Late last year I sat down to ask myself what it actually meant to be “good with money”, and following an approach that takes various ideas and attacks them, was able to kind of see that most of my hunches were wrong. After all, one might think that somebody who spends very little is “good” with their money, but this isn’t true when important things like health are neglected. Spending little relative to one’s income also isn’t necessarily good, since everybody has different situations in life. It’d be like saying a single person with no kids earning $60,000 is better with money than a married person with several kids earning the same amount, simply because they are able to save more. That’s not a fair comparison. It also doesn’t account for people who are caring for parents, or people who need expensive medications to survive or live a relatively comfortable life. It’s also misleading to say that people are good with money when they only buy what they need, because needs are pliable and subject to interpretation, and misers often run the risk of going through life joyless because they simply don’t or can’t bring themselves to enjoy expensive things.
So really, as I’ve mentioned elsewhere, I’m starting to think that “being good with money” is all about priorities, and how you actualize them in the real world. Somebody earning very little, who lives paycheck to paycheck, might actually be really good with money, if they have a good system of priorities worked out. But this is all relative to one’s circumstances, which is why there’s very little point comparing people, or comparing yourself to someone else.
I don’t have the philosophical patience to sit down and grind through a list, but I would guess that good priorities are somewhere along the lines of relationships, health, food and security, long-term goals, aesthetics, entertainment, and miscellaneous, as a rough rule of thumb.
You could also consider neurosis as a factor, if you can accept that word from the mouth of a non-psychologist. By which I mean, an unhealthy obsession with health can be detrimental, unhealthy relationships can be detrimental, over-eating of food can be detrimental, too much entertainment can be detrimental, etc. Everything in its place, and a place for everything, so to speak. So actually, I think good spending is an extension of wisdom, knowing the healthy boundaries of things in your life and acting accordingly. But there’s nothing easy about that. And we are constantly battling asymmetries in information, pertaining to the quality of things we buy, how much we will use them, how actually useful they are, etc.
Spending money on a quality item can be awesome, but it can be temping to buy everything as quality, for no other reason than to experience the rush of spending. In which case, your spending is not a good representation of healthy, good-impact priorities. But then some people buy only the cheapest of everything out of fear, or even the conviction that spending little is synonymous with being a good person (even though it’s not)(and I’m sure I’ve been guilty of this).
This is why I think minimalism is so valuable – it’s not so much about having nothing as it is about having enough; having the right things. Well, unless you watch all the popular minimalists on YouTube, but I sometimes want to gag after too much of that. But when you go without the stuff that doesn’t really add value to your life, you save a lot of money, space, and mental real estate, which can be used for those things that matter more, that are higher in the priority queue. Maybe that’s the real mechanism by which some of this FIRE stuff is so useful.
Once again, this is just a smattering of thoughts. I’ll probably have more in the future.