Morgan Housel, author of two bestsellers about managing your money and life, is back with his latest, “The Art of Spending Money: Simple Choices for a Richer Life.”

Housel explores perennial questions such as “can money buy happiness?” and “how can we spend money in a way that will make us happier?”

Here are edited excerpts of our recent conversation:

Kerry Hannon: Morgan, why is knowing how to use your money quite different than knowing how to acquire it?

Housel: In investing and the acquisition of money, we treat it as more scientific than it should be. It’s more behavioral than it is chart-based, formula-based, math-based. It’s very similar with spending money as well. The assumption that is made is that the right way to spend money, the best way to spend money, is to spend more of it on nicer, bigger, fancier things.

That is sometimes true, but it’s nuanced person to person. It’s different based on your background, your socioeconomic status, your family’s background, your marriage history.

For investing money, it is very possible that the right way for you to invest would be disastrous for me and vice versa. The same for spending money. The truth is there’s no formula for how to do it. It’s an individualistic endeavor.

Learn more: Retirement planning: A step-by-step guide

One of the stumbling blocks for retirees is accepting that they need to spend the money that they’ve spent all these years accumulating. Why is it so hard to become a spender at this stage of life?

It’s possible that saving money and investing money becomes part of your identity, and you cannot break away from it. So even if you retire at 65 with $3 million saved and you have enough to spend, you still can’t do it because saving money every month and watching your net worth go up every year is how you’ve trained yourself that’s the only way that it can go.

The idea of whittling it down is so antithetical to who you are. That is money controlling your identity. It is also true that if you are a 60-year-old couple, the odds that at least one of you will live to age 90 are better than half.

Retiring at 60 or 65 means that you might have 30 years in front of you. Then the fear of having to make sure you don’t spend down this nest egg that you have is a real fear that’s not irrational.

That’s a new thing. If you go back to the 1950s and ’60s, most people worked until they died. This idea of you might retire at 62 and live until you’re 97, that’s a new endeavor.

Read more: The average retirement savings by age: How do you measure up?

You write that most of us are bad about knowing what we actually want out of money. Can you elaborate on that?

Most of us know what society tells us we should want — which is newer, nicer, bigger, more expensive things. There’s a lot of social comparison and competition with others. It doesn’t matter how nice or big your house is — what matters is how big it is relative to other people that you’re comparing yourself to.

A different topic is, what do I need to actually make me happy? I imagine if I were alone on a deserted island with myself and my family, but nobody else could see how we lived — what would make me happy? A lot of people will be stunned how much of their preferences and their lifestyle and their goals are merely status-based.

When does spending money make us happy?

One of the most universal ways is when it gives us independence over our own life. Spending money makes you happy when you’re saying, “I’m doing this for me. I’m not doing this for the appearance or the performance of trying to impress other people. I’m doing this because I genuinely love it.” When you’re spending under those terms, most people are like, “This is fantastic.”

The concept of the book is that spending is an art. How so?

It’s an art because what works for you is not going to work for me and vice versa. It’s also an art because even within your own life, it’s going to change as we age and at different phases of your life.

For me, spending money today is very different than it was 10 years ago when I didn’t have kids. And it’ll be very different 10 years from now when my kids are grown and starting to leave the house.

Spending is always an evolution within your own life. And I think that’s what makes it an art and not a science.

Why is there a struggle to know how much you should invest for the future versus spending today?

The question that you want to ask is not “should you spend today or save for tomorrow?” The question you want to ask is “what are you going to regret in the future?” You could easily say that if you spent your money in your 20s and 30s and didn’t really save anything by the time you’re in your 60s and want to retire, you would look back at that with a sense of regret.

You could also look back and say, “Man, when I was in my 20s and 30s and didn’t have kids yet, I should have done a lot more traveling because now that I’m in my 40s and 50s and have kids, I just can’t do it anymore.”

Learn more: How much do you really need to save for retirement?

You write that having no FOMO, or fear of missing out, might be the most important financial skill that someone can have. Can you riff on that?

It’s impossible to do well financially with the accumulation of money, managing your career, investing money, and spending money, if you’re always chasing what appears to be the performance and pleasure of other people.

If you’re always thinking, what does he have? What does she have? They’re doing it better than me. They’re earning higher returns. They have a bigger house. They have bigger cars. If that’s your benchmark, it’s impossible to get ahead. One of the solutions is to have your goals and your expectations. Those should just reside under your own roof. As soon as you start looking at other people and how well they appear to be doing and how much fun they appear to be having and anchoring your expectations to that, it’s the root of so many bad financial decisions.

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.

In your research, you have found that the people who have used money best have inconsistently spent. What do you mean by that?

The people who have really figured out what works for them — some of them are very wealthy people — and they spend no money at all on travel because they don’t enjoy it. They’re very wealthy people and they drive old, beat-up, rusted pickup trucks because they don’t care about cars, but they overspend on whatever their thing might be. You need to truly figure out what works for you and then you double down on what you enjoy, whatever that thing might be. And you cut mercilessly everything else that just doesn’t work for you.

What’s an exercise folks can do to get a sense of what spending they value?

It’s not always intuitive what the thing in your life that brings you a lot of joy and happiness is, that thing that you really should be overspending on. You need to try different kinds of spending — from different foods, different kinds of travel, different kinds of clothes, and so on — because it might not be obvious what the thing is that works for you.

The only way to figure it out for yourself and your family is to always be experimenting with different types of spending. And the important part of those experiments is nine times out of 10, you’re going to experiment with a new kind of spending and say, “No, that’s not doing anything for me. Let’s cut that.”

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky and X.

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