Managing money is hard, everyone knows that. It doesn’t help that no one ever teaches you how to manage money, which leaves you with few ways to learn. One of them is squandering your entire first year of earnings — that makes you realize that you need a crash course in money management.

When you reach the end of the year without a penny to your name, waiting for the next client payment to come in, you say “no more.” I did, at least. You start saving ruthlessly on everything: no more Uber, no more lattes, no more eating out, no more dumb comfort purchases on Amazon. For a while, it feels pretty good, like you’re on a rightful, successful mission.

Then you become miserable. You second-guess every single purchase you make because you’re afraid you might, once again, not know how to pay your taxes. You see the digits in your bank account growing and growing and it makes you feel good and why on Earth would you want to reverse the trend?!

However, there is a different way to use money, one that doesn’t make you miserable or poor. It requires good judgment and an understanding of basic mathematics, which I’ll assume you have.

My point is that you should spend your money on three things: time, money and happiness.

Time

People say money doesn’t buy time, but I beg to disagree. You can definitely buy time with money. In fact, you probably do it without even realizing: when you take an Uber instead of walking, you’re buying time. When you hire someone to do stuff you don’t know how to do, or don’t want to do, you’re buying time.

The question you should be asking yourself every time you do such a purchase is: what’s my return on this investment?

Let’s consider for a second the case of the Uber: suppose that walking (or taking public transport) from location A to location B would take you an hour. How much is that hour worth to you? If you’re a freelancer, that’s just your hourly rate — let’s say it’s $100.

Now, suppose that taking an Uber from location A to location B takes you 20 minutes and costs you $20. When you arrive to location B, you still have 40 minutes of your time left, approximately $66 dollars (= $100 / 60 * 40). Remove the $20 dollars you paid for an Uber, and that means you have potentially earned $46.

I say potentially because you have not really earned the $46 until you get to work. In other words, if you want that Uber to be a justified expense, you need to spend your remaining 40 minutes working. Otherwise, you just lost $20 (which, by the way, is totally fine every once in a while, since you’re not supposed to be maximizing your time… all the time).

This is why successful people have drivers and assistants: if they pay their employees $16k/month, but those employees save them 60 hours/month, they only need to convert that time into $16k/month for the expense to be justified, and they can spend 60 more hours every month doing the things they like and are good at.

I make the math look very simple here for the sake of argument, but the line is not always that clear: for many of us (especially those who are not paid by the hour) there’s no crystal-clear relationship between time and money. Many decisions will be left to your own judgment. This system is not supposed to yield precise results all the time either — think of it more as a new perspective on saving and spending money.

Money

The second thing you can — and should — spend your money on is… money.

I’m not talking about old-style investment here, although that’s a perfectly valid option too. I refer to courses, books, conferences, podcast subscriptions and all the material that will help you keep your skills up to date and increase your market value, while also making you a more interesting person to talk with at parties.

You should never (within reason!) question the value of learning a new skill or simply expanding your culture. We’re in the age of information: the more information and abilities you can acquire, the more you’ll be worth to your employer or client. If you can master a wide range of skills, you will never find yourself unemployed or run out of work.

Do you still need to consider whether this a justified expense?

Happiness

There’s something else people say money can’t buy: happiness. This myth has been disproved a long time ago. What scientists have found instead is that there is a limit to how much happiness money can buy you — and that limit is $75k/year. In other words, money doesn’t make you happy, but the absence of money certainly doesn’t help either.

If you deserve a vacation, go for it. The world will keep spinning when you’re away. Don’t be afraid of going out for dinner every once in a while. Don’t be afraid of junk food either, if that’s what you need to keep going on a rough day. If you want to buy something dumb on Amazon because it will brighten your day, do it.

In general, prefer experiences over things, but don’t underestimate the value of things, especially when they’re long-lasting or, at the very least, reusable (e.g. a new TV, a pair of quality headphones, clothes that fit).

This stuff is not just for fun either: when you’re happy, you’re more productive. Have you ever had an “off” day? How much were you able to accomplish? What about those days when you wake up with a smile on your face and everything seems to fall perfectly in place?

A trip to Spain or a better laptop won’t secure life-lasting happiness, for sure, but they might be just what you need.

Spend money, stay happy.

A Different Way to Look at Life

The relationship most people have with money is deeply flawed: they cling to it and, as a result, they limit their own potential and lead unhappy lives.

As you have seen, there is a different, better way to look at the matter— one that will make you happier, more productive and wealthier. It has the potential to change the way you approach your life: when you have the confidence to put your money where it deserves to be put, you make better decisions and achieve greater results.

It requires discipline, judgment and a deep understanding of your own psychology, but this is true for all the changes that are worth it — so, whether you decide to follow my advice or not, start working on yourself now and never look back.

Technology leader and strategic advisor. I work at the intersection of people, software and words.

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