no financial level at which like okay once you have this much money then you're set free you can be a multi billionaire and completely beholden to other people you can have very little money and have pure financial independence in your head. Let's such on investing because you have a really great take on this you see that success in investing has more to do it long term thinking and avoiding jealousy driven behavior yeah why is it so powerful all compound so compound interest is an incredible thing of just you're growing your money over time and it grows at an increasingly higher level and that's how you can come into the person listening who may not know what that is because I know a lot of people are going to share this episode to people in their lives who may have never ever listen to anybody when it comes to the psychology of money or how to change your behaviors around money so what is compounding interest so we explain it very simply we have we have a hundred dollars and we are in a ten percent return on our money this year so in one year we have a hundred and ten dollars ten percent return so you're in ten dollars in profit this year I'm also going to earn a ten percent return next year so now I earn ten percent on a hundred and ten dollars so my profit that year is eleven so my profit in year one is ten dollars a profit in year two is eleven dollars a profit in year three might be twelve or thirteen dollars it's growing every year because you are earning gains on your gains and if you extend that over a lifetime over 30 or 40 or 50 years the returns get absurd so the example that I use in my book is warm buff it grace investor of all time is worth over a hundred billion dollars nobody comes close to the level of investing success that he's achieved 99 percent of his net worth was accumulated after his 60th birthday say that again 99 percent of his net worth was accumulated after his 60th birthday now when he was 60 he was a billionaire absurdly successful by any metric but he became worth over a hundred billion dollars from age 60 to he's 94 today and so the reason that's the case is that how compound interest works it's not necessarily about what your returns are it's about how long can you keep it going and I think what is so empowering for ordinary people is that if you can be an average investor for an above average period of time you can achieve absolutely incredible returns and so a lot of people when investing they look well I can't compete against Wall Street I can't compete against all these smart hot shots and the hedge funds they know more things they can earn higher returns that I can and so you become discouraged the truth is that you don't need to do anything extraordinary with your returns you need to have extraordinary patience and so if you can be average for 30 years you will end up in the top one percent of investors my parents really personally really personified this my parents are smart educated people but they have no financial experience no financial education no financial background no connections no information that anybody listening to this doesn't have but they have had extraordinary patience and self control and discipline so they have been investing consistently every month for 40 years never sold anything every month they invest a little bit of money leave it alone for 40 years if you look at their returns they would literally be in the top of professional money managers without knowing anything without having any extra information that you and I or anyone listening can't have because they had the one skill that actually mattered which was just patient patients and discipline and that's all you need that's the only thing that you need and you know there's a there's some very interesting stories of professional investors who I remember hearing the story about this professional investor who in any given year was never in the top half measured against his peers in any given year you look at this money manager and you're like yeah we did okay nothing extraordinary but over 30 years he was he was the best because of that's all you need it's not about what you earn this year it's about how long can you keep it going for is all that matters Morgan there's so much more I want to dig into but first let's take a quick pause for sponsors can share a few words and I know that you are learning so much today and so here's what I want you to do be generous share this conversation with people in your life they're stressed about money or feel like they're never going to get ahead we're just starting out on the journey of learning how to be more responsible with their money I promise you they will thank you for the gift that is learning from Morgan House and don't go anywhere we're just getting started Morgan is about to reveal the simplest habit that will transform your financial life no matter how much you earn we'll be right back and we're going to be waiting for you after this short break welcome back at your friend Mel Robbins and today you and I are getting to learn from Morgan House one of the most respected financial thinkers in the world and he's showing you and me how to take control of your money and your future starting where you are today some Morgan you know having been 800 thousand dollars in debt and having leans on my house I and clawing my way out of it you know it's funny and almost every interview I get asked so how did you get out of debt I'm like 15 years of just just clawing away at the bills and saving more than I spent I mean it was lowering expectations from my lifestyle I mean it was grueling but now I notice that I'm afraid to really do anything that feels slightly risky yeah and I know there's a lot of people that are worried about losing their money and so if you have a mindset where you're worried about losing the money that you have do you still recommend that people invest in the stock market yeah but it's always the question is how much and so I have that fear I was I've never been buried in debt I've always been a diligent saver but I probably have and if you put me on the psychologist's couch you can maybe pull a string of why this might be but I've always had kind of a worst case scenario prepare for the worst mentality of everything that I've done life so I think that's why I've been a big saver and so I have if you looked at my entire net worth I'm trying to it's probably a half maybe a little bit more than half in the stock market most financial advisors if you looked at somebody my age my income would say you can have way more than that and I said no no no like this is that's fine that's plenty because I have this kind of worst case scenario yeah thinking and that's fine that works that works for my personality my my financial goal in that aspect is maximizing for how well I sleep at night I have no desire for my tombstone to say he was in the top 5% of investors he outperformed the S&P 5 I couldn't care less I want to use money as a tool tell me sleep at night that's the metric I'm going for and so during periods when the market has done very poorly 2008 2020 during COVID it didn't really have that much impact on me because it was and I was never a hundred percent in it I always had plenty to fall back on to a things so I have quite a bit of cash and bonds and like boring basic savings and look you like you you can overdose on that you can overdo that but I think the idea that most financial advisors would just say well look you know if you want to maximize your investing returns this is this is how much you should have in the stock market that can be true for some people but you really have to look in the mirror with you and your maybe your spouse and your partner and say well like what are we trying to maximize for and I think there's no amount of investing return that can compensate for waking up at 2 in the morning and saying oh shit am I doing this right to have I gone too far there's no amount of return at least for me that would be worth it for that I would much rather just use money as a tool to be happy and look at my savings and think you know I have young kids right now when I think about my savings I think about if something terrible happened to our family my career or health whatever it might be this savings is a cushion to prevent hardship on my children now everyone's in a different situation but for me at this phase of my life that's that's what it is to me and so it's not about like oh am I maximizing investing return it's in my using this as a tool to give myself and my kids my wife a better life that's what it is for me personally but you said at the very beginning you either use your money as a tool in order to live a good life and to be content and you've now introduced this question what am I maximizing for or you're using it as this yardstick so that you can measure up with people externally right and there's the two things and there's a graveyard of stories of people most of them were very wealthy people who the goal of their investments was beat other people yeah their goal was outperform the next guy and it completely backfire on their hat they were chasing a goal that had no impact on their quality of life and that is that's never made much sense to me it's always just been like how can I use this as a tool to be happier and there are a lot of people I explained in psychology money how I invest my money and I was maybe not surprised but I think it's so interesting to me that it seems like their goal is making the spreadsheet happy yes their goal is so that you could come up the formula that says you're maximizing return and my goal has always been use it as a tool to live a better life what is the shorthand version I do I know you do right about it in your book for how you do invest your money so I invest in what are called index funds which are very boring very basic you basically own every stock in the universe pick a public company I own it in this fund very low cost and I invest consistently every month every quarter and I've never sold anything in any significant amounts and I hope to do that forever I hope this is money that I pass along to my kids or charity or whatever it might be and that's it it says boring and basic is that and if you look at my entire net worth it's a house cash index funds and chairs of a company called Marquel or I'm on the board of directors and that's it it's it's as simple and boring as basic as you can get the more complicated your investments are the lower the odds that you can actually stick with them for 10 or 20 or 30 years and getting back to compound interest like all that matters is can you stick with this can you keep this going for years or decades and I think the simpler it is the fewer levers you have to pull in your portfolio the higher the odds that you're going to be able to stick with it for a long period of time you keep saying the word patience yeah and I think it's both patience with the things that you're doing patience with yourself as your life is not meeting your expectations yeah patience with your emotions when you feel like maybe if you bought that new thing those new set of golf clubs it make you feel a little less depressed patience patience patience for somebody who's never invested they don't look at their money they feel intimidated by this what would you say to them Morgan one of the most important things about investing in the stock market is that we know historically you can do very well over time you can make a lot of money in the stock market over time like anything else in life there is a cost of that yeah there is a fee for doing that and when I say fees I'm not talking about fees to your advisor fees to your broker the fee for doing well and investing is putting up with a constant never ending shade of volatility and uncertainty that's what you're getting paid for that's the cost of admission is putting up the fact that I am very confident that the stock market will do well over the next 20 years but I have no idea when that's returns going to come might get all of that return next year and then have 19 years of stagnation we might get 19 years of stagnation then it all comes in year 20 we have no idea when it's going to come and enduring that and putting up with that is the cost of admission there are other investments out there that have no volatility savings account in the bank you have no volatility very predictable what your returns are going to be your returns are going to be low those returns that you deserve and so if you're willing to put up with volatility on uncertainty and not knowing that's that's the cost of admission and historically that has been a cost of admission that is worth paying that if you can put up with that over time 10 20 years you can do extraordinarily well in Morgan you make a huge distinction between being rich and wealthy can you walk us through the difference in why it matters I think if you are rich then by my definition that means that you have the money in the bank to buy the things that you want you can make your mortgage payment you can make your car payment you can pay for your dinners out whatever you want to do that's rich wealthy is independent it's money in the bank that you're not spending it is money it's things that you have not purchased it's savings it's investments that sitting there not being spent but it's giving you independence it's giving you financial independence and psychological independence where you can live your life in your way without chasing what other people what you think other people want out of you and there's some pretty astounding examples of the two sides of the spectrum I use this in the book the artist spending money the Vanderbilt family was the richest family that the world had ever seen back in the 1800s Cornelius Vanderbilt if you adjust it for inflation he had something like half a trillion dollars was his net worth and some of the other very wealthy families the Carnegie's the Rockefellers did a pretty good job at giving most of their money away to charity the Vanderbilt basically said we're going to give it all to our kids and our grandkids and our great-grandkids and their job is to live the biggest most ostentatious life that you can possibly imagine and the biographies that came from there of those Vanderbilt heirs which show I think without exception that every single one of them was miserable every single these are you know if you were a Vanderbilt heir in the early 1900s the day that you were born you got half a billion dollars trust fund and the only thing that was ever expected out of you in life was that you spend as big as you possibly can and every single one of them was miserable there's a book called Fortune's Children written by one of the heirs and Arthur Vanderbilt and he talks about the history of his ancestors it is a satis one of the saddest books I've ever read because these people are people who maybe you and I and people listening would look at and say you're so lucky that's I can't believe how lucky you got you just got a billion dollars a day you were born and you read it and you say like I would never want that life because they were so very rich they were the richest people in the world but they had no independence everything was dictated about even including who they were allowed to marry was dictated by kind of the social circle of their family and to me the most interesting part of the Vanderbilt family is that by this point today virtually all the money is gone there are a couple Vanderbilt heirs that have some money but the first Vanderbilt heir who got no inheritance no trust fund was Anderson Cooper the CNN post to answer most people are familiar with his mother Gloria Vanderbilt was kind of the last person to get a big trust fund and Anderson Cooper has talked about this that being the first Vanderbilt heir who didn't get much money was probably a good thing he was the first person in his family in like 150 years who was told you have to go figure it out for yourself you have to build your own career make your own money figure out your own way and he's talked about this like he's probably the happiest person in his career not that he's had a perfect life but he's probably one of the happiest and I think that is again like if you look at the richest people because the Vanderbilt were the richest people in the world and they had no wealth by my definition they had no independence they had no ability to live their own life I think that's the difference between rich and wealthy all comes back to what are you actually using money for and the clearer you are about the drivers for why you're doing it it changes what and how you're doing it yes and it's so clear in my head like would you rather earn $70,000 a year and your kids admire you you have a great marriage you have barbecues with your friends and you sit and laugh and you're in good health and would you rather have that life or make a million dollars a year and you're on your fifth of or your kids don't talk to you anymore you're in terrible health you're being sued by all of your business partners it's when you frame it like that it's the most obvious thing in the world like would you rather have a good life and less money or more money and I want a worse life but still even if you agree with that framing it is so normal and natural to say okay but it's still rather make a million dollars a year like the poll is still always there well because you think you're going to be the exception everybody does everybody does so if you're in your 20s and you're just getting started you haven't been a big saver you're just got your first job out of college Morgan what is your advice in terms of getting good with money I came to this by realizing that most people who are making financial mistakes and have a problem with money it's not because of the lack of intelligence it's it's ignorance and for most people they actually have no idea how much money they're making or spending and if you ask them like how much money do you make per month and how much money do you spend per month overall most people in that situation either couldn't tell you or they would give you an answer that's false and I think the the very basic such boring advice that goes the longest is check your bank account balance every single day it takes every single day every day it takes 10 seconds it's not that hard and just to give yourself some sense of how much money is coming in and how much is going out just be cognizant of it I've never not and people don't do this anymore but back in a different generation balancing your checkbook was always a big thing people don't do it anymore but I remember it from my entire life since I've been a teenager I've never had any desire to never need to do that because I know my bank account balance down to the dollar every day since I've been 16 or 17 and I think just having that awareness of what's going in and what's going out it's the most basic advice but for people who are new and starting out nothing goes further than that it's not a lack of intelligence it's ignorance you just have to become aware of what you're spending and how much is coming in and how much is going out that's the very first thing and what's the next thing the other thing is financial independence exists on a spectrum it's not black and white so most people would say we talked about this earlier why save $20 that doesn't seem like it's going to make any difference whatsoever so I'm not even going to save every dollar that you save is a piece of your future that you own every dollar that you save is a little bit marginally more comfort that you're going to have if you get laid off if you have a medical emergency if your car breaks down every single dollar is getting you to that place so if you view independence as black and white either I'm filthy rich or there's no reason to do it then I understand why you would say why even save when you view it as every dollar that I save is a piece of my future that I control it's a night of sleep in the future that's going to be a little bit better I think the desire to save becomes even more and you don't feel like it's idle money like you're saving money and it's just sitting there not being used it can give you pleasure today right now and I think some of the best financial decisions I've ever made was what I didn't do I almost bought a house in my early 20s that I wouldn't have been able to afford that would have locked me down to a region of the country that I didn't want to stay in that would have done all kinds of things that in hindsight would have been terrible and the freedom the independence that I had by renting earlier in my life of getting up and going moving to where the jobs were I look back at that in hindsight as being an absolutely wonderful thing well you know as I listen to you and I'm realizing it's also a matter of expectations yeah if you expected to be able to afford a house in your late 20s or early 30s then of course you're going to think you failed right but if you shift your expectations and say to yourself if I'm patient markets go up and down inflation goes up and down mortgage rates go up and down if I am patient I will be able to figure this out and when the timing is right and when I can afford it I will find the right house for me yes and that's the way that you manage the stress that you feel right now because it's your expectation based on what society's telling you or your parents are telling you that is making you miserable around the topic you know one of the other big lessons of your work is the importance of mastering saving money and I had always made the mistake of thinking about making more money I got to make more money in order to have more money and you really switched my thinking to focus on saving can you talk about why saving is so important versus the obsession with making more well so much is is just what you need to be happy and content and you know for someone it's I've always felt like my level of savings since I don't need that much to be happy my wife and I live a good life but not a not a very materially flashy life so we don't need that much to kind of check the boxes in our life and so I feel like that can be a super power for your savings if you need $10,000 to be happy but I only need $1,000 to be happy like I'm getting way more out of that savings than you might and so once you realize that that gap between expectations and reality is like super charging your savings then it has a totally different feel and so this is especially true when I was younger where saving $100 or $1,000 that was that made an extraordinary difference in my life I think the wealthiest I've ever felt was when I had $5,000 in the bank and I remember just feeling like that it was such an unfathomable amount of money at that phase in my life and I look back at it now that's a less meaningful amount of money to me now than it was back then but I look back at it now I'm like yeah but I thought it was more extraordinary back then and isn't that kind of sad that like that made me feel so rich I remember waking when I have $5,000 and just being like I can't even fathom how much this is and now I don't get that feeling with that kind of money and isn't that kind of sad that's what happens when your expectations kind of spiral up so the idea that the power of your savings is completely dependent on the expectations of what you have and the lifestyle that you want to live I think is a pretty powerful idea How do you switch the focus though from this obsession of making more to understanding the importance of saving? I've always viewed it as again back to independence and if you are earning a high salary but you need that money to pay your bills this year and you have no independence whatsoever but if you have lower expectations and a lower level of I still a good life not a completely frugal life a good life and your savings can cover some portion of that that's going to give you a better sense of contentment in there and so look I want to earn more money I want to earn more money this year than I did last year I want to earn more money next year I have that as well I think ambition is a wonderful thing but I also have a level of savings that would tell me that if I did not earn more money next year even with my income collapse next year I'd be okay and particularly at this phase of my life with kids nothing matters more than me to that if my career collapse next year we'd still have our house we'd still have this level of savings that I've been saving for for you know 25 years having the savings built up to which we're going to be okay because income can be much more fickle than savings is you know most people over the course of their life what are the odds that you will get laid off at some point in your life very high very high almost 100% that at some point in your life your income is going to fall to zero it might be for a week it might be for a year might be for you know who knows how long it's going to last but it will happen to you so income is much more fickle than savings and when that happens to you and it will maybe it already has the savings that you built up in the previous years is going to be the most valuable thing that you've ever imagined Morgan what do you recommend we do every time we get a paycheck or get paid? I view savings as an expense just as I would view rent or food or whatnot obviously it is more subjective you don't have to save in the sense that you have to buy food but if but once you view savings as a nice to have it's it's almost unavoidable that you're going to you're going to avoid doing it once you view it as I don't need to do this you're going to view it as I shouldn't do it then so how do I think about it if I think about it as an expense? I think about savings as the most valuable portion of my financial life I think the idea that life is more fragile than we want to admit careers are more fragile than we want to admit the economy and geopolitics are more fragile than we want to admit is why you should save if we all lived in a world where we knew exactly what our income and expenses would be in the future this would all be very easy but we don't it's a constant chain of unknowns and surprises in your personal life and throughout the broader country the broader world and that's why savings is mandatory and I just like I think everyone has an obligation to manage their health you have to manage your health you can't just put it off it's going to affect you whether you like it or not I think money falls in that bucket or two as well even if you don't have any desire to learn about money or finances you have an obligation to learn about it and to respect it because it's going to impact your life whether you like it or not here's one way that I have started treating savings like an expense use the 10% rule no matter what you're getting paid save 10% so if you're working a restaurant shift and you get 50 bucks in tips save five dollars that's the 10% rule if you watch somebody's dogs this weekend and somebody's paying you a hundred bucks to watch the dogs over the weekend save ten dollars that's the 10% rule and that's how you can make savings a habit no matter how little or how much you make anything is exponentially better than nothing and I remember when I was younger when I was a teenager saving five dollars I remember transferring 15 dollars from my checking account to my savings account and that might seem completely worthless to people but it made sense to me back then of like that's a meal in my future that I have now that I didn't have before anything is better than nothing is the most important rule of thumb is there a simple and effective way to make saving money a habit anytime in finance that you can automate it as well so automating your bank and say every paycheck you're gonna move 50 dollars to savings whatever it might be and making it automatic the more that you can take behavior out of the system because we're all flawed we're all emotional we're all biased we've all got social pressures I do you do everybody does the more that you can take a motion out and put automation in the better you're gonna do overtime and for the person who's still thinking I mean what's the point I can barely pay my bills what do you want them to know? The first thing I want you to know is I feel you I empathize with you I don't judge you I'm sure you're a good person and you should not be embarrassed about it because there are tens or hundreds of millions of other people in your shoes so knowing that you're not alone I think is an empowering thing for most people because a lot of people look at their lack of savings look at their poor financial skills and they feel guilt shame and embarrassment and you shouldn't this is a very very common thing that doesn't mean you're a bad person but the second thing you should know is that it is in your control right use this in the psychology of money it's an astounding story it's got him Ronald Reed Ronald Reed came from the most humble if not impoverished background that you can imagine and even as an adult he spent his entire career as a janitor and a gas station attendant and when he died he left millions of dollars to charity in everyone is like where did janitor is millions of like what in the world happened here and the answer was he saved what little he could $10 here, $20 there, maybe $100 here he invested in the stock market he left it alone for like 70 years and that's it that's the whole story and that's all you need if you have the right behavior if you have the right mindset you don't need much else to even achieve extraordinary returns over time you know one of the big lessons from your work for me is also this idea that enough is better than more and I'm reading from your blockbuster best seller the art of spending money this is page 36 Desiring less can have the same impact on your well-being as gaining more money and Desiring less does not mean giving up it doesn't mean you don't know how to spend money and have a good time I think it's quite the opposite to be content with what you have is the deepest way to enjoy the house you've purchased the clothes you wear and the vacations you take talk to us about that Having enough does not mean you have no aspirations for more I want to work very hard this year and earn as much money as I can I want to do that next year and the year after that but with as much emphasis, with as much strategy and will I want to think about my expectations and keep my expectations in check and when you realize that wealth is what you have versus what you want and the wider that gap is the worse you're going to feel the narrower that gap is the better you're going to feel you can mix aspirations for wanting more with contentment with what you have and appreciation for what you have as well and you have to go out of your way to think about it all the time because it's not normal and natural what is normal and natural and everyone's knee-jerk reaction is I want more and once I have more I'm going to be happier about it the idea of being gracious and having gratitude for the world that we live in for what we have rather than what we don't have for me it takes effort to do that but every therapist, every psychologist, would tell you how powerful gratitude is and it sounds kind of mushy and washy washy like how can that possibly be be a thing nothing in psychology I think is more powerful than keeping your expectations and check and being gracious for what you already have there's a great quote from Stephen Hawking, the great scientist who of course had ALS and was had absolutely no control over his body he could not even speak he was in a wheelchair for almost his entire adult life and he gave this interview with the New York Times several years before he died and in the interview he was talking about how unbelievably happy he was and how grateful he was to be able to do this research and how great his life is and if there's any of us who have the right to complain about life it's somebody like Stephen Hawking if anyone who has the right to wake up and say I was dealt an unfair hand in life and I'm so jealous of you and me it's him and he wasn't he was so happy and so the New York Times asked him they said what's your secret to happiness and he said my expectations were reduced to zero and I was 21 that's when he got his disease and he said everything else since then has been a bonus and it just made him in that dealing with that tragedy made it much easier for him to exercise gratitude for what he did have now obviously I hope to not be in that situation I hope you not and I hope nobody is in that situation but it's unavoidably true that when you experience iconotrum whatever the trauma might be Louis can be losing a job it can be divorced whatever it is that it can push you closer towards appreciating what you do have how do you take that quote everything was reduced to zero so anything else that happened became a bonus and use that philosophy to change your mindset about money because there was so much that you just shared that I think is super important and I want the person listening who maybe has no savings who's living paycheck to paycheck to be able to take everything that you've shared with us and really use these two tools because what you're saying is whether it's constantly comparing yourself to other people or having outsized expectations for where you are or the power of being grateful and just stopping for a minute that you are where you are and that you can change your behaviors based on everything that you've shared with us today that that's a foothold to be able to work with like how do we apply this to flip our mindset right away we were reading the story many years ago about a family husband, wife and two or three kids and their house burned down burned completely to the ground they lost everything the house that they had grown up in and imagine their future being in and when their house burned down everyone is distraught and in tears we lost everything and the mom gathers everyone together and says guys everything that we need to be happy is right here the five of us this is all that any of us ever need to be happy it's right here we have each other we lost everything material but none of that mattered everything we have is right here and I think there is some version of that in everybody's life regardless of what your family situation is that you have all the tools that you need right now to be as happy as you are capable of becoming it's not to discount your problems it's just that everything is the gap between expectations and reality and you have those tools right now and I think if you go out of your way to not compare yourself to what you don't have but to appreciate what you do have at any level of life I think you get a little bit closer to that feeling of what you're trying to get to which is contentment and rather than waking up and saying what don't I have and what a hole is that going to fill you're waking up and being like look I'm pretty grateful for the control that I have over my emotions I'm grateful for the hope that I have in the future I'm grateful that I can control those thoughts without them being dictated by society and move ahead from there I love it, it's also way to double down on what you are capable of doing once you get out of your own way Maureen, if the person who's listening wants to change the story they tell themselves about money what is the story that you would say this is what you should say to yourself from this point forward Money can make you happier having more money, spending more money can make you happier just not in the way that you probably think and not as much as you probably think that you can use it as a tool to live a better life and that is a great thing it can also be much more commonly a yard stick of status to measure yourself against others by we've repeated that multiple times because I think it's the most important thing today in this era about money is that because it's so easy to measure it's so easy to quantify and our society has made it so that that is the level of success that your net worth is equal to your self worth and it's obviously a broken and damaging story and once you exercise controlling your expectations controlling your emotions having gratitude for what you do have I think that's the ultimate that's the ultimate wealth for me it's not necessarily about what your net worth is it's your ability to control what you think and be grateful for what you do have if the person who's spent this time together with us takes one action today from everything that you've shared what do you think the most important thing to do coming out of this conversation realize that other people are not thinking about you as much as you are that you and your goals are often attached to wanting to impress other people but they're not paying attention because they are busy worrying about themselves that's the first step to controlling your expectations once you can control your expectations you get much closer to what I think the ultimate goal is which is being content with your money well the most important thing for me right now is to thank you you and your work have made a huge difference in my life and so thank you thank you thank you for what you do and thank you for being here with us today thank you Mel this has been fun thank you for having me you're welcome and I also want to thank you thank you for making the time to listen to something that is going to improve your financial life he talked a lot about independence and what I heard and that was freedom and when you apply the simple things that he told you to do I promise you you're not only going to gain more independence you are going to feel freer and one more thing in case no one else tells you this as your friend I wanted to be sure to tell you that I love you and I believe in you and I believe in your ability to create a better life there's no doubt in my mind if you and I apply everything that Morgan taught us today we will create and we will live a better life already I will be waiting for you in the very next episode I'll welcome you in the moment you have played it's going to be dynamite even though you're one of the most compelling financial experts on the planet your kids won't listen to you Morgan no of course not oh oh okay oh yes wonderful guys thank you let's just do it more quick and then I'm going to have to sprint to the bathroom alright boom I've never heard of my head that's Manipause Manipause is the thing too I've never heard Manipause it's a good phrase you didn't die in my 8th grade nothing less you're calling us out here I'm calling everybody out oh and one more thing and no this is not a blooper this is the legal language you know what the lawyers write and what I need to read to you this podcast is presented solely for educational and entertainment purposes I'm just your friend I am not a licensed therapist and this podcast is not intended as a substitute for the advice of a physician professional coach psychotherapist or other qualified professional got it? good I'll see you in the 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