The Different Ways To Spend Money By Milton Friedman

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Making money is when you use your own time and energy and a bit of creativity once, and obtain paid over and over and once again. Making money puts you within the driver’s seat. It allows you to be independent, not contingent somebody else controlling your wealth potential on a regular basis.

Back in 2010, I first addressed this topic because i used to be frustrated by what proportion i used to be paying in taxes. i used to be regularly working ~70-hour weeks and faced an ever-higher marginal tax rate. i used to be burning out and needed a change.

Who knew that two years later i might negotiate a severance and permanently leave the well-paying finance world behind.

In 2021, I’m much happier because I not need to work or work nearly the maximum amount , don’t make the maximum amount , and don’t pay the maximum amount in taxes.

With likely higher taxes and better spending on the horizon with Joe Biden and Kamala Harris in power, it’s worth revisiting the four alternative ways to spend money by Nobel prize-winning economist, Friedman .

The Four alternative ways To Spend Money

As a Financial Samurai, i think in fiscal responsibility. Therefore, I even have long been bothered by the government’s general lack of fiscal discipline. rather than trying to spend within the government’s means, like most folks seeking financial independence attempt to do, the govt tends to only borrow and spend more.

spend money by milton friedman

To get us brooding about our future government, it’s worth watching this short clip from Professor Friedman on the way to spend money.

1) you can spend your own money on yourself.

If you spend your own money on yourself, you’re very careful on what you spend it on. you create sure you get the foremost for your dollar.

2) you can spend your own money on somebody else .

When you spend your own money on somebody else , you’re careful on not spending an excessive amount of . You don’t worry the maximum amount about the gifts you purchase for people because the belongings you buy for yourself.

3) you can spend somebody else’s money on yourself.

You’re careful to urge goodies for the cash . But you’re not very worried about getting the simplest bang for your buck. You’re happier to spend more of someone else’s money reasonably .

4) you can spend somebody else’s money on somebody else.

You become a “distributor of welfare funds.” You’re curious about making your own life nearly as good as you’ll . But you’re not getting to be anywhere near as careful as spending this money on people .

In an environment where we are familiar with spending other people’s money on somebody else , we find yourself not maximizing the worth of the dollar. We also don’t find yourself appreciating money the maximum amount either.

Economic Waste may be a Shame

We can agree that spending somebody else’s money on somebody else usually doesn’t end in the foremost efficient use of funds. There’s just an excessive amount of economic waste because people don’t have the maximum amount or any vested interest.

However, I do recall that once I used the company’s corporate card to entertain clients over a lavish meal or a show, I wanted to maximise the expense because my boss ultimately had to log off on the bill. If I spent an excessive amount of , my judgement would inherit question. If it did, my year-end bonus would be in jeopardy.

Government Spending may be a Different Matter

As a private , spending somebody else ’s money on someone else is one thing. It’s an entire other level of waste when it involves the govt spending the taxpayer’s money on someone else. the govt doesn’t have direct accountability for a way they spend our money, in order that they are comfortable with being billed $100 for a fastener .

Yes, politicians are supposed to be good people that have their voters best interests at bottom . However, to become an official , you also got to have an enormous ego and an unusual amount of narcissism. Being an official goes completely against my beliefs of stealth wealth and avoiding fame.

If you don’t pay tons of taxes, you almost certainly won’t mind the maximum amount that the govt isn’t allocating your tax dollars efficiently. you’re probably the most important advocate of tax hikes. But if you’re paying tons of taxes and you’re miserable at work, you’re getting to want the govt to spend more responsibly.

Professor Friedman says that people spending someone else’s money on others may be a “distributor of welfare funds.” goodbye as these funds are literally spent on helping those less fortunate, being a distributor of welfare funds is sweet .

People Are Naturally Self-Serving

Unfortunately, there are many instances where the system breaks down. for instance , millionaire early retirees receiving health care subsidies shouldn’t be happening if welfare funds are being properly distributed.

The thing is, people tend to be more self-serving than magnanimous. If this wasn’t the case, you’d see tons more people willingly donate more money to the IRS.

I know one millionaire early retiree who wants to vote on legislation to boost taxes on people . However, to no surprise, she won’t need to pay more income taxes herself if legislation passes. Further, she and her husband happily receive ~$1,400/month in health care subsidies.

The reality is we can’t change attribute . the bulk of individuals are getting to rationally do things in their best interest. It’s why we’ve politicians who sing the virtue of public schools, but send their kids to non-public school.

Virtue signaling has become somewhat of a sport in today’s society. It’s up to us to ascertain through the inconsistencies.

Be according to Thought And Action

When it involves your money, you ought to spend it however you see fit. Hopefully, many of you’ve got saved an incredible amount of cash to spend during times like these. If you’ll spend money to counteract the negatives of a nasty situation, you should.

Although I’m not within the firing zone where my income taxes might be raised, I still hope there’s more congruence in beliefs and action.

In other words, if you think we should always raise taxes rather than cut costs, then you ought to be willing to pay more taxes also . After all, the goal is for all folks to assist people , not just tell people to assist people .

If you think in equality between men and ladies , you ought to fight to abolish the wedding penalty tax instead of do nothing because your household income isn’t negatively affected. simply because you’re not being discriminated against doesn’t mean discrimination is OK.

Spending other people’s money on somebody else is fun to do. I get it. But if we will all be more according to our beliefs and actions, I’m sure our nation would be far better off as a result.

Readers, does one agree or afflict Professor Friedman’s thesis that the 4th way of paying is that the worst way of spending? If you are doing agree, why does one think people feel it’s okay to spend other people’s money as they wish?

The Different Ways To Spend Money By Milton Friedman

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