How you spend money is more important than you how save money. In this post, let’s talk about things you can waste money on: in both the good and the bad.

Learn the things you should waste money on to maximize your ROI. And know things you should almost never waste money on, including my personal experiences.

Things You Should Waste Money On

First and foremost, you should “waste” money on yourself by investing in yourself. It’s crucially important than when you splurge on your education, you do so wisely. That is, avoid charlatans that charge you $1K or even $200 per course. Just go on Coursera, YouTube, and do the legwork to get good at whatever it is you want to get good on.

These skills you learn will provide lifelong value as you’ll always retain the knowledge, forever.

Second, you should splurge on yourself and loved ones from time to time to procure memories that’ll last a lifetime. Traveling is a great way to get memories that’ll last you a lifetime. And maximizing credit card points is a great way to minimize the cost of travel. Other words:

Hack credit card points + Traveling = Lifetime memories for cheap = very high ROI = minimal regrets.

And that’s it. To recap, you should waste money on the following things to maximize the value of your money and to minimize regret:

• Lifelong experiences, like travel as an example. Memories don’t depreciate over time.
• Lifelong skills that can net you more money over the long-term. Skills don’t depreciate over time either (unless you pick up a useless skill, but that’s for another post).

Things You Should Not Splurge In

There are 3 things you shouldn’t waste money on, and I’ll list them out here.

Social Status

First, you shouldn’t bother wasting money on social status. This includes going to a restaurant you don’t particular want to eat in, but go because you want to take a photo for that Instagram. This includes that Gucci bag that makes you feel like you’re better than everyone else.

The only exception to this is if you have a direct roadmap where investing in your social status means a high ROI. Take, for example, if you were Patrizia Gucci (née Reggiani Martinelli) and bought a bunch of Gucci to impress the Gucci family so that they’ll give you shares of their company…that’s another story. Another example is if you’re a realtor and you need to buy a suit because dressing like a slob just doesn’t sell property. And so on.

But I wouldn’t say investing in your wardrobe for your professional ‘wasting money on social status’ – it’s more like just making purchases for your professional status.

Charlatans, And Other People You Don’t 100% Know

Second thing you shouldn’t waste money on (that I’m guilty of) is wasting money on charlatans. The thing with charlatans that make it tempting is because of their grandiose promises. A logical thing to think is “even if 10% of what they say is true, then…” or “even if there’s a 1% probability this would work, then my expected value is huge…”

But the thing is there’s a huge difference between a 1% probability and a 0% chance. At 0% — you’re better off never wasting money on charlatans because the expected value is negative of whatever you need to pay them. That is: charlatans can promise things that are unlimitedly ridiculous and assigning a nonzero chance to those things actually happening means you’ll be a sucker and be exploited (because if there’s only a .01% chance giving you an expected value of $10K it might not be worth it, but the next charlatan can just promise something that’s 1000X and it looks like you can get $10MM from their scheme, but in reality 0% is 0% and your expected value is still negative of whatever your cost is).

It’s very hard to know if something will happen with a 0% probability or a .0001% probability. So you should not assign nonzero probabilities to charlatans’ claims if you think they’re frauds.

You can tell charlatans but gut feel generally. If they are saying things that are likely (or could possibly be) untrue, or if you feel ‘man they are really selling me something’ or if you feel that they’re charging a nontrivial amount of money…they’re charlatans.

I got suckered in by charlatans many-a-times. Including but not limited to buying a lot of digital courses that turned out to be fraudulent, and losing $21K in a crypto ponzi scheme.

Risky Gambles With Long Tail Risk

Finally, you shouldn’t take risky gambles. That is, you shouldn’t put yourself in a position where you’ve unlimited downside and limited upside. All it takes is one ‘black swan’ to wipe you out. For example: in shorting stocks you can be right 99 out of 100 times and still go bankrupt. That’s a bad deal.

I can attest it from personal experience. I used to run a short strategy and gained 20% in a week. That’s astronomical. Then I lost it all in a single trading session.

Wrapping Up

Following these rules and having discipline with your money will make you rich. Not spending money wisely will make you poor. To reiterate…

These are things you should spend money on:

• Experiences
• Self-education
• And actually, any other “thing” you can purchase whose value doesn’t depreciate over time.

These are things you shouldn’t spend money on:

• Social status and luxury items that don’t give you an ROI.
• Actually, you generally shouldn’t purchase anything that’ll depreciate in value over time.
• Charlatans and people who talk big, but have no track record. Or a faked track record. Or anyone you don’t 100% trust. Or anyone that you know since childhood but you’re not 100% sure if they’ll perform. Basically, if it’s not a ‘hell yes!’ it’s a ‘hell no!’ Be very selective who you pay and who you listen to.
• Risky gambles with limited upside and unlimited downside.