How to Make the Most of Your Money in the New Year — ft. Morgan Housel

Morgan Housel, New York Times bestselling author of “The Psychology of Money,” joins the show to break down why the holidays are such a stressful time financially – and how we can all navigate it. He also discusses how to shift your mindset around money in the new year, make the most of bonuses, and determine what “spending well” really means for you. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 0:30Speaker 01

  Energía baja, falta de concentración, nebla mental? You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 1:00Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 1:40Ed Elson?

  Welcome to Prof G Markets. Scott is unfortunately out sick today, or that's what he's telling us, so we're going with it. And so today we're speaking with Morgan Housel, the New York Times bestselling author of The Psychology of Money and a partner at the Collaborative Fund. And we speak with Morgan about financial stress around the holidays and how to create impactful financial plans for the new year. This was, I think, an important conversation about the holidays and the stress that we often feel, or at least that I certainly feel. Morgan is an expert on the psychology of money and how money affects our brains. So I thought this was a really insightful conversation and I hope you enjoy it.

• 2:22Ed Elson?

  Morgan, really great to have you back on Prophecy Markets. Thank you very much for joining us.

• 2:26Speaker 04

  Good to see you, Ed.

• 2:27Ed Elson?

  So, we wanted to talk with you today because it is the holidays and for many, that is a pretty fun and cheerful time, but it's also a very stressful time largely due to money. So, I just want to start off with this one stat, which is that nine in 10 Americans say that the holidays are a cause of significant financial stress. So, pretty obvious question, why is it such a stressful time financially? But more importantly, what can we do about it?

• 2:57Speaker 04

  So many people think about Thanksgiving and Christmas. And Thanksgiving, I think, tends to be a happier time for people because it's just good food and family and friends, and that's it. There's no, there's no, there's no gifts, there's no expectations. It's like, let's eat some good food and tell some good stories and drink some good wine and all have a good time. Christmas becomes, I have to get presents for everybody and everyone has to get presents for me. And I hope I get you the right thing. I hope you get me the right thing. And one of us is bound to be disappointed. That's, that's always been the case. My, my mom would always bring up when I was a kid that Christmas was my worst holiday because I was always disappointed. They, they got me, they, they, they got me nice presents. I had a great childhood, but whatever they got me, I, I wanted something more. And I was always, it was like, the, the day of the year when I got everything, I got like, as you know, presents galore, was my unhappiest day of the year because

• 3:41Speaker 04

  my expectations were so high. I think as an adult, it turns into, if I don't get you the right present, you, you're, you're not going to like me. Like, I have to be really thoughtful about this. And then as your social circle grows and you have to get presents for 20 people, that's a huge stress. It's a massive stress. Like, not even the cost of it. Of course, that's a big thing. If you're putting on your credit cards, whatever it might be, but just the social stress of getting it right. That you don't have that with Halloween, you don't have it with New Year's. Christmas is this one that has like ridiculous amount of social pressure. And I think there is a lot of evidence that like mental health tends to bottom around Christmas. It's a tough time for a period. A lot of that is because of their families. Sometimes it can be a reminder of the family that you don't have, or broken bonds, whatever it might be. But I'm sure like finance plays

• 4:24Speaker 04

  a big role in there. Compare how people feel about the 4th of July, which is like, oh, day off, day off of work. And it's sunny and I'm going to go to the beach with my friends. And Christmas is like a month of financial and emotional trauma for people.

• 4:37Ed Elson?

  So I mean, there are two things in there that that cause the stress you mentioned. It's the family aspect, but it's also mainly gifts. Do you think that America places too much emphasis culturally on giving gifts? Do you think our gifting culture might be a bad thing?

• 4:55Speaker 04

  I think it's it's generally true overall, like this has nothing to do with Christmas, but it's true that it is very easy to assume that if your life is not going well and you're unhappy with who you are, you're unhappy with your career, unhappy with your family, it's very easy to assume that if you had more money and if you're spending more money and if you had nicer things, your life would be better. It's a very easy assumption to make. And by and large, for most people, it is wrong most of the time. It's not that money cannot buy happiness. It can, but it is too easy to assume that if you had more money, all your problems would go away. And particularly for a lot of people, their problems are their health and their their relationships, their friendships, their marriages, their relationships with their kids. Those are the core to a lot of their problems. And those are the problems that I think money has plays the lowest role in terms of fixing and happiness.

• 5:38Speaker 04

  And so I think that's that's the assumption that we make is like, if I had nicer stuff, then people would love me more. And if I bought you a big present, you might love me more. And I think those are those are very easy financial assumptions to make. But then you realize that like, the core of what you're getting at is so much more complex than money. It's a it's a it's a social endeavor. And my wife and I, you know, we've been together for almost two decades. And many, many years ago, we were like, we stopped buying each other gifts. Like, we have everything we need. And it's like, it doesn't it doesn't make any any difference to me. I love you, you love me. And so what my wife started doing, she does this for several years. For my birthday, she does this. She writes me a poem. And she's so absurdly talented at this. It'll be a poem of like, something that happened in my life. She's so good at it. They're always funny. They always rhyme.

• 6:21Speaker 04

  And it's something that like, like a big thing that happened to me that year. That is a million times more meaningful than to me than if my wife bought me a sweater or something. I don't mean nothing to me. Like, this is not my expertise in the slightest, but the thoughtfulness of that makes me so happy. And I think at the core of it, it's because she's buying me something that money cannot buy. Like, she's showing me a level of thoughtfulness and love that you cannot get with a price tag and a credit card.

• 6:48Ed Elson?

  Yeah, Scott and I recently had a conversation about gifts and our conclusion was that there isn't really like a social or cultural code on who's supposed to get gifts and also how much money you're supposed to be spending on those gifts. It sounds like you have established some of your own code around gifting with with your wife. Are there any other rules or recommendations on how people can go about gifting during the holidays?

• 7:15Speaker 04

  No, I think it's it's different for everyone. I think how my wife do it to a lot of people would disagree with that. And they would say that the gifts they get their spouse brings so much pleasure and joy. So this is not black and white. Everybody is different. I I've often noticed too, for a lot of my friends, some of whom send Christmas presents, but what I absolutely love about them is once in a while they'll text me and be like, hey, haven't caught up with you in a while. How you doing? Let's let's jump on the phone and just catch up with you. Like, if I compare, I have one friend, I will not name him. Every year, he sends me a case of wine for Christmas, which I love and appreciate. And about once in a quarter, he texts me and says, hey, how you doing? Let's catch up and talk about life. I appreciate the wine he sends me, but I love our quarterly phone calls 100 times more, 100 times more. And I think a lot

• 7:58Speaker 04

  of people fall into that category of like, yes, I appreciate your gifts. I like your gifts. Your guess was very thoughtful, but I want what I actually want is your friendship. And that's that's what means the most to me. I think this is especially true when you have a little bit more money. And you're like, look, when when you're a kid and you have nothing, I'm like, if I want that toy, like Christmas is my only shot. That's that's my only shot at getting it. As you become an adult and you have your own money, and by and large, for a lot of people listening to this podcast, they roughly have everything that they need and most of what they want. That's true for probably the majority of people listening to this. And then so you turn the things that money can't buy, like genuine friendship and whatnot. And I think if you are counting on Christmas to like accentuate that, it's going to lead to some disappointment.

• 8:37Ed Elson?

  What about with your kids? I'm sure they they would not accept a token of friendship for a Christmas gift.

• 8:44Speaker 04

  I should try that this year. See, see, see how that, that, how, how, how that goes over. I think it's, it's normal when you're a kid, A, because you don't have your own money. Look, I myself, as an adult, if I want something, I usually go and get it. I don't have to wait till Christmas. Kids usually have to wait till Christmas, so their allowance, whatever. So there is so much more pent up demand for physical things that kids have. But I think it's, it's also true that, you know, kids are, it's, it's easier for them to make friendships. You know, my, my kids have started at a new school. Day two, forty eight hours in, they had like five new best friends. Whereas for me, I'm like, I, you, I, I have to know you for seven years before I let you into my friendship circle. This is easier for kids to make friendships. So for adults, I think those genuine friendships, because they're so rare, just so much more meaningful than it is for a kid that just wants a new toy.

• 9:27Speaker 04

  When I was a kid, this is not black and white, I'm, I'm going to grossly exaggerate this, but I've, I roughly got no presents throughout the year and then Christmas was a bonanza. Like, not, not actually, but it was close to that. And I feel like my kids get more presents throughout the year and then Christmas is like, cool, it's fun, but it's, it's more mediocre than it was. I don't know which one of those is better. Because as I said earlier, Christmas for me as a kid, it was the only, it was the one day per year that I got presents. It was a bonanza, it was a huge day. And according to my mom, I was always pissed off. I was always disappointed. I think it was so emotionally overwhelming that I just could not handle what was happening to it. Whereas I've, I've noticed that my kids actually seem to do better and are happier during Christmas than I was when I was a kid.

• 10:09Speaker 04

  And maybe that's because it's more spaced out and it's not just this emotional just dumpster at the end of the year and it's being dropped on you.

• 10:16Ed Elson?

  Yeah, I think the other interesting thing about this time of year is it's sort of like a summary of what has happened in the previous year. And I think when you're giving gifts, especially with your family, I, I feel like for a lot of people, it's sort of a reflection of like, this is how we're doing right now. And I think if you've had a, a tough twenty twenty four. You know, the holidays seem to sort of exaggerate that. And on the other, on the flip side, if you had a really great year, it might exaggerate that too. But for people who have had kind of like a tough year and they're feeling that, that financial stress, what are some like tools and strategies that you can employ to deal with that and, and to come back stronger next year?

• 10:58Speaker 04

  I think you're, you're absolutely right. And when I was a kid, I've, I've written about this before, spoken about it, but the first 10 years of my childhood, my parents were extremely poor. They were students, we were poverty by, by any level. And then my dad became a doctor when I was 12 and then things like very abruptly shifted. It was not, we were not rich by any standards. He was an ER doctor, but um, it was, it was a very stark, it happened in one year. And I remember that year, I think it was 1993 or something like that, where it was like, everything changed. But what I think is true, when I look back to my poverty years, let's say that, my parents loved me just as much. I was just as happy. I had just as much fun with my friends. My like, like the things that actually were core to my identity and feeling love really did not change that much

• 11:41Speaker 04

  from my poverty years to my better years. And so I, I think if you view money as the panacea to all your problems, either your problems or your ability for other people to admire you, that's the problem. Like money can be an incredible tool to live a better life. Spending money can make you happy. Like this is not to say money can't make you happy, but if you view it as the sole source of your comfort and your admiration from others, you are almost certainly going to be disappointed.

• 12:08Ed Elson?

  How do you make that shift? I mean, I, I agree with you rationally. It's like, yeah, this isn't the source of, you know, this can't be the source of all of my happiness. But I feel like it's very hard on a day to day basis to, to really practice that and to really embrace that in your, in your daily life. Like it's just money, just sort of. permeates around everything you do. So how do you kind of practice that and really employ that in your everyday life?

• 12:38Speaker 04

  You're absolutely right that it's easier said than done. And I think it is true that there are some people who are just much better naturally at it than than than others. If you're, if you're the kind of person who has had any kind of financial windfall, or if you know somebody who has, I think a lot of those people would say like, was, were you or that person materially happier, better off after the windfall? The answer might be yes, because money can make you happier. But did it feed your soul to the extent that you thought it would? I think that's the answer is, is, is probably no. So I think once, it's probably one of those things that you cannot actually work on until you've experienced yourself or watched somebody else experience it. And I've noticed this with myself, having had a couple of good years in my career,

• 13:19Speaker 04

  that it has pushed me more towards my wife, my kids, my five good friends. It's pushed me more towards that because I have seen, yes, I've seen what money can do. More starkly, I've seen what it cannot do. And that has made me be like, oh, you know what's actually going to make me happier? Spending time with my kids. And it, and it's done that in a way that I did not understand five years ago, when I was doing less well in my career. And I think I'm grateful for that. So I think that's, that's a roundabout way to answer your question. And I think there's no way to actually put it into practice until you've experienced it firsthand. A lot of things with money are like that.

• 13:54Ed Elson?

  We'll be right back. And if you're enjoying the show so far, hit follow and leave us a review on Profiteam Markets. Stay with us.

• 14:10Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 14:40Speaker 01

  Energía baja, falta de concentración, nebla mental. You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síndomas persisten.

• 15:10Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 15:43Ed Elson?

  We're back with Prophets Markets. Speaking of windfalls, one thing that I wanted to touch on is that around this time of year, a lot of people, probably a lot of people listening to this podcast, may be getting bonuses, end of year bonuses. Just from a psychological perspective, I've always found bonuses very interesting because it's like, on the one hand, it's sort of framed as a gift. I mean, it is bonus to the base. Many other people would say that, no, this is just like regular income that was sort of factored in from the beginning. As it is bonus season right now, I'd just love to get your perspective on how you think about bonuses. And what would be your advice to someone who's receiving a bonus and maybe doesn't know what to do with that money?

• 16:29Speaker 04

  You're right that most people do not think of it as a bonus, like by the definition of that word, they think of it as deferred compensation. Like they are owed that money. It is part of their compensation. This happened to get all of it in December. I remember many years ago, I was speaking with a guy who was at the time, I think he was the head of HR at Google. This was maybe 10 or 15 years ago. And he said, the way that they think about it at Google is people live off their salary, play with their bonus, and retire on their stock. This is like a rough framework for how to do it. And I think that there's actually some wisdom in there, that if you are counting on your bonus to live off of, by definition, it's not a bonus. That's just part of your deferred salary. But it's probably not. So many companies, banker people in finance realize this very starkly. When you have a year, and you're 2008, your bonus falls 80% or whatever it

• 17:12Speaker 04

  might be, or maybe it was zero. And if you're counting on that bonus to live off of, that's trouble. And so I don't know if I have much advice, other than everything in finance is about expectations. And if you expect your bonus, it's not a bonus, and you're almost certainly going to be disappointed someday. And so, any kind of like, non-standard windfall that I've had in my career, I've invested. And I think the reason that I invested is because I know that if I spend this, it's going to become part of my expectations that I also need to spend this next month, and the month after, and the month after, and it's not going to be there. And you can make a ton of money, and be disappointed, if you expect all of it. If the gap between your expectations and your circumstances breaks, it doesn't matter how much money you make, you're going to become disappointed.

• 17:56Speaker 04

  And I think it is the most fraught and the most troublesome when your bonus becomes your expectation.

• 18:00Ed Elson?

  So, how much of that money, do you think, or how much, just in terms of spending, I know you're writing a book about this, should be the money that we play with? And I love that term you said, bonuses of playing with. But you said, when you had a big windfall, you've invested it. Like, how do you think about play money? What can we just spend on, to what extent should we be spending on frivolous things?

• 18:24Speaker 04

  I will paraphrase Scott Galloway, I think has said this many times, where I'm paraphrasing him, I don't want to put words in his mouth, but he's like, once he hit his number, he spent money frivolously and gave a lot of money away. He said it much more eloquently than that. But I think what's important to that is that he waited until he hit his number. How I've always thought about it for my whole career, is always having this calculation I have in my head of, if I get laid off, or if everything collapses from here... How long can I support this current lifestyle that I have if things get real nasty? That's always been really important to me. And for a lot of people, that answer is zero. That if they got laid off next month, they'd be in deep shit. And I think that's like bonus season is a good time to reevaluate that. Cause if you are in that situation, then the answer is how much of your bonus should you play with? The answer is probably none of it.

• 19:09Speaker 04

  You should probably save it. That's always been really important to me because every single one of you, me, you, everyone listening to this, at some point in their career will come across a big unexpected problem in their career, in their health, in their marriage, in the economy, whatever it might be. And your ability to endure that is going to be completely based off, your ability to do it financially at least, is completely based off of your ability to defer your previous compensation. And so if you don't have any of that cushion and that calculation of if things get bad, how long can I last? If your answer to that question is not good, then the answer to what you should do with your bonus is probably save it.

• 19:46Ed Elson?

  Absolutely. And also it seems like building in that habit is a really important thing. Like just the habit of knowing that every year, when I get this amount of money, I'm just going to put it away. I'm going to put it in the stock market.

• 19:57Speaker 04

  It's also true that you can overdose on that mentality. And you know, if you talk to a lot of financial advisors, they will tell you that one of the biggest problems that they face with clients is you have clients who have saved up a ton of money for retirement. They've done, they, they won, they won the game. They saved up millions of dollars for retirement and now they're 70 years old and they cannot spend it. They can't even spend a very reasonable amount of it because saving money and watching their net worth go up became core to their identity and they cannot break away from that. That's, that's a problem too. And so if you can use money as a tool to give yourself independence and to live a great life and spend money on things that make you happy, on you and your family and friends, but never let it become part of your identity so much that it is controlling you more than you use it as a tool. That's the spot you want to get to.

• 20:38Ed Elson?

  Yeah, we, we just did a big episode talking about spending money. And we spent maybe an hour trying to figure out what it means to be a good spender. What is spending your money well mean to you?

• 20:49Speaker 04

  To me, it means.

• 20:52Speaker 04

  That is always within my control, that I am not saying, God, I want to buy this, but I can't afford it. At that point, money is controlling me. Or if I say, I, I, I, this thing doesn't give me any joy, but I'm still going to buy it anyways. That is money controlling me too. The extent that I can be like, money is a tool in my life toolbox that I use and I use it every day. And it's a powerful tool. It is a damn good tool, but it's nothing more than that. It's a tool. It does not control me. I am perfectly in control of it. If you are a karmic mechanic, the wrench in your toolbox does not control you. You use it. It's a very good tool. It helps you use it every day, but the wrench does not control the work that you do. You are controlling it. And I think if you can use money to that purpose, and I think it is actually extremely common that money controls

• 21:37Speaker 04

  the person, controls their identity, controls their desires. And I, I think there's actually a lot of very wealthy people who are like, why do I have this gigantic mansion? Why do I have four of them? They don't bring me any happiness. And in fact, they are, they are burdens. They are huge time sucks and cost sucks. And I don't even go to this fourth house that I have. It's because money was controlling you and you didn't know what to do with your money. But you're like, I, I guess I should go buy another house or another car or, or do this. It doesn't even bring me that much happiness. So the more that it can truly be like you're in control of it. That's the only time you're getting actual independence from your money.

• 22:12Ed Elson?

  Yeah, it was this very similar conversation we had with Ramit Sethi where it's like, it feels like so much of the money conversation ultimately gets down to having a very strong understanding of what it is you actually want. And it's like, all of these different distractions, I think it's the same with the holidays too, where you're getting all of these ads telling you, oh, you gotta buy this, you gotta buy this. Like just so many distractions trying to pull you in different directions, trying to like convince you like this is what you want. But I feel like what you're kind of describing there is like, if you have a, a very solid, concrete understanding of what it is that you want in life, you're, you're a lot more impenetrable in terms of like money controlling you.

• 22:55Speaker 04

  Yeah, I think one way to think about this is if you were, it's, it's, it's a stupid thought exercise, but if you were on a deserted Island, maybe with your friends and family, but nobody else like no, no one in society can see you. So there's no, there's no need to show off because nobody's watching you. What kind of life would you live? What kind of house would you live in? What kind of car would you drive? What kind of clothes would you wear? And I think most people in that situation would choose utility over status. If there's no upside to status, because you know that nobody is watching you, you would be like, hey, like rather than a Ferrari, I'd probably want a pickup truck. It's like way more utility than than status. And rather than just an absolute monster house, I would want a really nice house with a good view, because that makes me happy. I don't care what you think about it makes me happy. And so viewing it as utility versus status through the

• 23:40Speaker 04

  lens of like, what if nobody was watching? Because the truth is, almost nobody is watching. Nobody's paying attention to you as much as you are. Nobody is thinking about you as much as you are. They are busy thinking about themselves. So it's actually a great thought exercise because it's close to reality. Like, how would I live if nobody was watching is a great thought exercise because the truth is very few people are watching.

• 24:02Ed Elson?

  We'll be right back.

• 24:16Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 24:45Speaker 01

  Energía baja, falta de concentración, nebla mental. You might be dehydrated. Gatorade Zero powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 25:16Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 25:50Ed Elson?

  We're back with Prof G Markets. The other big ritual that we all do over the holidays is New Year's resolutions. And I was just doing a little bit of research here. It turns out the number one most common New Year's resolution in America today is saving money. It's more popular than working out and eating healthier and losing weight. So I'd love to just pivot to New Year's resolutions. Do you think New Year's resolutions are effective? And do you think, you know, setting a goal of saving money is a good way to actually ultimately save money?

• 26:26Speaker 04

  It's hard to go against that. If someone has a resolution to become better financially, how do you? How do you say that's a bad thing? Of course, that's good. But there is the famous quote from Charlie Munger where he said, "When teaching money to people, they either understand it instantly or never." And I think there actually is like a grain of truth to that. It's kind of a harsh statement, but there's a grand truth to it. And I say that because if you need January 1st to become better at finance, it's probably not going to last. And like that's if you're like, look, it's December and I can spend frivolously. But come January 1st, I'm going to start saving. No, you're not. No, no, you're not. And so the people who have good financial habits don't need goals. They just practice those systems daily and it comes naturally to them and they're not forced.

• 27:08Speaker 04

  I think the more you have to force a good financial behavior, of course, the less durable it's going to be. And the people who do well are the people who are like, look, I've been a saver for years and years. And it just comes naturally to me. I enjoy doing it. I like the benefits that I get from saving. I like the independence and the cushion that I get from savings. And I don't need an artificial constraint like January 1st to get me to do it. So on one hand, like, great. If people are vowing to be better with their finances, of course, that's good. I also think that in virtually all of those circumstances, it's not going to be durable.

• 27:42Ed Elson?

  Yeah, I mean, I feel like the research just shows that New Year's resolutions are just very ineffective. But what are some other more effective ways that we can establish some decent financial habits? I mean, say, you know, someone wants to make some sort of change, or they want to improve in some aspect. Are there any strategies or tools that they could use to start establishing a better framework for 2025?

• 28:10Speaker 04

  This is not universal advice, because some people really are in bad situations outside of their control. But for a lot of people, if you aspire to save more money in the new year, that's a symptom of a deeper cause, which is you're not saving enough money. And for a lot of people, that's because you're spending too much money. And you're spending too much money because you have social aspirations that you can't afford, or you think that spending that money is going to make you happier, whatever it might be. So for a lot of people, like, they need to dig a couple of layers down deeper and be like, why am I bad with money? I'm bad with money because I spend too much. And I spend too much because I think my friends will admire me more if I had nicer clothes. Because I think that I would be happier if I had a bigger house. Those kind of things. And it's not that a bigger house won't make you happy. But like, you need to dig a couple

• 28:51Speaker 04

  layers down to do it. I do think a big, nice house can make you happy, because it makes it easier to spend time with your friends and family. And that's what's actually making you happy. So for a lot of financial goals, you just need to dig a couple of layers beneath the surface and be like, well, why do I want that? I want that because there's this hole. Well, why is there a hole? There's a hole because I feel like I don't have enough good friends. Okay, well, you need to focus on that. And the money's not going to get you there. That's a different problem.

• 29:15Ed Elson?

  Have you done this? Like, I mean, just practically speaking, would you recommend someone kind of sits down? Instead of sitting down and like, writing down, okay, this year I'm going to do this, this, this. Like, is there like a practical thing that we can do where you maybe take a look at the things in your life that are important to you, or some sort of like, concrete way to address what you just said?

• 29:39Speaker 04

  I think it sounds so trite, but I think it's so important. Take a good, hard look about what is the days that you've actually been happier. And it's not for everybody, but I think for a lot of people, and this is true for me, that the happiest days you've had did not require a lot of money. I thought about this a couple of years ago when we took a really nice family vacation to Maui. And it was great. We didn't hold anything back. It was a wonderful vacation. And as I was sitting on the beach, building sandcastles with my two little kids, I was like, this is a 10. This is a 10 out of 10. This is so great right now. But then a couple of weeks after we got home, I was like playing Legos with my kids on our living room floor. And I was like, look, if building sandcastles in Maui on a fancy resort in Maui is a 10,

• 30:24Speaker 04

  playing Legos at home with them is like a nine or nine and a half. Like, it was actually really close because what made me happy in Maui was not the fact that we spent a shitload of money and stayed at a nice resort. What made me happy was uninterrupted time with my kids. And I could actually do that at home without spending as much money. So actually, if you dig down to be like, what actually made me happy about that? Was it the fact that I spent a lot of money? Or does spending a lot of money allow me to do something different in my life? That actually, if I'm honest about it, did not require spending a lot of money. It was uninterrupted time. So for a lot of people, vacations do make them happier. But it's not because you need to fly across the world to be happier. It's because what vacations give you is uninterrupted time away from work, uninterrupted time with your friends and family, and that's what's making you happy.

• 31:06Speaker 04

  Like, understanding what the core of the motivation is, is really important.

• 31:10Ed Elson?

  What are some of like the main things that you learned about spending? Cause I know you're writing this spending book. What are some of the main learnings you've you've taken away from that research?

• 31:18Speaker 04

  I think what's so much in finance is true for investing too, is that we teach it like it's math and it's analytical, but at its core, it's all social. And so the key to spending money is not understanding what purchases are going to make you happier or less happy. Because, look, the book I'm writing is called The Art of Spending Money. It's not called The Science of Spending Money because everybody is different. You cannot make formulas here.

• 31:38Ed Elson?

  By the way, now that you say that, I think we accidentally stole that title of one of our episode titles. So I'm sorry.

• 31:45Speaker 04

  That's fine. Go for it. No worries. But look, I think that the core to understanding the spending that's going to make you happy is really digging deep and understanding things like envy and jealousy and social aspiration. And then those kinds of topics, it's not a science of, there's a lot of times you get these really, uh, these statements like spend money on experiences, not on things. It's not that that's bad, but I think it's very surface level. Whereas if you dig deeper into like envy and jealousy, you really get at the core of why. Some spending makes you much happier than than others. And and so I I I think understanding the emotional side of it rather than the surface level, spending money on this is good and that is bad. It's almost never that black and white, but if you can get to the core of your own

• 32:25Speaker 04

  personal relationship with envy and jealousy and social admiration and social aspiration, you get much closer to a good spending habit.

• 32:33Ed Elson?

  Did you learn things about yourself writing this book? Because it sounds like it's a very like personal and emotional experience.

• 32:40Speaker 04

  I feel like everything I've written in my entire career has been like trying to understand my own relationship with money, whether that's investing or or I I feel like all of it is just a diary entry that I that I phrased a little bit differently. So, yeah, I I I, you know, as as I mentioned earlier, kind of, as I made a little bit more money in my career, I I more than I realized what money can do to make me happier, I realized very starkly what it cannot do. And that was actually a wonderful realization because it pushed me towards more meaningful pursuits. I'm happier with my life with a little bit more money than I had five years ago. But I think one of the main reasons I'm happier is because it made me realize that what's actually going to make me happy is health, sleep, friendship, marriage, kids.

• 33:24Speaker 04

  And so realizing that has been a a big eye opener for me personally.

• 33:28Ed Elson?

  You mentioned jealousy and envy as like two big drivers of what's sort of like getting us to spend so much. And I I would imagine that the the conclusion I'm sure is like, you know, spending your life being jealous and envious is just not a very good life lived. But I would be curious to know if you have found that there is a way to deal with that at a personal level, because I'll just tell you from from like my experience, like it's a little hard to not feel envious at times. And I wish I could just kind of be like, stop, it doesn't matter. Like, that guy has a Ferrari, you don't like, well, who cares? Like, he's probably not even happy or whatever it is. But it's like trying to extinguish those emotions while I know at a rational level

• 34:13Ed Elson?

  that they're not adding anything to my life. I do find that it's a kind of a hard thing to detach myself from. So I'd be I'd be curious to get your thoughts on like how to deal with that.

• 34:23Speaker 04

  You're right, Ed, that it is it is difficult. And I'd be lying if I said that, like, I'm I'm susceptible to those, of course, of course, everybody is. What I think it they become easier to extinguish is when you really. Constantly remind yourself that I can see your car, I can see your house, I can see your clothes, I can see your jewelry, I cannot see your relationship with your spouse, I cannot see your relationship with your children, I cannot see your mental health. And that's what actually makes a difference. It was really interesting, I live in Seattle, so Bill and Melinda Gates were like our king and queen. And, I mean, Bill Gates, people have their different views about him, but my view is always like, look, the guy worked ridiculously hard, became the richest man in the world, created the most important technology company of a generation, and then gave virtually all of it away towards like curing malaria and stuff.

• 35:07Speaker 04

  I was like, look, he's not a perfect person, people have their individual views on him, but like, pretty damn good life, if you wanted to summarize it. And then, three years ago or so, they get divorced, and you realize, like, you look behind the curtain, and you're like, look, there's a big one, but you look behind the curtain and you're like, look, from the outside, this looks like literally a fairy tale life. But then the curtain is pulled back, and you're like, oh no, actually, there is some shit going on there. There are some really bad things happening, but that was invisible to everybody during all of that time. And the other thing I bring up a lot is the book The Snowball, which is Warren Buffett's biography, kind of the most elaborate biography on him. Goes into extreme detail about things that people have known for a while, is that his personal, Warren Buffett's personal life has not been perfect by any means whatsoever.

• 35:51Speaker 04

  That's a polite way to put it, there have been times where it's been miserable. And that was really important for me, as someone who has looked up to him and admired him for decades, to realize like, look, I can see his investing returns, I can see his ranking on the Forbes 400 list, I cannot see his relationship with his children. But inside his head, things like that probably matter way more than his ranking on the Forbes list. So what is visible tends to be the things that matter way less than things are invisible. So the guy in the Ferrari, yes, he's got a cool car, yes, I might be envious of that car. There are almost certainly things going on in his life that I cannot see, that if I had a full picture of his life, I'd be like, look, that car is pretty cool, but...

• 36:35Speaker 04

  You're dealing with a lot of shit in your life that I am too. And therefore, like, would my life actually be materially better if I had a nicer car? Probably not, because the other things that move the needle more would be the same.

• 36:46Ed Elson?

  Do you have like a ranking system of your own values in terms of like which things are actually important to you? Because I feel like that's a big part of this is defining what it is that you want and what it is that is meaningful to you and how to spend well and and use your money well. You need to to understand, well, okay, at the top I've got, you know, I don't know, my my kids or my wife or my family and that. Like, do you prioritize it in any way?

• 37:15Speaker 04

  I don't know. I don't know if I rank it or prioritize it, but you're you're right. The the three things, I don't know what order this would be in, are my wife, my kids and my personal health. Like, nothing else matters more than those three. And you can imagine a world where me or or anybody is very wealthy, has an incredible career. But they're on their fifth divorce, their kids don't talk to them and and they weigh 300 pounds and sleep three hours a night. Like, is that success? Not not not in my book in in the slightest. And I would much rather make $100,000 a year and have a wife who loves me and kids who admire me and be in good health and have a good conscience. Then make a million dollars a year and have none of those things. And so you can say on one hand that money is very important and money can give you a better life and money is an incredible tool.

• 37:59Speaker 04

  And it pales in comparison to other things in your life that are going to be more meaningful.

• 38:03Ed Elson?

  So as we start to wrap up here, do you have any advice for people my age ish? I'm 25, so I'm a young person around money and around spending, around honestly, anything going into 2025? If you if you had to advise, you know, young, hardworking professionals who want to make it, make this a good year? Do you have any advice for them?

• 38:26Speaker 04

  I don't know if this is advice, but it's a reflection on when I was 25. Since I've been, you know, 16 and earned my first dollar, I've been a very big saver. It came naturally to me. I was always saving well over half my paycheck, no matter where I was. And I think there are some times when I look back when I was 25 and didn't have kids and had a lot more freedom than I do now. That I'm grateful for the savings habits that I had. And I also wonder if I should have loosened up a little bit. A lot of that is because you Ed are almost certainly going to be making more money at age forty than you are today in age twenty five. So you might be, you know, and so not, not you in particular, but other twenty five year olds might be working very hard to save a thousand dollars. And, and when they're forty, a thousand dollars will come to them by snapping their fingers, you know?

• 39:09Speaker 04

  And so the life that you're giving up, both because you are young and you have fewer commitments at twenty five, you might be going way out of your way to save an amount of money that in fifteen or twenty years will come very easy to you. And so I am grateful for the saving skills that I had at twenty five. And sometimes I do wonder if I should have loosened up a little bit because I didn't know what I know today, which is that once you have kids and more responsibility and your career is more ingrained, you're not going to be able to have the kind of freedom to go out and do the kind of things that you could at twenty five.

• 39:38Ed Elson?

  A final question from me. I'm wondering if you have any New Year's resolutions for twenty twenty five, or at least maybe some goals of your own that you want to accomplish next year.

• 39:47Speaker 04

  I, I just finished my book. It'll come, it'll come out next year. So I'm writing a book is, is, is difficult and takes a lot of time, takes a lot of, a lot of focus. And so now that that's behind me, I think I, I aim and aspire to sleep better, which is always a big problem of mine, to eat better, which is a problem of mine. And focus on some of those things that have absolutely nothing to do with money that are very easy to overlook when you are in the pursuit of finishing a big work project.

• 40:12Ed Elson?

  Morgan Housel is a partner at the Collaborative Fund. He's the New York Times bestselling author, The Psychology of Money, and same as ever. His books have sold more than five million copies and have been translated into more than fifty languages. Morgan, as we wrap up here, do you want to just give us like a summary of the art of spending money and, and what our listeners might learn from it?

• 40:30Speaker 04

  Yeah, I mean, I, I mentioned a little bit earlier that it is not called the science of spending money. It is called the art of spending money because it's a little bit different for everybody. So at no point in the, in the book do I say, this is how you should spend, or this is how you should not spend. It's actually quite the opposite. It is a, a psychological look at envy, jealousy, social aspiration, uh, what actually makes people happy, contentment, those kind of topics. In the typical storytelling fashion that I like to do, I like to find examples of how other people have done, done well or done wrong and try to tell their stories in a very quick, hopefully punchy way, moving on from chapter to chapter.

• 41:02Ed Elson?

  Awesome. Thank you so much, Morgan. This was great.

• 41:05Speaker 04

  Thanks, Ed.

• 41:08Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lang is our research associate. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us on Monday for our Ask Me Anything episode on Prof G Markets.