What is the best way to spend your money?

This depends on what is your goal in life. Some people want to be rich. Some people just want to be comfortable.  Everyone says that they want to be rich, but only a few will do what it takes. To be rich, we have to buy assets that earn for us. This earnings from assets, without the sweat of the brow, is called passive income.

For instance, if you buy shares of a company, and the company does financially well, the value of your stocks will go up. You may earn dividends as well. You are not doing anything other than holding the stocks. Same for owning a property that you then rent out to others in exchange for money. That income is passive too.

If we want to be truly rich, we have to acquire such income-generating assets.  All assets are not expensive, some are quite cheap. You should buy what you can afford.

I had a friend. His father used to own several stalls in various railway stations which he rented out to others. 

In Goa, where I was writing this from, operating permits for building lucrative beach shacks are given out based on a lottery. Many smart locals apply for these permits. If they get one, they just allow someone else to build the shack, charging handsome money for trading these rights with those who could not get a permit but are good at running a restaurant! 

Although I am a shareholder in a company, it is not quite passive income as I work actively on the business. However, businesses we build up can become a source of passive income at some point and therefore, an asset. 

In quite the same way, products and tools that help you to increase your ability to generate more income are also amazing. Imagine that you run a restaurant. If you buy an awesome coffee machine, it will increase your ability to earn every day as more people flock to you for the amazing coffee you serve. A good coffee machine can cost in lakhs, but is it not totally worth it if you can recover that investment within weeks or months?

So the best way to spend money, in my view, is on buying assets as this increases the overall supply of money in the future. 

However, this requires that you have to choose to not spend on other consumables, but invest your money. You have to forego a lot of temptation for instant gratification. This is not a very common trait in human beings.

We are tempted by many things around us - food, clothes, fancy gadgets, holidays, status-enhancing products, a great many things that we can spend our money on right now. And that would give us instant gratification. It takes training our mind to do the opposite - to limit our immediate needs and investing for the future.

To do the maths homework now and not watch cartoon instead. Read a book that will teach me a new skill instead of watching another endless series on Netflix.

To show up at the gym instead of going out for a drink with friends.

To do the hard work that will take us towards greatness whereas most others around us are just chilling, and it is perfectly viable to live life without doing all that hard work.

To invest not only money but time into a skill development program instead of spending that time, money and energy, let's say, ongoing on a holiday or dining out a few times.

Will our desire for comfort and temptation of instant gratification keep us away from our larger goals? For a vast majority of humanity, this is exactly what happens. 

And this is why you can say a lot about a person by looking at their bills. If you are using credit cards or debit cards to pay most of your bills, take a look at your bills for the last month or two. It would say a lot about what you prioritise and where you are headed.

Spending a lot on desserts, drinking and eating out at restaurants? Watch out for lifestyle diseases like diabetes or heart blockage. Spending quite a bit on the gym, supplements, sports, or personal trainers? Well, you are probably taking care of your health. Looks like you will be in good health, and look much better if you keep it up.

Paying for chess lessons and books every month? Chances are high that your game will improve in the next few months.

Spending money on education, online courses and personal development? Well, what does that say about your priorities? What do you think is going to happen?

Spending money is not exactly equivalent to doing the work one has to do. However, if you are paying regularly for something, you probably care enough about it. And if you care enough about something, you will improve.

So what do you spend your money on? What is your best way to spend money? What do you invest in?