I was catching up on some of my personal finance blog reading when I came across a post by Meg at All Financial Matters about whether and when spending money is good or bad (which itself is a reaction to this post at Living Almost Large). Meg's conclusion is basically that, of course spending itself is not wrong, but spending excessively is definitely wrong. In her words:

I think most of us are naturally disgusted when we see “wasteful” spending. Of course it’s all relative, but there are some examples - like the $20,000 a night hotel suite or the million dollar antique car or the gold plated toilet - that do and should strike most everyone as wasteful and extravagant. When I see those examples I can’t help but think of all the people that money could have fed or educated or healed or how that money could have helped shape or build a community.

I tend to disagree with this statement (it's not really an argument, per se, just an assertion) for two main reasons which I have outlined below.

1. It's All Relative

The very relativity of it, which Meg points out, ultimately makes it impossible to indict any kind of spending as "wasteful" and "extravagant." Sure, a lot of people think its wasteful and extravagant to spend $20,000 per night at a hotel, but undoubtedly some or even many of those same people might think it's fine to spend $5 for their morning latte, since they're only spending a few dollars – even though percentage-wise the markup on the coffee might be many times higher than the markup on the car. Please note that I'm not saying this is Meg's position, just that there are some people out there who would agree that it's okay if you're wasting just a little money (they might not put it quite in the same way). In this view, too, there is no room for things like entertainment, collections and other non-functional spends of money.

However, spending money is at heart an extremely personal matter. As an example, say there is an expensive medical test (upwards of $10,000) that would help uncover a rare disease, but this test is not covered by insurance. Would a person be wrong to order such a test? Without looking at whether the person has a genetic disposition toward such a disease, there is no way to answer that question universally. For some people it definitely is worth $10k or more to uncover a potentially deadly disease early enough to prevent it, and for others it isn't. And it doesn't necessarily matter how much money the person makes or has saved up in the bank.

Some might argue that spending money on a medical procedure is completely different than spending money on a sports car or lavish hotel room, and I would agree to a certain extent. But the whole point of money is to better one's self, whether physically, mentally or emotionally. (If you don't believe this is the point of money, then I would ask you to describe what is.) If spending money on a particular item improves a person in one of these ways, then there is not and cannot be any immorality associated with that expenditure.

Important: I am not arguing that spending money makes someone happy. I'm simply saying that if spending money on a particular item makes that person spending it happier in some way, then it cannot be immoral.

The corollary to my claim is, then, th,m> immoral. And in fact, this is the only way that any kind of spending can be considered immoral, since morality itself is a personal matter. I will expand on this below.

2. Spending Money vs. Helping Community

The second half of Meg's paragraph quoted above seems to imply that you can do one of two things with your money: spend it on yourself or help other people. Looking at this statement as a Fichtean contradiction, though, it is easy to see that these two concepts can be synthesized fairly easily into one that is more accurate: Spending money is helping other people.

When you buy something, the money you spend is divided and passed on to people through a number of different levels. A percentage of it is used to pay the employees at the store where you bought the item; another percentage is used to purchase additional stock from the manufacturer, and then gets used to pay the manufacturer's employees; a third percentage is used to pay utility bills, and then is used to pay employees of the utility company; a fourth ends up on accounting books as "profit" which then is spent on capital improvements or returned to shareholders, who may be large institutional investors such as pension and retirement funds.

And of course various levels of government take their slice at each step of the way, which allegedly "helps people," though I'll not discuss that particular accusation here.

Now, it's true that it's possible to feed and clothe "the needy" more directly by dropping coins into a cup or sending a check to a local charitable organization, and certainly that's a valid use of money if it makes you happy to do so. Sans any kind of personal desire or satisfaction gained from giving to charities, there is no objective moral reason to do so.

Some people would argue against me here, saying that there is some universally good reason to give to "the needy." But ultimately, there is no moral obligation to help someone based on that person's need alone. Rather, the only primary objective moral obligation and responsibility a person has is to help him or herself. All other moral obligations – such as to care for one's progeny or to fulfill a contract – are derived from this primary obligation. Therefore, the only moral reason to help others is that by helping them, you are helping yourself.

Now, I know someone is going to take my meaning to be that a person should only help others when there is some sort of extortion or exploitative opportunity available. This is not what I mean at all. For one thing, exploitation is rarely beneficial to the exploiter in the long run. Secondly, there are many ways to help someone out monetarily without expecting a monetary, or even tangible, return. Simple friendship may be worth more to some people than all the money they have, and in that case giving all of their money to help out a friend is well-spent if it can keep that friend alive and able to continue being a friend.

When Spending Is Immoral

I've gone through great lengths above to show why it is not immoral to spend money "extravagantly." That does not mean, however, that spending money is always moral. Here are some ways that spending money may be immoral.

When you don't have it and can't get it

There is nothing wrong with buying on credit. It allows us to own (or at least partially own) assets that we never would be able to afford any other way, such as a car or house. However, if you get a loan and are not really sure how you will be able to pay off, or if you dig yourself into credit card debt that becomes overwhelming, then you are spending money immorally.

Now, I understand that that most people do not hold long-term jobs anymore, but I'm not saying that you shouldn't get a mortgage simply because you don't know where you will be working for the next 30 years. But you also should not get a mortgage that assumes you will be making more money, or that your financial situation will otherwise improve somehow. Expecting the best but being prepared for the worst is the best way to spend morally when considering a long-term credit purchase.

When you're trying to match someone else's happiness

There are lots of expressions that relate to this concept:

• The grass is greener on the other side.
• The lights are brighter in New York.
• Don't covet your neighbor's wife.

Essentially, if you're buying something in an attempt to grasp the happiness that someone else has, then you most likely are spending immorally. For one thing, there's no guaranty that what makes someone else happy will make you happy. For another, that other person's happiness may be feigned, or it may not be caused by the thing you think is causing it.

This is something I struggle with sometimes myself. Particularly with my good friend Dave, who has a lot of similar interests to me and whose household income is currently much higher than mine, I find myself wanting cool gadgets and other things similar to those that he has gotten – though maybe a newer model. And while I've never bought anything specifically because he bought it, there are a few things that I've bought primarily on his mention and less because I actually wanted or needed them.

Bottom line is, friends, family and acquaintances can provide good resources for ideas about things that you might like and find useful, but they can also influence you (subconsciously, most likely) into getting things that won't really make you any happier.

Guilt, affection and appeasement spending

Guilt spending is a tough one. On the one hand, purchasing something to appease your conscience could actually make you happier. For example, if you accidentally bumped a good friend's fine Elvis-themed decorative plate and knocked it onto the floor, scattering it into a dozen pieces, you might want to go to a thrift store and replace it. In such cases spending the money might be well worth saving the friendship.

However, spending money on something that doesn't actually ease any guilt is simply a waste of money. For example, if the Elvis plate belonged to someone you don't particularly like, and the reason you bumped into it was that someone else pushed you, and you don't feel guilty about it, then there's no reason to spend the money to replace the plate.

A similar type of spending is affection spending, or spending in an attempt to win someone's love and devotion. This could be aimed toward a would-be significant other, a child, or anyone else whose heart you hope to win over for some reason. As with guilt spending, affection spending isn't necessarily wrong unless it doesn't actually achieve its goal. And if it does achieve it's goal, you might want to think long and hard about why the only way to gain the person's affection was by spending money.

The third type of spending in this category is appeasement spending. Like the other two, appeasement spending can be good if it actually helps the other person to be appeased. If it won't, however, then spending the money is wasteful and immoral.

Conclusion: Spending = Freeing

This blog is named "Money $ Liberty" primarily because I wanted to blog about how the two concepts embodied by those words are complimentary. Money should be used to help you achieve liberty, and while liberty doesn't require money, it's certainly a hell of a lot easier when you have it.

But here's the takeaway for this post: If the act of using money is spending, and if money promotes liberty, then spending money ultimate should be an act of freeing one's self. Ultimately, then, the morality of spending is based on the extent to which the spending sets you free.