Most personal finance blogs talk about saving money and frugality, we’re going to go to the opposite end of the spectrum and outline ways to spend your money… Maximizing the quality of your life. The main problem with frugality is that your life becomes too plain and boring and when you’re older the things you wanted to do are unlikely available anymore. While life never really ends and you can always find things to do we think it makes a lot of sense to highlight ways to spend your money with minimal regrets. We’ll also give some ideas based on age bracket since hardcore activities become more difficult as we age.
#1 Muscle Memory and Skills: This is not only low cost but also offers the highest reward. Anything where you’re exerting physical effort to learn a task gives a very high return on investment. This could be anything from basic weight lifting to more serious items such a high intensity sport. It also extends into lower impact activities such as musical instruments. Investing in this arena with at least three items offers the highest returns. We suggest a muscle building activity, a speed training activity, a coordination activity and finally a rhythm activity. Life is long so there is a good chance you can have high quality skills in at least four items. As an example it could be: standard weight lifting, swimming, yoga and the piano. Alternatively it could be: power lifting, sprinting, golf and dancing.
The natural issue here is you’ll unlikely be good at all four of them. The reality is that your body will be designed more for one of the four activities. If this is the case, definitely focus on it if you can become elite. But. Once you’re older… it is better to be balanced. If you’re simply “very good” at four tasks instead of Great/amazing at one, it decreases the chance of injury and you end up having a very healthy physique. The most polarizing items would be a body builder and long distance swimming/running, these contradict each other so finding four different activities that make you look well rounded and balanced will be the sweet spot.
The last thing we would highlight here, is that you can absolutely spend as much as you would like becoming “good/great” at any of the four items. It does not matter if the cost is a bit higher (professional trainers). At the end of the day, spending on these items will increase the length and quality of your life. This is a great way to maximize your life experience. You’ll be healthy every single day (knock on wood) and you’ll have muscle memory that allows you to be “solid” at a variety of tasks. This is probably the best place to start given all the major benefits and there is no need to “feel bad” when you spend more money on equipment, training and nutrition in this arena.
#2 Health Items: The second big item to spend on is “hormone optimization”. As you get older you do not want to age like everyone else does. Find a doctor on the edge of health care and get all of your numbers maxed out. This is exactly what professional athletes and celebrities do and there is no reason to skimp out on healthcare. It is much better to have 50% more energy at age 40 than your competitors/peers. This takes a lot of work and we would suggest reading multiple endocrinology books in addition to finding a leading edge private doctor.
Is this cheap? No. Ideally it is affordable for you and there are many options that are available. From what we have seen there are options in the range of $500-1,000 a month or so. Yes this isn’t “cheap” for the vast majority of people but the good news is that it improves all of your metrics: ability to think, physical capabilities and of course appearance. The only downside is the cost but that was the point of this post! If you can afford it this is the next area to spend because it increases the quality of your life by many leaps and bounds. Ideally, by the time you’re looking into this type of spending, you’re already financially well off as most people jump on this train at around 35-40 years of age (yes this is a general comment and there are always exceptions).
#3 Experience: The two biggest items were unsurprisingly related to health. Now we’re moving onto a broader topic of “fun”. Mainstream advice suggests spending more money on materialism… This is yet again the opposite of our strategy. While it is perfectly fine to have a few key items such as a few high quality suits or watches… Going down this route results in a lot of small hits of dopamine followed by crashes. The good news is that there is a solution, which is spending on life experiences that cannot be replicated.
The best way to explain the difference is by looking at two major expenses. Vacations and Car ownership. These days, owning a car can cost you hundreds of thousands of dollars and at minimum it could cost you $40,000 or so. The real issue is the cost of: 1) gasoline, 2) maintenance, 3) insurance and 4) depreciation. To really kill this, it almost guarantees that you’ll have some sort of run in with law enforcement: speeding tickets, parking tickets, accidents etc. While it sounds logical to have a way to get around faster, if you can live in a major city you’ll actually save thousands of dollars per month and decrease the chances you’ll have a negative experience with law enforcement entities (lost time and money).
Now we can compare this cost to something like two or three vacations. For $40,000, even if you’re on the expensive side, you can quite easily take a very good high-end vacation. If you’re cheaper this would likely result in multiple vacations over the course of a year (maybe even two years depending on the destinations and how much you spend). Your life experience will go up a lot, learning about a new environment versus driving around in a vehicle where you’re simply burning time and unable to learn anything (at best a podcast which could have been consumed during your plane flight anyway).
You can extend this same concept on a dollar for dollar basis when comparing multiple activities. Comparing expensive clothing to concerts/sports events/festivals (insert anything) and you’ll see a much higher ROI. The problem with a ton of high end clothing is you’ll unlikely use it all and just end up with a ton of clothes you never even use. So you’re better off spending more on “events” that you may not want to go to later. A good example would be boxing fights and concerts where the typical shelf life of each artist/athlete is under a few years so if you don’t go now it’ll unlikely be the same quality in a few years.
#4 Partying Hard: There is absolutely nothing wrong with partying hard while your body can take it. This isn’t a contradiction to the same idea of making your money first. You’re not going to work 80 hours per week for more than a few years so there are many years where you can go out and have the time of your life (from mid-twenties through at least forty). While the scenery may change the ability to go out and party does diminish over time. Contrary to popular opinion having a “partying hard phase” is almost a pre-requisite to living a fun life. From what we have seen the people who are living the most enviable lives in their 30s/40s/50s have had a history of going “all out” at least for a duration of time. People settle into different life styles after this phase but it is rare to see someone who really understood the nightlife/party scene and ends up with a terrible personal life. The major upside to this hectic part of your life is that your social skills will go up in parabolic fashion.
Additional good news. You’ll learn the ropes quickly and realize that there are many ways to optimize the chaotic part of your life as well. Basic ways to spend more while maximizing output are as follows: 1) heavy tipping, 2) restaurants, 3) extremely good logistics to the areas you like and 4) avoiding bottle service like the plague unless you’re throwing an event or are located in Las Vegas. When you spend with these four items in the back of your head, you can increase spending and see consistent improvements in your social life.
Another item to cover in partying hard is the groups of people you’ll meet. This is probably the most misunderstood benefit. Very few (more likely none) of the relationships you develop here will be “significant” however, the soft touch skills will be of immense value to you in the future. Soft touch skills are used when trying to maintain a position with a client/customer (instead of selling more to them) and are easily transferable to many other dimensions in your life. Just remember to stick to the main four items we listed and you’ll see significant “utility” when you go down this path. As a side note, many people who become successful also go through an addiction phase so we hope everyone is mentally prepared to battle that one when the time comes.
#5 Heavy Outdoor Activities: While partying can be done for a long period of time as long as you adjust your “go to places”, outdoor activities are probably the toughest to continue over time. By outdoor activities we’re not referring to basic “camping” trips, but higher intensity items like rock climbing or other extreme climate/weather activities. Many people are not interested in these types of activities but if it’s something you wanted to do, it is significantly safer and smarter to do when you’re younger. Who knows… going to space might even be on this list in the near-future and going when your body can take a lot of punishment will make a lot more sense.
One good and underestimated benefit here is this makes you a lot more interesting. Generally, people who get “bored easily” ask questions about how to “be more interesting”. They are like this because they are boring in general. By forcing yourself into the extremes it becomes impossible to be boring in the first place. Looking for someone who is extreme yet boring is like asking for a tall midget (doesn’t exist!).
#6 Services: Our favorite spending item! Instead of those cars and clothes, focus on cooks and massage therapy. Anything on the services side not only saves you time but improves the quality of your life by leaps and bounds. Driving that 911 Carerra feels good for the ego boost (attention) but at the end of the day it just draws unwanted attention. Paying for high quality food, fixing back/muscle issues and remaining flexible will be worth many millions of dollars in the future. If you can extend the quality of your life by 5-6 years, that will be worth much more than attention from random people on the street. As usual if you’re interested in material things go for it (you’re rich!) but we’re simply outlining our take on it. To wrap up the ideas here, we would include things such as hot tubs, saunas and steam rooms as examples of services (Spas generally have this as well).
Calculating the Value: A good way to calculate if you’re spending on the right items is to do a dollar per hour spent on the item. If you spend money on a chiropractor for example, figure out how much that improves your general quality of life relative to the cost. For other items like cars and clothes, you’ll see an immediate decrease over time. If you enjoy having the latest and greatest vehicle, the returns come down pretty dramatically (you adapt to it, the car becomes less relevant over time and of course it does not extend the quality of your life). Continue with this calculation and you’ll see your net worth slowly go up as you invest in the correct assets: Triangle Investing.
Going “YOLO”: If you’ve followed all of the spending patterns above (never went knee deep in materialism) and still have money to burn… Feel free to go “YOLO” and spend on anything you’d like. This can now include large houses and fancy cars. The same rule applies… As long as you never have to work again, feel free to buy it. If you’re levering up to buy “too much house” like a mansion with large recurring costs or a super car thats costs many thousands of dollars to maintain… Then you may be in trouble. If you can cover the costs? Then enjoy the ride and go for these bigger items. The key is to spending appropriately is finding way to 1) buy long-term quality of life, 2) go through experiences, 3) go through activities that are easier when young, 4) buy time with services and 5) making the final switch to “YOLO” purchases. We have no doubt you’ll make at least 3-4 of these and they will be worth it assuming you’ve spent correctly!
Importantly, for those that are serious about developing multiple streams of income and a high net worth, we can recommend Personal Capital. The Company offers *free* software tools with the following four key features: 1) ability to avoid losing money by tracking all fees associated with an investment product allowing you to choose the best possible fund for your future, 2) portfolio analysis where your risk profile is stacked up against your current age and retirement goals, 3) in addition to these free tools, you can also track your net worth and path to becoming a millionaire and 4) when you hit $100K in networth you’ll receive a free one time consultation with an investment professional at Personal Capital. After linking up all of your accounts you’ll be able to sit back and watch as your net worth goes up and your fees remain minimal over the next several years. We strongly believe that Personal Capital is the premier personal finance software tool when compared to its competitors such as Mint. If you’re looking to avoid personal financial collapse, it makes sense to track everything in one place for *free*.
Side Note: For some reason we got a lot of questions about meeting successful friends after college. The easiest answer for everyone? Upgrade your gym membership. No unsuccessful person spends $200+ a month on a high-end gym membership. If you’ve made it financially, change your gym to a nicer one and you’ll realize this is where well off men go to work out. It also typically has a large number of attractive women as well.