Why Morgan Housel Said, ‘Wealth Is What You Don’t Spend’

Here’s the complete quote: “Wealth is what you don’t spend, which makes it invisible and hard to learn about by observing other people’s lives. Spending is contagious; wealth is mysterious.”

Morgan Housel is the author of The Psychology of Money: Timeless lessons on wealth, greed, and happiness. I pre-ordered it. It’s a great read.

It’s on my re-read list.

Building wealth can be a long-term game.

It’s not just about making more money but spending less and investing wisely.

In the modern world, many of us are taught to want more. We want bigger houses, fancier cars, and a designer wardrobe.

But the truth is that all of this spending can add up and compound against us.

When we live in such a consumer-driven society, it’s easy to lose sight of what matters when it comes to wealth.

You can live a life of wealth without spending your hard-earned money on things you don’t need.

“Wealth consists not in having great possessions, but in having few wants,” says Epictetus.

You can easily increase your wealth by not spending it on things you don’t need, especially if you aim to impress people you don’t like.

Sounds counter-intuitive, right?

Wealth is a relative term and can be interpreted in different ways.

The way I define wealth is money that you either have saved up, invested in long-term assets, or money that’s coming in without your direct involvement.

If we want to stay wealthy, we need to make sure that we are not spending our hard-earned money on things that are not important.

It’s all about how much you spend versus how much you earn.

Based on this definition, saving or investing even 10% percent of what you earn can help you become wealthy over time.

Ask yourself: “Do I really need this?” “What will happen if I don’t buy it?” “Can I afford it?”

Wealth is also not about how much you make; but what you do with what you have.

Wealth is a state of mind, and it starts with self-control. It’s hard to save or invest money when so many temptations are out there.

With the constant barrage of hundreds of products on TV, in magazines, and online; it can be hard to resist buying products that we don’t need or saving for our future.

However, as Warren Buffett once said: “It takes 20 years to build a reputation and five minutes to ruin it.”

Starting now, try doing one thing differently than you would normally do and invest for your future self.

For a healthy retirement portfolio, you need to invest aggressively.

Many people can’t afford to do that. If you want to retire and live comfortably, you have to start investing more than you spend.

You may not make a million dollars in a few years, but there’s hope for a comfortable future.

It is possible to achieve financial freedom with careful spending habits and some careful savings.

With just a few changes in behaviour, you can set yourself up for financial success without sacrificing the things you love.

Spending is attractive — building long-term wealth demands sacrifices

Global systems are built around spending: we are encouraged to buy more and even borrow more to fund a lifestyle we can’t afford.

The problem is we all want the best of everything and will do anything to get it. But, this can lead to a vicious cycle of debt that can be hard to break out of.

Decreasing your spending by just 10% could save you $1,000 or more per year! Invest the percentage in separate savings, retirement funds, or investment accounts.

Consider paying off outstanding debts that are hitting your income hard. Start with any debt with high-interest rates before paying off lower interest rate loans.

Wealth is about more than just money — it’s about having a secure financial base and feeling confident about your future.

You may not feel wealthy now, but by taking your finances into your own hands, you could be well on your way to building wealth.

Your long-term success depends on your ability to resist the many temptations to spend — the habit of buying more or upgrading your lifestyle to match the increase in income.

The only way to grow your wealth is to save and invest more of your income.

It’s not just about how much you make, but what you do with it, how much you spend and where you spend it.

“The only way to be wealthy is to not spend the money that you do have. It’s not just the only way to accumulate wealth; it’s the very definition of wealth,” writes Morgan Housel, in his book.

The difference between the wealthy and those who aren’t is how they use their time — specifically, how they spend their money.

If you want to do well with money, learn to control your emotions and stop buying things you don’t need to impress people you don’t like.

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This post was previously published on MEDIUM.COM.

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