Gideon: Welcome to today’s episode of Beyond the First Million. I’m your host, Gideon Drucker, alongside my much closer, my much taller colleague, Jordan Haines. How are we doing today?

Jordan: Good. I can touch your shoulder now, and you can see my screen.

Gideon: I don’t really like it. It’s disconcerting. Even though we’re looking at the same information, I don’t know. I’m going to have to move this over and keep my own setup here.

When you work from home for so long, it’s weird when other people can see your screen because you’re never used to it. You’re used to doing whatever you want on your own time.

Today’s episode is about what personal finance experts and gurus get wrong. We’re going to talk about spreadsheet math.

I think everybody knows the beginning of making fun of personal finance gurus’ advice. It’s that classic example of saying that if you spend $5 a day on coffee or avocado toast, four days a week, 52 weeks a year, and multiply that by the return, you’re giving up $7 million or $3 million by the time you retire.

Well, yes. If you compound anything over 30 years, it’s going to seem like an outrageous amount of money. That doesn’t mean you shouldn’t have done the thing on day one. Lots of things we spend money on would compound in a ridiculous fashion over time.

Jordan: I bought a $20 pen the other day. I don’t know, I love this pen, and it was completely unnecessary. I remember talking to a buddy of mine who was like, “I only buy the cheapest things. I just want the cheapest things so I can get ahead.”

And I’m like, “Well, I kind of want to enjoy my life a little bit. I want this pen to feel nice when I’m using it.”

Gideon: How much do you use a notebook?

Jordan: I do a lot of things in a notebook, especially organizing my thoughts when I’m meeting with clients. Having something that feels good in your hand is worth the price. What do they say? “A fool knows the cost of everything and the value of nothing.” It often feels to me like you’re optimizing the small things and neglecting some of the more important things. What Is Spreadsheet Finance?

Gideon: Exactly. Everybody knows it’s ridiculous because, once you get to a certain level of income or assets, those decisions don’t move the needle. It’s the $100,000 decisions that matter: where you choose to live, your property taxes, what level of home you’re buying, and whether you’re sending your kids to private school. I’m not saying any of those things are right or wrong, but those are the decisions that are going to move the ball forward. Today, we’re talking about the next level of personal finance. We’re going to define it as spreadsheet math.

Jordan: Love it.

Gideon: All right. Spreadsheet finance. Spreadsheet finance looks at every financial decision through only one lens: What’s the most optimized decision on paper?

Everything is viewed through the lens of, “How do I maximize the amount of money I’ll have when I’m 60, 70, 80, or 95?”

Some examples might be: Don’t buy the $3 million home if the $1.5 million home gets the job done and accomplishes the same things. Don’t lease a new car; buy used. Never fly business class. Don’t upgrade the hotel if you don’t need to. Don’t hire someone to do something you could technically do yourself. Don’t pay off the mortgage if you have a low interest rate. Basically, don’t do anything a personal finance expert would say is wasting money.

Jordan: Personal finances are more personal than they are financial.

I think one of the grand assumptions finance gurus make is that there’s one right way, and that right way is whatever maximizes the amount of money you have on paper.

Think about when you should pay off your mortgage. If you have a 3 percent interest rate, they’ll say, “You should never pay off your mortgage early because you could earn more money by investing than you’re paying on that mortgage,” which is true.

Gideon: But I’ve also had clients say, “Yeah, I get it, but I’ve had this mortgage around me for 20 years. If I could never have another mortgage payment for the rest of my life and wake up every morning knowing that I own the house I live in outright, holy shit, that would make me feel good.”

The same applies to the amount of money you keep in the bank. We typically recommend six months of living expenses and one to two years of planned expenditures, but some clients like having 12 months. These decisions aren’t necessarily about spending or saving. It’s the same framework: What is the most optimized decision on paper versus what actually feels best for your life and the way you think about money?

Your goal in life and the point of proper planning is to get to a point where you can ignore spreadsheet math entirely. You can do the thing that isn’t the most optimized decision on paper because you’re confident you’re on the right track.

Jordan: There’s this tension that a lot of people feel. On one hand, they feel like they should be doing something, whether that comes from a guru, family member, friend, or just something they’ve had in their mind forever. I had a client who had always wanted this chair, and it was an expensive chair, all things considered. I told her, “Don’t ‘should’ yourself. It’s okay if you buy this chair because it’s important to you.” No, this isn’t the spreadsheet answer. But you’re not a spreadsheet. You’re a person, and this is going to bring you a lot of joy. That’s going to be the thing that’s most important to you.

Gideon: It’s okay not to make the most optimized decision. That is what the heck we’re working for. Everybody has those decisions where it isn’t really about the dollar amount. It’s that it feels frivolous.

My dad is financially independent. He’s done a great job. There are still things that, just on principle, he isn’t going to spend money on. But having the freedom to say, “I don’t give a shit what it says on paper. This is going to improve my life,” is the point. There comes a point at which making another decision that increases your net worth by 2 percent isn’t actually making your life 2 percent better. Now, I want to talk about more examples and bigger examples. A few that we hear all the time start with leasing a car.

Is leasing a car the best mathematical, financial, spreadsheet decision? No. You’re paying a premium to do it.

Spending Money to Improve Your Life [06:10]

Gideon: But sometimes it’s really fun and really cool to drive a new car every three years. If you’re at a point where you can make that decision without throwing off any part of your future financial plan, why the heck not?

Or maybe you do want to buy that larger home. Would not having the larger house mean having a little more money 30 years from now? Probably.

But if we’re no longer solving for financial independence because you’re already on track, maybe that larger house really would be cool.

Maybe your backyard is where your entire extended family comes every summer. Maybe the extra bedroom means your parents visit more. Maybe the pool is where your future grandchildren are going to swim.

Those are all rationalizations, in a sense, and that leads us to the biggest bone we have to pick with some of the spreadsheet math.

Things that cost more money generally provide more value. Again, not across the board. But you might enjoy something more. It might be more fun. It might give you back more of your time. It’s almost like we’ve attached a moral good to these things: Saving equals good, and spending equals bad. That isn’t really how life works.

That’s also why I think the truism “money doesn’t bring happiness” needs a little bit of a caveat.

Money by itself doesn’t make you happy. If you’re unhappy in life or unhappy in your relationships, money probably won’t change that because you’re assigning money a job it can’t do.

But money is a multiplier. If you’re already a pretty content person, having more money can make you happier. It can make you less stressed. It can make life easier. It buys time, options, experiences, and convenience.

Money Is a Tool, Not the Goal [07:32]

Jordan: Almost inevitably, more than 50 percent of clients will have a conversation where we ask, “What do you want to do in the future?”

More than half will say, “I want $5 million.” It’s always $5 million. I’ll always follow that up by asking, “Why? Why? Why? Why?”

They’ll say, “That means I can stop working when I’m 50.” Then I’ll say, “Well, it isn’t $5 million you want. You want to stop working when you turn 50. Why?” “Oh, because I want to spend time with my family.” Okay, so it isn’t really about stopping work. It’s because you want to spend time with your family.

That’s the thing you’re working toward, and that’s what you’re optimizing for. You aren’t optimizing for accumulating as much of this stuff as possible. At the end of the day, like you just said, money is a tool. It’s meant to be used to do something. The sooner you realize that and use it in a smart way, the more fun life becomes.

Gideon: If we still want to focus on spreadsheet math, the next question is, “How much income are you going to need at age 51 to replace the income you’re no longer earning?” That isn’t necessarily a function of your net worth. It’s a function of how you’ve been saving, how you’ve been investing, and what we can turn that money into.

When Lifestyle Creep Is Actually a Good Thing [08:31]

Gideon: This whole conversation is something I think I’ve evolved on myself.

When I started my career as an advisor, I definitely leaned into some of this personal finance coaching: Live below your means, save more than you spend, and all of that. All of that is true. It just isn’t the final level of advice or information.

I used to talk more than anything else about lifestyle creep. You want to avoid lifestyle creep, where you wake up one day and spend $12,000 a month on shit you don’t need, don’t care about, and that doesn’t bring you joy. That is bad. But lifestyle creep as an idea can be a good thing. If your income doubles over the course of your career, why shouldn’t your quality of life improve too?

Jordan: I think it’s natural. If you’re going to earn more money, grow, and progress in your career, life, and family, your lifestyle will grow. That’s okay. It isn’t a bad thing.

Gideon: I’m married. You have three kids. I’m expecting my first in January.

Jordan: Weird way to announce that on the podcast.

Gideon: I was actually going to set that up as an opening. But yeah, expenses go up. Your lifestyle changes. The things that are important to you change.

Lifestyle creep can be a good thing. It’s something that should be celebrated as long as it’s intentional. We talk a lot about spending money on the things that bring you joy and trying to strip out anything that doesn’t. The thing I care about most, in terms of what I’m willing to spend money on, is anything that minimizes hassle and gives me time.

If it’s 80 degrees and I don’t want to sweat while getting off a train or subway, be uncomfortable, and arrive somewhere feeling gross, I’m going to take an Uber. I’m not even going to think twice about it.

Jordan: There’s no part of me that feels bad about spending a lot of money on a bed, sheets, or something in my room that helps me sleep well. There’s no part of me that feels bad about buying a really nice chair for my office because I’m going to sit in it a lot. And there’s no part of me that feels bad about spending money on things that allow me to be present with my family during the eight hours a day that I can do that.

Gideon: It’s funny because we answer that question not only with different things, but with entirely different frameworks. It can be individual things, material things, or experiences, but they have to fit within those areas of life. If something is going to keep me from doing the things I really want to do, I’m likely going to spend money on it because I don’t want to have to deal with it. If you eliminate the shit you don’t want to do, guess what? You’ll have more time and energy to do the things you really do want to do.

Graduating From Spreadsheet Math [11:55]

Gideon: To bring this back to our opening idea, getting to a point financially where you can graduate from spreadsheet math, where you can make the suboptimal decision, that is the point of personal finance.

Now, we’ve spent the whole episode saying this, but I’m going to issue a caveat in the last few minutes: Personal finance education and advice are good things. We’re not throwing the baby out with the bathwater.

It’s helpful when you’re getting your start. Before you reach the point we’re talking about, when you’re in your 20s, building, hustling, and grinding, yes, you should have a budget. You should focus on saving more than you spend and not maxing out your credit cards. That is great median advice for the median financial situation, which, by the way, describes most of America.

Jordan: Yeah.

Gideon: But we’re talking to clients for whom that stage is in the rearview mirror. They can afford to think about it that way.

That’s why so much financial media advice is focused on the question, “How do we reach the most eyeballs?”

The most people are going to read an article saying you’re giving up a retirement nest egg if you spend money on coffee or avocado toast because that affects most of the people scrolling through CNBC in the morning. Imagine you have two families. They both spend 40 years making great money, saving, investing, doing most of the right things, and building significant net worth.

The first family spends its life optimizing spreadsheet math. They filter every financial decision through the question, “Which option will provide the most money at the end of the day?” They choose the cheaper travel options and buy the smaller house. They never lease a car. They keep the same car for 10 or 15 years, delaying purchases until the exact moment they need something.

The second family also makes smart financial decisions. They save aggressively. They invest. They’re disciplined. But as their net worth grows and they become financially independent, they stop trying to maximize every dollar they have. They buy the bigger house when they reach a level where they feel comfortable and know it will bring them joy. They lease a car because they enjoy driving something new every few years, and they genuinely get excited about deciding what they’re going to drive next. They start taking incredible vacations and bringing their children and grandchildren along for two or three great weeks together. They pay for convenience and hire help to reduce stress. They do all the things that money can provide that we’ve spent this episode talking about. That’s how each family lives for 30 or 40 years.

The first person, who didn’t necessarily cut corners but also didn’t change their behavior or allow their lifestyle to creep up over time, dies with $24 million. The second person, who started to enjoy and luxuriate in their money a little more, dies with $16 million.

They’re both enormously wealthy. Their children are taken care of. Their retirements are on track. Neither is ever in any danger of running out of money. Who won? Which person would you rather be?

Did the first person really win because they died with $8 million more? By spreadsheet math, they made every correct financial decision and finished with significantly more money than the other person.

But I think if you look at that comparison, you might say, “Well, if I have $16 million and it accomplishes everything I need out of life, I’d rather enjoy that money and end up with a little bit less.” That doesn’t have to be the right answer for everyone. If someone is legacy-minded, wants to make an impact, or wants to donate a substantial amount of money, then sure.

But aside from those impact and legacy goals, dying with the most money usually isn’t what we’re trying to solve for, and it isn’t what clients are looking for. That’s the question I would leave you with. I don’t know if you have anything to wrap up with, but $16 million versus $24 million is a shit ton more money if you only look at the numbers. But in terms of the effect it has on their financial lives, it changes almost nothing.

Jordan: Yeah. You’re not a spreadsheet. You’re a human being. You have things that are important to you and things that matter to you. Those are the things you’re going to design your life around, not just making and accumulating as much money as possible. In both cases, they were financially secure and financially stable. Obviously, don’t do stupid things.

Gideon: If someone listens to this whole episode through the wrong lens, this could become bad financial advice.

If someone isn’t on track, doesn’t understand their spending versus saving, and listens to this thinking, “Yeah, Jordan and Gideon said we should buy a bigger house,” no. That isn’t what we’re saying.

We’re assuming that everyone receiving this message as intended has a financial plan. They’re saving. They’re doing the right things. They know what their outlook looks like. Then they can think about how they want to spend their money. But if you haven’t done that work, literally everything we’re saying doesn’t make sense, and you shouldn’t take it to heart. Assuming you have, this is the cool stuff you get to start thinking about.

Jordan: Yeah. Build the life you want, know what you want, and then go after it.

Gideon: With that, have a wonderful day. If you’re enjoying the podcast and getting value from the little nuggets you’re thinking about and discussing with your spouse or friends, please like, subscribe, and share it around. We want to build the audience. We’re going to stick with this. We aren’t going anywhere. And hey, if you get to it, write a review. We’d appreciate that as well. With that, we’ll see you next Thursday. Have a wonderful week.