I recently listened to a podcast from Tim Ferris featuring Rami Sethi. Sethi is the author of the New York Times bestseller I Will Teach You to Be Rich. His approach differs from just telling people to “budget” and encourages everyone to live a rich life with their money, careers, businesses, and psychology.

During the podcast, Sethi scathingly explained how he hates working with cheap people.

My ears perked up. I immediately thought, “Crap, I fall into this category.”

Sethi said he could help people change their money psychology, improve their investments, or fix their businesses. However, the one thing he can’t fix is cheap! While there are levels to someone’s cheapness, the ones he can’t assist with are those who acknowledge their thinking is irrational. Yet, they refuse to act on purchasing meaningful things.

Sethi challenged listeners to spend $100 on something meaningful. The rules included not using the $100 on other people, your pets, or charities.

Although I have a running list of my next purchases, I decided to go back to my roots. So I booked a cheap flight home that I kept putting off. I debated whether to go or not since I had just visited two months earlier. But my friends from my hometown encouraged me to go home and reunite, all of us in one place at the exact time for the first time in five years.

When you embark on a self-improvement journey, you’re trying to improve a little bit at a time. You’re hoping your habits (exercise, saving money, reading, etc.) all compound and produce a big a-ha moment.

While I’ve achieved proud milestones in my career and finances, I feel like I’m still unlocking a new level of spending my money better.

Here are five ways to spend your money better.

1. Bank on your future

Your current money actions establish your future financial health. The time for retirement will come whether you like it or not. It’s either by choice or necessity.

So what would your ideal retirement look like? When you’re ready to stop working, do you want your life to experience a debilitating state? Or in a healthy peace of mind?

What I used to do: Save thousands of dollars.

When I first started working, I didn’t trust myself. I gather a small percentage of my paycheck for spending money. Then I gave the rest to my parents for safekeeping. The out of sight mentality meant out of mind curbed excess spending.

I equate saving money to attending elementary school. It’s essential and establishes the foundation for your financial future. You can’t get ahead quickly if you can’t master the simple basics.

What I do now: Invest thousands of dollars.

While I invested here and there, I still had a big cushion for my savings and didn’t utilize its full potential. Now I save enough only for emergencies and invest the rest. My actions have made it easier to buy a home and look at other investment opportunities.

Contributing to my retirement, investing in real estate, and dabbling in cryptocurrency helped me start my investment journey. Investing also allows me to beat the market and provides a much better return than a big bank’s embarrassingly low-interest rate for my savings account.

My brokerage account allowed me to cough up enough money for my downpayment on my first home.

Jumping on the opportunity to buy my house sooner rather than later allowed me to secure a smaller mortgage. If I entered the housing market now, a comparable home would be worth $150,000 more.

Additionally, since I’m in the United States, I am fully taking advantage of pre-tax benefits. This includes my retirement accounts, health savings account, and dependent care FSA.

Banking on your future allows you to do the following:

• Establish peace of mind. I’m a natural worry monster. I always worry if I’m going to get fired from a new job. By investing in my future, I’m securing my sanity.
• Plan for the retirement you want. I don’t want to retire at 70 years old. An ideal retirement means working by choice. I’d also enjoy traveling with my favorite people.
• Able to support others. As my parents grow older, I want to assist with their health expenses. As I’m starting to grow a family, I want to ensure I can provide for my future children.

2. Build your knowledge library

“Learning one new idea won’t make you a genius, but a commitment to lifelong learning can be transformative.” — James Clear, author of Atomic Habits

Prioritizing your education is essential to how you should spend your money. While it’s not a flashy immediate return, bridging your knowledge gaps can produce substantial changes in your life.

What I used to do: watch YouTube videos for entertainment.

In college, I held a weird obsession with beauty gurus. It felt terrific to spend the pocket money I did have from working my first part-time job. But, I think a lot of it also opened a world that I didn’t know about growing up in a strict household.

But the knowledge I gained there didn’t apply to adulting at all. Instead, it was repetitive information and trendy products. These videos also encouraged me to spend money on the latest products to add to my collection.

What I do now: Spend money on books and invest in my career.

Beyond college, there are multiple ways you can invest in furthering your career and finances.

For my career, I took additional human resource classes and got certified in my field. These costs totaled a few thousand dollars. It was a tough pill to swallow when I was working an entry-level job.

But those decisions allowed me to get the ball rolling and double my income within two years.

Gaining my senior certification provides me with an industry stamp of approval. It also makes a job search more manageable, as recruiters and hiring managers flood my inbox to secure a certified professional to join their company.

You can lose your job or money, but taking away your education is impossible. Therefore, the best investment can be in yourself.

It’s hard to weed out the experts and ulterior motives.

For example, in the finance world, everyone has a different opinion. Financial experts like Dave Ramsey will claim their way works (and claim it’s the only way) while other successful millionaires like Graham Stephan vouch for a different strategy.

Finding advice that aligns with your goals, motivations, and lifestyle is your winning combo. I know my winning combo isn’t buying everything in cash and eating beans and rice. But that’s a discussion for another day.

3. Spend money on others (on what they want)

Researchers found in a study that spending money on others predicted greater happiness. Participants randomly assigned to spend money on others experienced greater satisfaction than those who spent money on themselves.

The researchers proved that individuals who spent money on others were measurably happier than those who spent money on themselves. How much money people found in their envelopes didn’t matter either when the amount varied.

But gifting others can come with its flaws. How do you know for sure if someone will get full utility out of your gift?

What I used to do: Spend money on obligatory gifts.

I used to buy into the idea that the best gift is a surprise. It used to be taboo growing up to get anyone a gift card for a birthday.

But that thinking directly conflicted with my Asian upbringing. Every birthday, Christmas, and Lunar New Year in my family meant red envelopes with cold hard cash.

Cash was king. I possessed all the control to do whatever I wanted. After all, can someone get me the best gift when I don’t even know what I want yet?

For holidays, we used to exchange gifts based on what we think people would like. They were friendly gestures, but the practicality wasn’t there.

What I do now: Spend money on what others want.

I have three close friends where we continue to exchange birthday gifts and Christmas gifts. We’ve got this down to a science. And by science, we create a list with links and all. Of course, the surprise will be which one it will be. But we rest assured knowing that we’ll get something we’ll use.

Once in a while, an element of surprise is there, but it’s planted within our stories. For example, when I told my friends I moved into a new place and didn’t have a coffee machine, they rushed to buy me a housewarming present. I didn’t even register this off-handed comment.

Examples of spending money on what others want:

• Keep a running list of wants. I keep a running list of my items on my purchasing radar. Then, it’s convenient when my birthday or Christmas rolls around.
• Provide links. I send over links to my boyfriend when his birthday is near. Pick an outfit and pick a restaurant you like. Then we’re off to the races.
• Ask directly. I asked my coworkers what they would like me to bring back from vacation. They initially felt awkward. But eventually, my coworkers always knew to drop me a hint they’d love Cuban pastries from Porto’s every time I flew back home.

4. Spend on experiences rather than material items

Travis Carter and Thomas Gilovich conducted previous research that indicated experiences like a memorable vacation make us happier than material items like an Amazon purchase.

They followed up with additional studies that determined participants thought of experiences as more connected to the self than their possessions. When participants described their life stories, they focused on experiences over material items.

Focusing on experiences goes beyond providing greater happiness. For example, when looking at buyer’s remorse, you’re more likely to regret a clothing purchase than a romantic vacation with your significant other.

What I used to do: buy a lot of material items.

The main problem with material items — they turn obsolete. My makeup collection collected dust and expired. My clothes filled my closet even when I didn’t fit them anymore.

Even after converting to minimalism, your excess stuff still reappears. Ultimately, the material items weigh you down. You can’t use everything. Or the frequency isn’t there. The presence of too much stuff serves as a clear reminder of your mistakes.

What I do now: save for meaningful experiences.

I’m much happier with experiences than material items. Therefore, I love saving for trips home for the holidays, travel, or a friend’s wedding.

My most recent trip to Austin with my college friend gave me a much-needed break from work. We explored a new city together, and the live music scene surprised us. We got our fill of Texas BBQ and Tex-Mex to round out our holiday vacation.

Months later, we’ve reignited our friendship and vowed to plan our next travel destination too.

Spending on experiences allows me to strengthen my relationships.

Here are valuable experiences you can spend money on:

• Relaxation: Have a spa day with my girls. I used to think this was the most enormous waste of money. But I’m converted. Enjoying an activity that allows you to decompress is worth its weight in gold.
• Travel: Go on a road trip for a day. It’s a quick trip that won’t break the bank but gets you out of your comfort zone. My latest trip was to Portland, where I took advantage of zero sales tax and got my fill of yummy donuts.
• Fitness: Meet up with friends to kayak or hike under the bright sunshine. The last time I went kayaking, a few of us felt seasick. It was a funny memory to laugh over later.

5. Calculate the value

The value of any purchase will vary from person to person. But three essential pillars to consider are the longevity, usefulness, and joy a purchase brings.

What I used to do: buy cheap things for a good deal.

When I didn’t have money, I attached myself to snails like glue. When you can afford the very least, this turns into a tough habit to break. Additionally, if it was cheap, I didn’t feel too attached to my purchases.

But that dopamine fades, and you’re left with a lot of stuff you can’t fully use.

What I do now: buy things that provide value over time.

My favorite exercise to do before I purchase something is to assess its longevity.

• Clothes. $Cost of Item / # of Times Worn = $Cost-Per-Wear. What is the expected cost per wear?
• Appliances. How many times will I use this? With making smoothies and protein pancakes, I’ll quickly whip out my Vitamix 3x per week. My $350 purchase is paying off sweetly.
• Furniture. Is this something I need or just because I feel like I need to fill up space?
• Groceries. Will I be able to use this before it goes bad?

Regarding clothes, it’s crucial to determine your cost per wear. Fancier items may have a higher cost per wear and are more fashionable. I try to increase my cost per wear with these items by layering clothing to dress them down.

But sometimes buying high-ticket items messes with us too.

My brother went out and bought a four-figure watch. It’s not a Rolex by any means, but still a substantial purchase. He realized he never wore it because he didn’t want to damage it. So he typically reached for his cheaper alternatives instead.

Final Thoughts

A quick recap on how to spend your money smarter:

1. Bank on your future. Your current dollar can be worth more in the future if you play your cards right. Make time work for you.

2. Build your knowledge library. Reading isn’t overrated. Educating yourself to be a more intelligent version will provide you with the best returns.

3. Spend money on others (on what they want). Gift smart. Just get people what they want.

4. Spend on experiences rather than material items. Happiness from experiences will linger much longer than a material item. I can’t remember the last material item that gave me a fond memory to brag about to other people.

5. Calculate the value. Longevity + usefulness + joy.

It seems like the crux of financial advice remains the same: save more than you spend. Don’t live above your means. And it holds its weight because it’s the reason so many people struggle with money. They have an income or spending problem, and sometimes both.

Even when you’ve solved this problem, there are still other layers of personal finance you can unlock to be better.

Don’t ignore your financial health, and be intentional with your money. This combo will make your money go further than you’ll ever imagine.

All Making of a Millionaire readers can now enroll in our free personal finance 101 courses available here.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.