Tuesday, June 23, 2009

Money and Happiness

A few months back when we were watching the markets dropping precipitously, I was talking about investments with a friend who is in her fifties. She is one of those people who plans for the future and who is extremely mindful of how she spends her money. "You know," she said angrily, "those of us who tried to do what we were supposed to are the ones who've gotten burned. Now I wish my husband and I had just taken more trips."

I have a friend at the opposite end of the spectrum. Although he is raising a family and is a homeowner, by his own account he frequently just squeaks by on his earnings as an independent contractor. But he cares a lot more about freedom than he does about security, and his tastes don't run towards extravagance, so in the end he is just fine.

I fall somewhere in between. I feel incredibly grateful to have a well-paying, steady job with health insurance and a retirement plan. I save every month and stay out of debt. But I rent a house in a desirable neighborhood not just so my children can go to the schools they do, but also because I feel I belong here. A more wise choice financially might be to buy a house in a more affordable part of the city, but that wouldn't make me happy. I have a really nice car that I bought second-hand. I take short trips when I can find a good deal. And I buy and cook good food and drink decent wine. These are the things that make me happy, and I feel life is too short to deprive myself of things that give me genuine pleasure.

We all have vices, of course. I love clothes and really enjoy wearing them and, frankly, feeling like I look good. I am a ruthless sale shopper, but I still can't say that every piece of clothing I buy represents a "need." To keep myself honest about where my hard-earned salary is going, I've recently signed up for a service at www.mint.com It tracks all of my transactions and categorizes them, although I've discovered I frequently need to go in and re-classify some of my purchases so I have a clearer picture. But the pie charts make my spending patterns quite obvious. For example, I spend a lot more money on gas than I was willing to admit to myself. I'm hopeful knowing this will make me slow down on the highway. But that's another kind of discipline.

An absolutely great blog I've run across is Money and Happiness. Laura Rowley has written a book with the same title, and is a columnist for Newsweek on the topic. She has a good number of practical tips (mint.com was one I picked up from her) but my favorite posts are about determining our emotional beliefs as they relate to money. In one entitled "Six Steps to Financial Happiness" she exhorts readers who want a healthier relationship with money to: stop comparing ourselves to others; be grateful; to not make money our top priority; to take care of what she calls "essential psychological needs", by which she means a sense of control over our lives and a connection to friends and community; and finally, to help others. It's a refreshing departure from the acquisition-driven media all around us.

So what does it mean to be rich? We must take some steps. Find things we enjoy for their own sake, not just because they impress others. Do our best to plan for the future but understand that if we're trying to control things, it's futile: life doesn't often turn out the way we expect it to. Finally, don't forget the old saying--you can't take it with you.

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