By Jack Forehand, CFA (@practicalquant)
Last week, Daniel Crosby, the author of the Behavioral Investor started a really interesting thread on Twitter that got me thinking about how I spend money and the value I get from it. In the world of investing, everything we invest our cash in is expected to produce a monetary return. But in the world of life, the best investments often produce benefits that are impossible to quantify.
In his tweet, Daniel listed some of the things he has found worth spending money on and some of the things that he hasn’t, and I thought it would be interesting to challenge myself to do the same. The goal of the exercise was to focus on things that are above and beyond the basics of life and to identify things that offer substantial non-monetary value. So I will focus my list on some unconventional things that have produced the most happiness for me and my family, even if they made little sense from a monetary perspective.
Things That Have Been Worth the Money
 Assets That Generate Experiences
I will group my two dumbest investments from a monetary perspective together in this group. About a decade ago, we put a pool in at our house and I bought a racing sailboat. The monetary results from these two purchases so far have been nothing short of a disaster. The increase in value of my house as a result of the pool was a small fraction of its cost. And the boat has offered a perfect combination of deprecation in value and significant maintenance costs. But if you asked me to list the two best significant purchases I have made, these would be them.
We spend pretty much every weekend of the Summer swimming in our pool. We have friends and family over all the time to enjoy it with us. And I spend every Wednesday night all Summer racing my boat with a bunch of friends and enjoying a beer (or two) at the local bar afterwards.
The research is pretty clear that your relationships with other people is the number one key to happiness. Although both of these investments couldn’t look worse on a spreadsheet, they have been a home run from that perspective. They have allowed me to spend more time with the people who are most important to me and that easily trumps any economic loss they have produced.
If you didn’t think I was crazy after reading the first part of this article, you definitely will now. How could a dumpster be one of my most worthwhile purchases?
Let me explain.
Like many people, we have accrued all kinds of things over time. Many of those things end up sounding great at the
I was the ultimate skeptic about AirPods. They cost way more than they seem like they should and you can just as easily listen to music with wired ear buds that cost 1/10th as much. But then I got them and my opinion completely changed. It isn’t that there is anything spectacular about them. It is that they just work. You just take them out of the charging case, put them in your ear and everything that needs to happen just does. The simplicity of the whole thing has made them well worth the money.
Things That Have Not Been Worth My Money
This one is just a personal preference one for me, but I have never found a lot of value in expensive clothes. I am sure that lack of focus on good clothes reflects itself in how I look, but I have always been fine wearing pretty much the same thing every day. My wife disagrees with me on this one, and when I remind her that Steve Jobs and Mark Zuckerberg wore the same thing every day she reminds me that I am welcome to do it when I achieve their level of success. But either way, this is an area I have never found a lot of value spending money.
This is another place where I have changed my mind over time. I used to love driving a nice car. But then one day I realized that it wasn’t adding value to my life that was anywhere close to the incremental cost. My favorite part of cars is the technology anyway and the base level Honda Accord has just as much technology as much more expensive BMWs and Audis. I still buy a new car every five years or so even though I know I should buy used, but for me, this is an area that spending money hasn’t been worth it.
 Red Wine
My opinion has also changed over time on this one. I used to like the occasional expensive bottle of wine. But over time, I have realized that I am not even capable of telling the difference between a decent, inexpensive bottle of wine and a much more expensive one. So now I just drink the Kirkland brand from Costco, which costs $7 to $11 and is very good for the money.
Value is in the Eye of the Beholder
Obviously, all of this is just personal preference. Someone else could completely flip this list and it would still make sense. But regardless of what in on your list, I think this is a valuable exercise to go through since it helps to focus on what is important to you and to align your spending where it produces the most value. If you haven’t ever done this, I recommend that you do. You might be surprised at the things that produce the most value for you.
Photo: Copyright 123rf.com / swevil