“I Earned It”

the art and science of justifying spending

This article is one I have been trying to write for many months, because it’s an extremely challenging and deep topic, so bear with me. It started when I read a short article written by a very rich person describing their lifestyle. I was shocked by the excessive spending. To me it seemed so wasteful and absurd. I thought they should have just done things normally and comfortably and donated the rest to people who really need it.

But really, this wasn’t fair at all. This kind of spending is not absurd to very rich people, it is normal. And someone who has much less than I do might think the exact same thing about my spending, so who was I to judge? Really, what this boils down to is one important question: how do people justify their spending? And in a more harsh and detailed form, knowing how much suffering is happening in the world and the fact that millions of people are starving and living on less than a dollar a day, how do you justify spending on extra money on things you really do not need?

How We Rationalize Spending

How do you rationalize the money you spend on a fancy dinner, a new laptop or car? This is a difficult question. A sharp question — it cuts when it hits. People get angry, or feel defensive. It instantly produces guilt, regret, and often hostility. But more important here are the answers that tend to be produced — the reasons why people think it’s OK to spend money on luxuries instead of giving it to those in need. These reasons actually are remarkably similar from person to person. So I set off on a mission to find the rationalizations that people use. By searching through a couple quora threads and making a slightly provocative hacker news comment, I was able to extract a decent number of rationalizations, seen below:

  • I worked hard to earn this money, it’s my money, not someone else’s.
  • If I gave money to charity it wouldn’t really make a difference anyway.
  • It’s none of your business how I spend my money, it’s my life not yours.
  • Other peoples’ problems are not my problem, they should make their own money and earn their own success. If they don’t have money, it’s their own fault for not working hard enough.
  • The money I spend helps to create jobs and stimulate the economy, and trickles down to people who need it anyway.
  • Who are you to be asking me these questions, you are no saint yourself.

On top of these reasons made directly by people rationalizing spending, I think I’d like to add two more:

  • I do not understand how people that are much much worse off than I am live, I have never experienced this type of life. I don’t see it, I don’t know about it, and it is not relevant to me.
  • I simply do not care about random other peoples’ situations, luck, or opportunities. Every man for himself. I have my life and my money, and that’s what I’m worried about, you worry about your own.

Of course nobody would outright say these last two, but it is inevitably true for many people.

How Valid Are Our Rationalizations?

Now, the next step in investigating this issue is to look into each of these defenses and determine how valid they are. Let’s take down the easy ones first.

Any sort of self-defense reaction is easily dismissed. Something like “it’s none of your business how I spend my money” or “you are no better than I am unless you donate all your money to charity,” for example. While this may temporarily make the rationalizer feel better about themselves, when it comes down to it, this is not actually a justification for their spending. It’s simply an attempted personal attack on whoever asked the question, because the question made them uncomfortable. With these types of defenses out of the way, there are thee primary justifications left, which we’ll discuss in further detail.

Donating to Charity Won’t Make a Real Difference

This viewpoint is one the easiest to dismiss, and is a very weak rationalization overall. While some charities are less effective than others, it’s extremely simple to find out which ones are most effective. On top of that, many of these charities publish plenty of statistics about what kind of impact their work has made. With many charities, your donations are feeding starving people, providing essential medicine to those in need, and saving lives, directly.

I think that the real problem is that most people actually feel as if charities are ineffective because of a lack of feedback from the charities, rather than their money actually being ineffective. As such, newer breeds of charities have emerged that consistently give donors feedback on what exactly their money has gone to support. If this is a concept that interests you, check out Watsi, where you can directly donate to a major life saving surgery for someone in a third world country who cannot afford it, and they report back on how the surgery went. Also take a look at Charity Water, where they send you detailed updates on which projects your donations have gone to support, and how your money has helped to bring clean water to communities that didn’t have any access to it previously.

Finally, I’d recommend checking out GiveWell, a project that measures the effectiveness and impact of many charities and offers tips on how to donate to maximize your dollar’s impact. Using their research, you can determine a way to give that maximizes impact and effectiveness, making you feel great about how much of a difference you are making.

Watsi funds patients at this hospital in Bwindi. While I was working there, I saw a little girl’s life saved by Watsi when her family couldn’t afford treatment. Her treatment was funded by the public, donating through the internet.

Any Money I Spend ‘Trickles Down’

Ah, the good ol’ Reagan defense. Unfortunately, the concept of “trickle down economy” is simply false, although it has been frequently considered by those uneducated in basic economics and implemented in various government administrations over time. There are plenty of studies and critiques that reveal that giving wealthy people more money to spend does not actually benefit less wealthy people at all. The basic reason for this is that rich people are more likely to save money than poor people, so it’s actually less likely to end up going back into the economy. Linked above is one study that measured income inequality and GDP in a variety of countries, finding that as income inequality increased, GDP decreased. That’s right — this means that widening the gap between the rich and the poor puts the entire country in a worse place. In fact, Wikipedia itself has a lengthy section on criticisms of this theory, including many referenced studies. On top of that, this school of thought is not even recognized in the actual study of economics, because it is so clearly false that it’s not even considered. In fact, an economist wrote an entire book on how it does not exist. The article linked in the previous sentence is an excerpt from the textbook “Basic Economics”. Ask any actual economist about this theory and you will be scoffed at.

So I think it’s fair to say that this justification is nothing more than entirely false and uneducated. This also brings up a number of political concerns, but this is not a post about politics, so we won’t get into that.

I Earned My Money, Other People Didn’t

While this is one of the most common defenses and additionally the one that seems most reasonable to many people, it surprisingly is also entirely invalid. While many people work hard for what they have, the reality is simply that if you are successful, most of the reason for this is that you got lucky.

Let me explain. Think about where you grew up, and your parents. These two make a huge influence on where your life goes, of course. Now think about what would have been the case if you grew up with a single mother who was rarely present and an abusive father, in a war-torn third world country. Still think you would have worked just as hard and attained the same success — honestly? There are huge numbers of other outside environmental factors that helped you to get where you are too. Where you went to school, if you went to school at all. Your friends, and their habits and tendencies. Chance encounters that lead to opportunities. And in addition to that, even your genetics were a combination of pure chance and luck. This concept is discussed in even more depth in “The Unavoidable Randomness of Life”.

“If wealth was the inevitable result of hard work and enterprise, every woman in Africa would be a millionaire”
— George Monibot

Your personality is formed through a combination of your genetics and the environment while you were growing up (nature and nurture), but both of these factors are forged purely by chance. When you add everything up, your ‘hard work’ is only one minuscule piece of your road to success. Even those who you perceive as lazy and unsuccessful despite being given a wealth of opportunities in their lives might have reasons behind this. Often times, they are reasons you can’t see, related to family influence and upbringing, or just awful luck. What if that person is clinically depressed, for example? This is not something you can “work hard” to get your way out of, it’s a chemical imbalance in the brain, and it just sucks and brings down everything in your life.

You simply cannot say that you deserve what you have and others don’t because you worked harder than them. I’m sure you did work hard, and without that hard work you would be nowhere, nobody is questioning that. But success is not a linear scale on which you move forward or backward based on amount of ‘hard work’. It’s a fragile lattice of events and circumstances which, if one piece were removed, would crumple and form into something entirely different. Your hard work is an essential piece of the structure, and one that, if removed, would likely cause a collapse. But the truth is that it still is only one tiny piece. Removing any other piece would cause a similar effect. Your hard work is not the reason for your success, it’s one of thousands of other reasons which are all determined by luck. There are others who work just as hard as you, if not harder, and live in a much worse situation day after day because of less fortunate circumstances they were dropped into by chance.

“Success is not a linear scale on which you move forward based on ‘hard work’. It’s a fragile lattice of events and circumstances which, if one piece were removed, would crumple and form into something entirely different.”

There’s even a name for the viewpoint in which you over-credit your hard work in the equation of success — the self-attribution fallacy. This fallacy is when you credit yourself with outcomes for which you were not responsible. If you are interested in learning more about this fallacy, check out this article which explains it in depth. The article is based on studies that show the pure chance involved in success, and how the successful people justify it based on their own creativity, skill, etc.

When it comes down to it, the view that you worked harder than others and earned what you have is simply endorsing a fallacy which is rooted in vanity and a lack of understanding of outside circumstances. As such, I would call it an invalid rationalization.

Lack of Understanding

Finally, this is not a justification that people make for themselves, but simply an observation I have made in general. Many people simply do not have the understanding of how people in significantly lower wealth classes actually live, and why.

This is entirely reasonable, and fits in with basic human psychology. People tend to associate with those they are similar to. This means that if you are wealthy, you will probably live in a wealthy neighborhood and have wealthy friends, etc. The principle remains across every wealth class and additionally across many other demographics. If you do not very purposefully and consciously break outside of this small bubble you create for yourself, you simply cannot understand how people live in significantly lower wealth classes, or why, because you have never experienced it.

Truly, the only exposure to poverty someone who is not poor is likely to have is ads for charities or news stories. However, even these must be constructed very carefully in order to make enough of an impact to change anything, and frequently do not. In fact, studies have shown that if an ad for a charity induces high guilt in the subject, it actually provokes an angry reaction and makes them less likely to give to or engage with the charity. On top of that, a simple advertisement or news story is not usually enough to change the course of someone’s life. They will watch it, feel an emotion if you were effective, then something else will happen and it will quickly fade as we humans like to eliminate discomfort and have plenty to worry about in our own lives. It’s a poignant drop of emotion in the sea of life, but not nearly enough to re-color the entire ocean.

However, if you do push yourself outside of the bubble for a real, significant experience, it can truly make a massive impact and change your perspective on life. If you have not yet seen it, I’d strongly encourage you to watch this interview with Scott Harrison, the founder of Charity Water. During this interview, he explains how his life changed from living in a bubble of excessive money and consumption to something very different through just one significant experience outside of his bubble.

The Responsibility to Really Rationalize

With all this said, it seems that when it comes down to it, many people rationalize luxury spending through a string of invalid psychological defenses and excuses. Alternatively, they rationalize it through simply not caring about helping others with their money, and/or not being educated in the types of situations that face many people in the world and how they could help. Or they might simply not rationalize it at all, and fall back by default into one of the previously discussed categories when asked, out of habit.

As such, I feel as if it is our responsibility as human beings to see and experience how different people live across all ranges of income, and hear their stories about why and how their lives are the way they are. With this diversity of knowledge, you can set a truly reasonable and educated basis for rationalizing your spending. Armed with the knowledge, you can live a lifestyle that you feel is fair in an entirely informed manner, rather than simply making excuses and justifications, or trying to ignore it when faced with guilt.

Let me be clear that I am not trying to suggest a way that anyone “should” be living or spending money in this piece. All I mean to do is discuss a topic which is important in my opinion, but not frequently considered, to provoke thought and reflection. After thinking about it and self-educating, each individual should find a balance between personal comfort and excess that, based on a good understanding of how people live across income and culture lines, they feel is right and just. And if that ends up being “give zero and spend it all on myself,” I respect that because it is at least a well-educated choice. But let’s be honest — chances are that it won’t be.

Expanding Perspective

Gaining a better understanding of the lifestyles of those in vastly different income brackets can be pivotal in the evaluation of your own spending habits. But how can you do this, exactly? A couple ideas:

  • Try pushing a little outside your normal social circle. It’s always good to make more friends anyway. Go to meetups or other events centered around your career field or a hobby of yours. The focus of the meetup is just an excuse for people to get together and talk. Try to branch outside the topic and delve into some of the more interesting parts of life to form a deeper connection.
  • Talk to a homeless person. Especially if you live in a city, you probably see many of them every day. Give them $5 to hear their story. Sit down with them and listen. How did they get to where they were? What led them into it?
  • Volunteer for some type of service organization. Homeless shelters often are happy to take volunteers. So are some aid organizations. This can be in your home country or abroad. This is both doing good work and exposing yourself to very different lifestyles.
  • Do a workaway for your next vacation. This means you’re living, eating, and working with a different family. The amount that can be learned from living with another family for a couple weeks, and working in a totally different field is staggering. And chances are they will be in a different income situation, which you will get a good snapshot of.
  • Most forms of travel will also help to open your eyes to new things. That being said, “travel” is often viewed by people in the US as equal to “vacation” — a luxury trip during which people post jealousy-inducing instagrams and get tans. And to be honest, taking a vacation probably won’t enlighten you about other wealth classes. But vacation and travel are completely different, and travel can be much easier and less expensive than you’d think. Workaway, as suggested above, WOOOF, and other service and volunteering organizations can fit into a trip that is less luxurious, but more life-changing.

There is certainly plenty more here — there are tons of ways to break outside your typical comfort zone and experience something new. And whatever conclusions come from it, surely they will help to shape your values, and your thoughts on what your needs truly are and how others live.

Always be learning, always be open, and take a moment to really think about how and why you spend money the way you do, and whether it aligns with the type of person you are. It’s a difficult topic, but a very important one.


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About the photo: An entire family lives in this home. Taken in Uganda.