Don’t Let Comparison Waste Your Time—Or Your Money

On this episode of The Long View, author, advisor, podcast host, and former New York Times columnist, Carl Richards, breaks down how he helps advisors set their clients up for success, how people can find what they truly want to spend their money on, and lessons from his money-related sketches from his latest book called Your Money: Reimagining Wealth in 101 Simple Sketches.

Listen to the full episode of The Long View. Carl Richards: The Case for ‘Deeply Human’ Financial Advice

Here are a few highlights from Richards’s conversation with Morningstar’s Christine Benz.

Don’t Let Comparison Waste Your Time—Or Your Money

Christine Benz: I think it was Brian Portnoy who made an astute point—we have all heard about how if we’re going to spend our money, our best ROI is spending on experiences, especially with loved ones. But he made the point that now that we can all see everybody else’s experiences, is that going to diminish our own experiences somehow if now they can be weighed and measured alongside other people thanks to social media? What do you think about that point?

Carl Richards: Yeah, I think it’s a huge problem. Because now it just becomes one more place we could compare and compete. And I think again, it really points to this need for intentional conversation around like what really matters to you. Gretchen Rubin was it, yeah it was—it was Gretchen Rubin on my podcast 50 Fires she talked about how she was at—this story was so great. She was at some event in New York as one does I guess, like a cocktail party or something, and somebody came up and Gretchen was just either coming back or on their way on a trip to the mountains to ski, so I’m sure it was Colorado because the skiing is terrible in Utah, you shouldn’t come to Utah to ski. That’s just a joke. And this lady says to her, “Are you going to ski?” And Gretchen’s like, “No we don’t ski. We don’t like to ski, my husband doesn’t like to ski; we don’t like to ski.” And the lady really insists like, “You’ve got to ski! I didn’t like it either, and I’ve started skiing. You got to ski; it’s the best thing. You got to ski.” Gretchen is like “No, no we don’t ski, it’s fine.”

And the lady went away, and she came back, she came back sometime later, 15-20 minutes, 30 minutes, and said, “You know what I realized in talking to you? I don’t like skiing either. I’ve just been doing it because it was what you do.” And I was like that is so interesting. I have lots of stories about that for me. Like dinner and a movie with friends. My wife and I went through this time where we were like we want to build more connection with some close friends. So let’s systematically invite friends, let’s go every, whatever, like twice a month on Friday night. And what should we do? OK we’ll go to a movie and dinner because we want deeper connection with friends. And after like five times we were like wait, if the goal was deeper connection, we were just in a noisy restaurant and a movie. So we’re like but that’s what everybody does so that’s of course what you should do. We don’t like movies, and we actually don’t love eating out. You know what we love doing? Let’s buy all the ingredients, come over, plan on two to three hours, we’ll make the meal, we’ll talk. We like that. And it turns out that was less expensive, but that was not the point; it was a better expression of the value of connection. So I think what you’re pointing to makes this even more important. How do you get clear about your goals? And by the way that’s a practice that’s never done because you’ll be wrong. Your guesses will be wrong. Five million dollars on a sailboat—well have you ever been on a sailboat? Go try that first.

It’s Time to Start Experimenting With What You Want

Benz: Well that’s something I want to delve into is—and we’ve talked about this with you before—but the idea of enough, finding your enough, finding what your values are. What are some key questions people should ask themselves to try to get to the bottom of that?

Richards: I really think that I have a heavy bias toward action for this experience. So start by some questions and some conversations around “make a guess.” And this is coming up a lot. I think it’s the age cohort of like 45- to 60-year-old who’s been working, working, working, working because that’s what we all did. And is now saying—I just had this conversation with the chief creative at a public company everybody would recognize, the head of creative. And he’s like, “I don’t have any hobbies. I don’t know what I’m going to do five years from now. I need to figure it out.” So, OK we start there, and we say let’s just guess, like just a guess and some of the places you can look for hints: What podcasts do you listen to? If you were still getting magazine subscriptions, what magazines are arriving at your house? If Gun Dog Weekly or Gardening is arriving, you got some hints. What conversations are you interested in?

Then you could go back 20 or 30 years and be like, what did you used to like to do? OK, so we’ve got a guess. And then my bias toward action is go take the smallest experience you can with that. Go do it and see what shows up, because new information will show up. And this is the same thing with the concept of enough. Enough—we’ve talked about this, but enough can’t be a number or else you’ll never get there. So how do you define your enough? Well you start to test things, like what if—I was just having this conversation with Ron Lieber and Jodi Kantor were out here for 4th of July and we were talking about, and I can’t remember who it is, was it Paige Pritchard? It might have been Paige Pritchard who wrote about her no-spend year, no-spend month.

Those are really interesting exercises of like well what if I didn’t buy any more running gear this year and I just used what I had, is that enough? What if we went on a—I was just talking to another friend who this year decided to do a staycation in somebody else’s house is what he called it. So they drove to a rental place in the countryside of Virginia. They didn’t spend any other real money. They ate at the house, the house had a pool, they went on lots of walks, like what if that was enough? We didn’t have to fly somewhere. How was that? So just start testing, running little experiments. Morgan Housel famously says that he’s supposed to be a car guy because he was a valet when he was 18 in Los Angeles. And everybody tells him he should be a car guy, and he could afford to be a car guy.

Well an experiment he runs is when he goes to the Hertz counter—he said that once every couple years he has to run this experiment. He’ll just be like, you know what, it’s an extra $200, give me the Porsche. And he said he doesn’t even have to drive; he doesn’t even get off the lot before he’s saying to himself, “I admire this. The craftsmanship is amazing, but it’s just not something I need.” Well that’s a very cheap way to learn that versus buying the car. So that’s kind of how I would run experiments, see what I notice; run experiments, see what I notice. And one of the things you got to keep in your mind is everybody else loves this; well you’re running an experiment to find out if you do.

For Retirees, the Permission to Spend Is All About Practice

Benz: I wanted to ask about older adults. I’ve been spending a lot of time talking and thinking about retirement planning, and it seems that many folks at that life stage truly do struggle giving themselves permission to spend what they could spend. How can people at that life stage get more comfortable with the spending they do and maybe even do some lifetime giving to their loved ones versus leaving it as a bequest when they’re gone? Can you talk about planning to spend at that life stage?

Richards: Yeah, this is another surprise to me, the number of times this topic—I’ve run into it lots in my own planning work when I was running my own firm. I hear a lot about it from financial advisors. But all these conversations I’m having lately, this has come up so often and it’s so fascinating to me. And it’s easy to understand, like the reason—if you’re in a position where you’ve been successful, which a lot of the listeners of this show either are or advise people that are in that position. The very habits and traits and characteristics that got you there delayed gratification. You’re really good at that.

You might even be good at being frugal, but certainly delaying gratification, investing for the future, waiting, and now you’re at the spot you’ve been waiting for. And you’ve been waiting for this thing, you’ve been successful, you waited for this thing. So what do you do now? And it’s antithetical to your very identity, and so I think you practice. The same thing we do, you just practice. Look, the research is clear, but you don’t need another lecture about the research. This behavior is perfectly rational, but now the situation you’re in, it’s slightly irrational to be at the spot where you could put the golf shoes on and refuse to do it. Or maybe even more interestingly, wouldn’t it be fun to spend a little bit of time with the grandkids doing things they love? Oh man I have this one grandkid that really wants to learn to sail and his parents are busy, and they don’t have—can I go spend a week at a sailing camp? And I could kind of be on the shore or even sail with them? That’s going to cost some money. The research is pretty clear that, and you pointed to Brian’s work and many other people about this funded contentment.

So practice, and like anything you’d practice, start small. This is funny, Christine and I are asking you to go spend some money. Tomorrow, I want you to find something and ideally find something small that you’ve always just wanted. You don’t even need it; you just wanted to do it. It’s small, it’s $25, it’s $100, it’s $5. Maybe it’s even to the point of you bought into the latte thing; you didn’t buy coffee out because you were saving, but you love coffee out. Go tomorrow morning to your favorite coffee shop. Feel the whole way through it, buy your favorite thing; it’s going to be $12. Sit in your favorite seat with the book that you’ve been reading, and enjoy it and feel the enjoyment of it. And it’s a $12 rep, a $12 practice. And I think that’s what you do, you rewire it until you get to the point where you’re like, you know what, I’m going to pay for my grandson’s entire education, because I’m so excited about the fact that he wants to become an electrician. I’m going to fund a scholarship for women who are getting into biomedical engineering. I think the way you get there is you practice.