Money and happiness

We all know money doesn’t buy happiness. We also know that having no money can really affect happiness. But can you handle money in specific ways to increase everyday happiness? I’ve been reading The Happiness Project by Gretchen Rubin, and one idea really caught my attention.

Rubin talks about two different orientations: in simplest terms, the underbuyers, who put off buying things until they run out, wait out pains or illnesses to see if they’ll go away, and never pop for the expensive haircut or premium manicure. Then, there are the overbuyers, who have far more sheer stuff stashed and spend on things that make them feel good. Enough stuff, and they may even be thought to be wealthy (read, the oversized house and pretentious car).  In fact, whether things make you feel good may be one way you can tell which you are. Another way—check how much toilet paper is currently in your house.

Of course, few of us are purely one or the other. I tend to fall on the underbuyer’s side, but I have plenty of toilet paper (that problem will get me out to Sam’s Club in a flash), and book buying, er, we won’t go there. Nevertheless, people I see with a lot of money stashed in investments tend to pursue an underbuying strategy, in the main.

While we might think underbuyers hold onto their dough better, it can produce a lot of stress to be out of essentials or unwilling to spend on care or services you really need. Safety, serenity, health, security, and pleasure have real monetary and non-monetary value, and time is the most expensive commodity of all. On the other hand, so many things we purchase are the whim of a moment, and delaying that purchase may eventually mean no purchase at all, and money saved. I think just-in-time inventory and thoughtful spending are a reasonable mean, and I think Rubin would agree. Frugal, not cheap—cheapskates who try to shift expenses to other people (e.g. the guy who never picks up his full share of the check) are reserved for one of my personal rings of hell.

Overbuying tends to diminish wealth for two reasons: waste and cost of inventory.  It’s not wealth if it’s rotting in your refrigerator or still has the tags on it in your closet. Storing our overbuying has made Container Store a fortune. And, that money spent on too much could have stayed invested and growing. But pleasure is worth something, too. As long as it really does give you pleasure. My mother used to keep a fully stocked freezer in the kitchen. And another one in the basement. And another one in the garage. When she died there was so much meat it took us nearly two years to eat through what we didn’t have to throw out based on label dates. But she had known real hunger as a child, and if that made her feel secure, well, they could afford it.

Mom and Ms. Rubin are both on to something. Small splurges can make for happiness. Buying things you truly want, and paying for services you really need, make for happiness. And ultimately, in many more excellent chapters, Rubin sees happiness in balance. Michael Pollan has a now-famous dictum on everything you really need to know about eating: Eat food. Mostly plants. Not too much. From this book, I think I could derive a few simple money rules. Spend thoughtfully. Mostly on experiences. Just enough. Not as pithy as Pollan, but if most of us did it, we’d be both happier and wealthier.

About the author

Danielle L. Schultz, CFP®, CDFA

Danielle L. Schultz, the principal financial planner of Haven Financial Solutions, is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a NAPFA-registered Financial Advisor, and a Registered Investment Advisor in the State of Illinois. She studied financial planning at Northwestern University’s Certified Financial Planner™ certification program. She also holds a Series 65 license (Registered Investment Advisor Representative) and a CCPS (Certified College Planning Specialist).

She writes a regular column for Better Investing magazine and is currently working on a revision of their mutual funds handbook. In addition to academic training and professional experience, Ms. Schultz has personally managed Social Security, Medicare, retirement and long-term care issues; college funding concerns; and cash flow and transition planning in self-employment and divorce situations. Her social work background gives her an innovative perspective on financial planning issues; for her, financial planning is not only about money, but also a key component in a satisfying and well-lived life.

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