Frankly if I Could Sll Raw Ideas Straight From My Mind I Would Never Have to Think About Money Again

Chapter 1. It'south More Important to Exist Happy Than to Be Rich

" Happiness, non gilded or prestige, is the ultimate currency ."

—

You don't want to be rich—you want to be happy. Although the mass media has convinced many Americans that wealth leads to happiness, that's not always the case. Money can certainly help you attain your goals, provide for your hereafter, and make life more enjoyable, but merely having the stuff doesn't guarantee fulfillment.

This book volition bear witness you how to make the most of your money, but before we swoop into the details, it's important to explore why you should care. Information technology doesn't practice much practiced to acquire about compound involvement or high-yield savings accounts if you don't know how money affects your well-being.

If personal finance were as simple as agreement math, this volume wouldn't be necessary; people would never overspend, get into debt, or brand foolish financial decisions. But enquiry shows that our choices are based on more than just arithmetics—they're also influenced by a circuitous web of psychological and emotional factors.

This chapter gives you a quick overview of the human relationship between money and happiness. You'll also larn techniques for escaping the mental traps that brand it hard to be content with what you take. Equally yous'll run into, you don't demand a million bucks to exist happy.

How Money Affects Happiness

The big question is, "Can coin buy happiness?" In that location'south no simple respond.

"Information technology seems natural to assume that rich people will be happier than others," write psychologists Ed Diener and Robert Biswas-Diener in Happiness (Blackwell Publishing, 2008). "Just money is merely one part of psychological wealth, so the picture is complicated."

There is a stiff correlation between wealth and happiness, the authors say: "Rich people and nations are happier than their poor counterparts; don't let anyone tell yous differently." But they notation that coin's touch on happiness isn't as large as you might remember. If y'all have clothes to clothing, food to eat, and a roof over your caput, increased disposable income has just a pocket-size influence on your sense of well-being.

To put it another way, if y'all're living below the poverty line ($22,050 annual income for a family unit of iv in 2009), an extra $5,000 a year tin can brand a huge difference in your happiness. On the other hand, if your family unit earns $lxx,000 a twelvemonth, $5,000 may be a welcome bonus, but it won't radically change your life.

And so, yes, money can buy some happiness, simply as you'll run across, it's just 1 slice of the puzzle. And there's a real danger that increased income tin can actually make you miserable—if your desire to spend grows with it. But that'southward not to say yous have to live like a monk. The cardinal is finding a residual betwixt having too little and having besides much—and that'south no piece of cake task.

Annotation

A recent commodity in the Periodical of Consumer Research showed that, in full general, our feelings for fabric purchases fade more quickly than they practise for experiential purchases. Material appurtenances depreciate: The day subsequently you buy something, information technology's usually worth less than you paid for it. Experiences, on the other hand, appreciate: Your memories of the things you do—vacations yous take, concerts you lot go to—become fonder with fourth dimension because you tend to recall the positives and forget the negatives.

The Fulfillment Bend

American culture is consumption-driven. The media teaches you to want the clothes and cars you come across on TV and the watches and jewelry you come across in magazine ads. Still studies bear witness that people who are materialistic tend to be less happy than those who aren't. In other words, if y'all want to exist content, you should own—and want—less Stuff.

Note

Because Stuff has such an important role in your happiness (and unhappiness), information technology deserves a capital S. Yous'll read more virtually Stuff throughout this book, especially in Chapter v.

In their personal-finance classic Your Money or Your Life (Penguin, 2008), Joe Dominguez and Vicki Robin argue that the human relationship between spending and happiness is non-linear, meaning every dollar you spend brings you a little less happiness than the one before it.

More spending does lead to more fulfillment—up to a point. But spending too much can actually have a negative impact on your quality of life. The authors propose that personal fulfillment—that is, being content with your life—tin can be graphed on a curve that looks similar this:

Effigy one-1. The Fulfillment Bend

This Fulfillment Bend has four sections:

• Survival . In this part of the curve, a lilliputian money brings a large gain in happiness. If you lot have nothing, buying things actually does contribute to your well-being. You're much happier when your basic needs—food, clothing, and shelter—are provided for than when they're not.

• Comforts . Later the basics are taken care of, you brainstorm to spend on comforts: a chair to sit down in, a pillow to sleep on, a 2d pair of pants. These purchases, likewise, bring increased fulfillment. They make y'all happy, but not every bit happy as the items that satisfied your survival needs. This part of the curve is even so positive, but not as steep every bit the first section.

• Luxuries . Somewhen your spending extends from comforts to outright luxuries. You motility from a pocket-sized apartment to a abode in the suburbs, say, and yous have an entire wardrobe of article of clothing. You drink hot chocolate on wintertime evenings, sit down on a new sofa, and accept a library of DVDs. These things are more than comforts—they're luxuries, and they make you happy. They push you to the superlative of the Fulfillment Curve.

• Overconsumption . Across the tiptop, Stuff starts to take control of your life. Buying a sofa made you happy, so you buy recliners to match. Your DVD collection grows from xx titles to 200, and you drink expensive hot chocolate made from Peruvian cocoa beans. Soon your house is so full of Stuff that yous take to buy a bigger dwelling house—and rent a storage unit of measurement. Just none of this makes you any happier. In fact, all of your things become a burden. Rather than adding to your fulfillment, ownership new Stuff actually detracts from it.

The sugariness spot on the Fulfillment Curve is in the Luxuries section, where money gives y'all the nigh happiness: You've provided for your survival needs, you lot have some creature comforts, and you even have a few luxuries. Life is thousand. Your spending and your happiness are perfectly balanced. Yous accept Enough.

Note

Yup, Enough gets a uppercase Eastward, too. You'll learn more than about deciding how much is Enough later in this chapter. (And don't worry: In that location aren't whatsoever more words with goofy capitals alee.)

Unfortunately, in real life you don't take handy visual aids to evidence the relationship betwixt your spending and your happiness; yous take to figure out what Enough is on your own. But every bit you'll see in the side by side section, considering we've been conditioned to believe that more money brings more happiness, near people reach the tiptop of the Fulfillment Curve and so keep on spending.

Caught Upwardly in the Rat Race

Typically, as your income increases, your lifestyle grows with it. When your dominate gives yous a raise, yous want to advantage yourself (you deserve it!), and then yous spend more. All that new Stuff costs coin to buy, store, and maintain. Gradually, your lifestyle becomes more expensive so you have to piece of work harder to earn more. You recall that if just you got another enhance, then you'd have Enough. Simply in all likelihood, yous'd simply repeat the procedure by spending even more.

Psychologists telephone call this vicious wheel the hedonic treadmill, though you probably know information technology every bit the "rat race." People on the hedonic treadmill recall they'd exist happy if they just had a little more money. But when they become more than coin, they notice something else they want. Because they're never content with what they have, they tin never have Enough.

Most Americans are stuck on this treadmill. According to the U.S. Demography Bureau (http://tinyurl.com/demography-inc), in 1967 the median American household income was $38,771 (adjusted for inflation). Back then, less than one-5th of U.Due south. families had colour TVs and only one in 25 had cable. Compare that with 2007, when the median household income was $50,233 and virtually anybody had a widescreen color TV and cablevision. Americans at present own twice as many cars as they did in 1967, and we accept computers, iPods, and cellphones. Life is proficient, right? But despite our increased incomes and fabric wealth, we're no happier than were in the '60s.

Note

In instance it's been a while since your last math form, hither's a quick refresher: If you have a set of numbers, half of them will be greater than the median, and half will be less. The median is ordinarily dissimilar from the average. For case, in the grouping of numbers 2, 3, 4, 5, and 101, the average is 23, merely the median is simply 4. (If economists talked almost average incomes instead of median incomes, their numbers would be skewed past billionaires like Warren Buffett.)

Since 1972, the National Opinion Research Center has been polling Americans virtually their happiness (http://tinyurl.com/norc-gss). As you tin can run across in the following graph, the numbers oasis't inverse much over the by 35 years. About i-third of Americans consistently say they're "very happy" with their lives (http://tinyurl.com/gss-happy), while a little less than 1-third say they're "pretty well satisfied" with their fiscal situations (http://tinyurl.com/gss-satfin).

Figure 1-2. Info from the National Opinion Research Center's General Social Survey

If Americans are earning more than, why aren't they happier? Nosotros've been led to believe that prosperity brings peace of mind, simply information technology turns out your grandfather was right: Money isn't everything.

The lesser line: Coin tin't brand you lot happy if your increased wealth brings increased expectations. In other words, if you desire more as you earn more, you lot'll never be content; there volition e'er exist something else you crave, and so you'll need to piece of work even harder to get the money to purchase information technology. You'll exist stuck on the hedonic treadmill, running like a hamster on a wheel.

The hedonic treadmill leads to lifestyle inflation, which is just as dangerous to your money equally economic aggrandizement; both destroy the value of your dollars. Fortunately, you lot can command lifestyle inflation. You lot can opt out, step off the treadmill, and escape from the rat race. To do that, you lot have to set priorities and decide how much is Plenty. The adjacent section shows you how.

How Much Is Plenty?

Kurt Vonnegut used to recount a conversation he had with young man author Joseph Heller (Vonnegut published this anecdote as a poem in the New Yorker). The two writers were at a party thrown by a billionaire when Vonnegut joked, "How does it feel to know that our host makes more in one twenty-four hours than Catch-22 [Heller's best-known work] has made in its entire history?" Heller responded, "I've got something he tin can never have. I've got Enough."

Knowing that you take Enough can exist ameliorate than having billions of dollars. If you're obscenely rich just aren't happy, what skillful is your money? Contentment comes from having Enough—not likewise picayune and not too much. But how much is Enough?

There's no simple respond. What's Plenty for yous may not be Enough for your all-time friend. And what yous need to remain at the peak of the Fulfillment Bend (The Fulfillment Curve) volition change with time, so Enough is a bit of a moving target. It'southward tough to define Enough, but at that place are some steps y'all tin take to figure out what it ways to you.

Understand your goals and values

If you don't know why yous're earning and spending money, then you can't say when you have Enough. So take fourth dimension to really recollect almost what having Plenty means to y'all. Hash out it with your family, and explore the thought with your best friend. Is being debt-free Enough? Existence able to pay cash for a new gunkhole? Having a 1000000 dollars saved for retirement? Make up one's mind what Enough means to you, then write information technology downward. If you don't have an end in sight, you're at greater run a risk of getting stuck in the rat race.

Annotation

Personal goals are and then disquisitional to financial success that you'll spend all of Affiliate 2 learning how to set up them.

Practice conscious spending

Because the notion of Plenty is so vague, the best manner to arroyo information technology is to be mindful of your financial habits. The human activity of consciously choosing how yous spend can help you make purchases that are in line with your goals and values.

Ramit Sethi popularized the concept of conscious spending in his book I Volition Teach You to Be Rich (Workman Publishing, 2009). The idea is to spend with intent, deliberately deciding where to direct your coin instead of spending impulsively. Sethi argues that it's okay to spend $5,000 a year on shoes—if that spending is aligned with your goals and values and y'all've made a witting choice to spend this manner (as opposed to spending compulsively—run across Curbing Compulsive Spending).

If y'all're new to conscious spending, try asking yourself the following questions:

• Did I receive value from this equal to the corporeality I spent ? In other words, did you get your money's worth? You already know that $100 spent on 1 thing isn't always as skilful as $100 spent on another. Witting spending is about striving to get the most bang for your buck.

• Is this spending aligned with my goals and values ? Witting spending means prioritizing: putting your money toward the things yous love—and cutting costs mercilessly on the things yous don't. If you're happy with the coffee at the function, then don't waste material your money at Starbucks. But if your extra-hot nonfat caramel latte is the highlight of your day, then buy the latte! Spend only on the things that matter to you lot.

The box beneath tells the story of Chris Guillebeau, who has made a lot of unorthodox choices to be sure his spending matches his priorities.

Reduce ataxia

If you have and then much Stuff that you need to rent a storage shed, you take more than Enough. If the Stuff leads to clutter that stresses you out, you've passed the pinnacle of the Fulfillment Curve and your added luxuries are bringing y'all less happiness, non more.

Purging clutter tin be a profound feel, just it tin can exist difficult, also: You don't want to toss anything out considering you might need it someday, or it has sentimental value, or it may be worth something.

Getting rid of Stuff but hurts for a little bit. Once you've pared your holding, it's similar a weight has been lifted; you feel free. Some people find the process so liberating that they go farther and practice voluntary simplicity, fifty-fifty to the indicate of moving into a smaller home. For instance, Dave Bruno is chronicling his fight against materialism at his website (http://tinyurl.com/100thingchallenge); his goal is to own simply 100 personal items.

Tip

Living Green: The Missing Transmission suggests lots of great ways to de-clutter your life.

Seek rest

A balanced life is a fulfilling life. To notice balance, you take to figure out how much is Enough for you—the bespeak where you're content with what y'all have and tin say "this much, simply no more."

One time you define Enough, you gain a sense of freedom. Y'all're no longer caught up in the rat race and have time to pursue your passions. Yous can environment yourself with family and friends, and rediscover the importance of social capital—the value you lot get from making personal connections with people in your community (come across Social Capital). And because you lot no longer feel compelled to purchase more Stuff, y'all can utilise your money to save for things that truly matter.

It'southward Non About the Coin

If vast riches won't bring you peace of mind, what will?

In a 2005 effect of the Review of General Psychology, Sonja Lyubomirsky, Kennon Sheldon, and David Schkade looked at years of inquiry to figure out what contributes to "chronic happiness" (as opposed to temporary happiness). Based on their survey, they came up with a three-part model:

• About half of your happiness is biological . Each person seems to accept a happiness "set indicate," which accounts for roughly 50% of your sense of well-being. Considering this set point is genetic, it'southward hard to change.

• Another 10% of happiness is based on circumstances—external factors beyond your control . These include biological traits like age, race, nationality, and gender, every bit well equally things like marital status, occupational condition, job security, and income. Your financial situation is part of this x%—merely only a role—which means it accounts for just a fraction of your total happiness.

• The final 40% of happiness comes from intentional activity —the things yous cull to exercise . Whereas circumstances happen to you, intentional activeness happens when y'all act by doing things like exercising, pursuing meaningful goals, or keeping a gratitude journal.

According to the authors, because circumstances—including your financial situation—play such a minor role in your general contentment, it makes more sense to boost your elation through intentional activity, by controlling the things you can and ignoring those you tin can't. (You lot tin read the entire article at http://tinyurl.com/hmodel.)

Although your financial state of affairs plays simply a minor role in your overall happiness, almost people believe information technology'south more than important than that. Considering of this, many Americans spend their lives striving for more money and possessions—but notice that this materialism makes them less happy.

If you're caught up in the rat race, you may be dealing with things like credit card debt, living paycheck to paycheck, fighting with your spouse over coin, and working a job y'all hate. These problems all stem from ane event: lack of control. When you feel similar yous take no control over money, you're worried and stressed. By taking charge of your finances, you can get rid of many of these stressors and exist happier. Wealth gives you lot options and makes it easier to focus on things that tin brand yous content.

This book will teach you specific ways to gain control of your finances. The beginning step to leading a rich life is learning how to set priorities.

Living a Rich Life

Living richly ways figuring out what to spend your time, coin, and energy on—and what to ignore. Since you can't have everything, you have to prioritize. This means spending money on things that affair to you—and skimping on things that don't.

Psychologists generally agree that a life well-lived is rich in:

• Security . It's hard to be happy when y'all're constantly worrying about how to pay the bills. If yous accept money, you lot don't have to worry about those things. (Just, as you now know, you don't have to be rich to exist happy.) By living below your means and avoiding debt, you can gain some financial command over your life.

• Relationships . True wealth comes from relationships, non from dollars and cents. Wealthy or poor, people with v or more than shut friends are more apt to describe themselves as happy than those with fewer. A long-term, loving partnership goes hand in paw with this. And as yous'll learn later (Social Uppercase), social capital letter tin be worth every bit much as financial upper-case letter.

• Experiences . As explained in the Note on How Money Affects Happiness, memories tend to grow more positive with time, but Stuff commonly drops in value—both actual value and perceived value. As Gregory Karp writes in The 1-two-3 Coin Plan (FT Press, 2009), "Experiences capeesh, avails depreciate." And in Your Money and Your Brain (Simon & Schuster, 2008), Jason Zweig notes, "Doing and being are better than having."

Recollect these iii pillars of happiness and you tin build a rich life even on a limited income.

To further improve your relationship with money, proceed these guidelines in mind:

• Prioritize . Spend on the things that brand you lot happiest. There's zippo wrong with ownership things you'll utilize and enjoy—that's the purpose of money. If y'all're spending less than you earn, meeting your needs, and saving for the future, you can afford things that brand life easier and more than enjoyable. (For another style to prioritize, see the box on Living a Rich Life.)

• Stay salubrious . There's a strong necktie betwixt health and happiness. Anyone who's experienced a prolonged injury or illness knows just how emotionally—and financially—devastating it tin exist. Eat right, exercise, and get enough slumber (Your Body: The Missing Manual has loads of tips on how to practise all those things).

• Don't compare yourself to others . Financially, psychologically, and socially, keeping up with the Joneses is a trap. You lot'll always have friends who are wealthier and more than successful in their careers than you. Focus on your own life and goals.

• Limit media exposure . Mass media—especially Telly—tries to persuade you that happiness depends on things you don't really demand and can't afford. Studies accept found that watching lots of Television set can influence your levels of materialism—how much you remember you lot need to exist happy.

• Simplify . The average Joe believes that materialism is the path to happiness—but the average Joe is wrong. Research shows that materialism actually leads to unhappiness and dissatisfaction. By simplifying your life and reducing the amount of Stuff you own (or want to own), you'll salve money and exist happier.

• Help others . Altruism is one of the all-time ways to boost your happiness. It may seem counter-intuitive (and maybe even a trivial self-serving), but donating to your church or favorite charity is a proven method for brightening your day.

• Embrace routine . Emerson wrote, "A foolish consistency is the hobgoblin of little minds," but there's evidence that some consistency is conducive to delectation. In Happier (McGraw-Loma, 2007), Tal Ben-Shahar recommends building routines around the things y'all love: reading, walking, gaming, knitting, whatever. Because information technology tin be hard to make the fourth dimension for these activities, he argues that nosotros should make rituals out of them. If you lot enjoy biking, make a ritual out of riding to the park every evening, for instance. (See the box below for tips on finding time for what yous beloved.)

• Pursue meaningful goals . As you'll learn in the adjacent affiliate, the road to wealth is paved with goals, and the same is true of the route to happiness. But for a goal to be worthwhile, it has to be related to your values and interests—it has to add something to your life. Affiliate two will help you decide what goals to set up.

The bottom line is that if you tin't be content, you'll never lead a rich life, no thing how much money you take. The key to money direction—and happiness—is existence satisfied. It'due south not how much yous take that makes you lot happy or unhappy, only how much yous desire. If y'all want less, you'll exist happy with less. This isn't a psychological game or New Age mumbo-colossal, it'due south fact: The lower your expectations, the easier they are to fulfill—and the happier you'll exist.

That'due south not to say you should lead an aimless life of poverty; quite the opposite, in fact. But near people confuse the means with the ends. They chase after money and Stuff in an endeavour to feel fulfilled, only their choices are impulsive and random. Their "retail therapy" doesn't accost the root cause of their unhappiness: They lack goals and an underlying value system to assistance guide their decisions.

In the adjacent chapter, you'll learn how to create meaningful fiscal goals that are aligned with your passions. Then you'll be able to utilise these goals to make better decisions about coin. These choices volition, in turn, assist yous alive a happier life.

Notation

For an excellent await at how to be happy, option upwards a re-create of Gretchen Rubin's The Happiness Project (Harper, 2009).

holimanbracken.blogspot.com

Source: https://www.oreilly.com/library/view/your-money-the/9780596809430/ch01.html

Share this post