Read an Excerpt
Money and Happiness
By Laura Rowley
John Wiley & SonsISBN: 0-471-71404-6
Chapter OneWealth and Values
Julie D., 29, calls herself "a hippie at heart." The Florida teacher just bought her first house: a 1960s cement bungalow painted periwinkle blue, a shade inspired by the nearby Gulf of Mexico.
The charming three-bedroom home boasts a nicely landscaped yard, tiled patio, and a small pond with a fountain. New homebuyers like Julie typically spend $6,500 on furnishings and improvements in the first year of ownership, statistics say.
But Julie isn't the typical new homebuyer. Instead of shopping, she "dumpster dives."
"Every Thursday night, the town lets you put anything at the end of your street," Julie says with enthusiasm. "People throw away good stuff and it's free! We got wrought iron chairs and tables for the patio, little plant stands, and stuff for outside the house."
Julie earns $34,000 a year teaching preschoolers with special needs, a passion she stumbled upon in a high school child care course. "Being with children made me feel good," she says. "I wanted to do something that made a difference in the world." Julie has money automatically deducted from her paycheck for retirement and sets aside a little cash every month to splurge on travel. Last year, she was laid off after the state cut funding for the pre-K program where she taught. She took $2,000 out of her savings and went to the Caribbean for a month. "My boyfriend had a friend who washouse-sitting a gorgeous villa," she says. "We stayed for free, we went to the grocery store, I brought a yoga tape and did yoga, and there was a boat for us to use. We pretended we were movie stars. That's why I save up money and why I have a nest egg-because if I get sick of it all, I'll be able to quit and go to the Caribbean and still pay my mortgage."
Marilyn N., 31, is also a saver, but in a town where it's tough to save-New York City. "I was always the kid counting my money in my piggybank instead of spending it," she says. Her parents divorced when she was young, and she lived with her mom and sister in modest circumstances. Married with one child, Marilyn now enjoys a household income of around $300,000 a year. But old habits die hard: "As one of my friends says, we're the cheapest rich people she knows," she jokes. "We just don't want crazy things. That's part of my upbringing. I could never in a million years bring myself to pay $500 for any item of clothing-which a lot of people in New York do. When we buy extravagant things, like a car, we labor over the decision forever."
Like Julie D., Marilyn N. has found her calling, as a documentary film producer. When asked about her best money-related experience, she answers quickly: "Winning scholarship money in college. I have peers with a lot of student loans. If I had loans, there's no way I could have taken the jobs that led me to where I am now. I started in film as a researcher, at $10 an hour with no benefits."
While their incomes are miles apart, Marilyn N. and Julie D. have much in common. They have discovered the secret to financial happiness: aligning their money and values. What does this mean? They are clear on what is most meaningful to them, and focus their money around it. The way they earn, save, and spend is in sync with what's most important in their lives. Managing their money makes them feel "good," "smart," and "empowered." They consciously prioritize their money goals: They know what they want their money to do, and more importantly, understand how to manage it so it maximizes their happiness. They have defined "the good life" in a way that's authentic to them, and use money to realize a personal vision.
Back in the 1990s, I worked as a producer at CNN business news, and went to seminary at night. Few of my business journalist friends understood why I was studying theology. Few of my peers in the master's program (most of them ministers in training) understood why I was interested in Wall Street. I lived in a dualistic world, covering the financial markets by day and biblical Greek by night. I was fascinated by both, and still am: Today, I write a money column for Self magazine and teach a university course called "Contemporary Moral Values."
Here's what I have learned about money and meaning: You can't separate them. Think about the definition of cash itself: It's an entity that stores value. Understanding what value it holds for you can be life altering because we structure our lives around money; it defines the choices we make; it shapes the person we become. To be successful at achieving wealth, you first have to discern what wealth means for you.
Most personal finance books make this difficult to do. They define wealth as a numeric formula: The difference between your assets and your liabilities-between what you have and what you owe. They focus on financial instruments-those three-letter, three-number combos like IRA, Dow, 529, SEP, and 401k-and discuss investment concepts-diversity, liquidity, tax efficiency. You're smart enough to understand all this information-but what does it mean to your real life?
Theology poses the same problem: "Where theology becomes overly abstract, conceptual, systematic, it separates thought and life, belief and practice, words and their embodiment, making it more difficult, if not impossible, for us to believe in our hearts what we confess with our lips," says theologian and author Sallie McFague. The same is true for money: If you don't start with what you believe in your heart, all your money management is just lip service. You'll join your company's retirement plan because it seems like a good idea, then run up your credit cards because what you really value is a canvas lounger on a Caribbean beach in February. It's okay to value these things-but pursuing them simultaneously doesn't work. Your net result is a paltry 401k and a lot of debt. Both make you unhappy and anxious.
This book gives you the financial tools you need to succeed. But first, it shows you how to bring together your thoughts and your life, your beliefs and your practices, your words and their embodiment-so that you mean what you say and take action that achieves what you desire. You'll be able to fully engage your finances because you'll know how to put your money where your heart is. Your money will reflect your energy, imagination, and passion. This book also explains the findings of three decades of research into money and happiness, and helps you figure out how to be more satisfied with whatever you have, while you move toward your long-term goals.
The aim of this book is to help you create your own definition of wealth based on what you truly value. The first few chapters offer tools to uncover the source of your values-family, community, and personality-and explain how experiences and character come together to create a larger belief system about money. Once you identify unconscious beliefs that control how you view and use money, you have the power to change them and better align your finances and values. Later chapters tackle the nitty-gritty of getting out of debt, spending, saving, and investing, with a special look at money and relationships and what to do when you achieve certain financial milestones. The goal is to connect these financial concepts to real life, so the book is built on the experiences of women like you-stories about their money choices, how money has shaped their lives, and how they have used money to facilitate their genuine happiness.
How Wealthy Are You?
Let's start with an assessment of your wealth. Do you consider yourself rich, poor, or somewhere in between? Use the following wealth assessment to get some perspective on where you stand:
1. I have easy access to food and clean water. ____ ____
2. I live in a home that has heat and running water. ____ ____
3. I feel safe in my home and in my neighborhood. ____ ____
4. I can comfortably spend more than $2 a day. ____ ____
5. I am employed or supported by someone who is. ____ ____
6. I exercise regularly. ____ ____
7. I get at least eight hours of sleep a night. ____ ____
8. I have health insurance. ____ ____
9. My children have access to affordable medical care. ____ ____
10. I fully expect to live until I'm 70 years old. ____ ____
11. My children are enrolled in a good school. ____ ____
12. I graduated from high school. ____ ____
13. I earned an associate's degree. ____ ____
14. I earned a bachelor's degree. ____ ____
15. I earned a master's degree. ____ ____
16. I earned a PhD. ____ ____
17. I earned a professional degree (law or medicine). ____ ____
18. My household income is at least $43,300. ____ ____
19. My household income is at least $50,000. ____ ____
20. My household income is above $75,000. ____ ____
21. My household income is above $100,000. ____ ____
22. My household income is above $150,000. ____ ____
23. I have a checking account.
24. I put money away into savings last year. ____ ____
25. I own stocks directly or through mutual funds. ____ ____
26. I pay off my credit cards in full every month ____ ____ (or don't use credit cards at all).
27. The credit card debt I carry is less than $1,000. ____ ____
28. I own a car. ____ ____
29. I save money for retirement. ____ ____
30. I own my home (with or without a mortgage). ____ ____
31. My home is worth more than $169,900. ____ ____
32. I have no student loans. ____ ____
33. I have meaningful relationships. ____ ____
34. I have opportunities to express and develop my ____ ____ skills and talents.
35. I have the ability to strive for my goals. ____ ____
36. I like my work. ____ ____
37. My day is filled with meaningful activity. ____ ____
38. I have enough time to enjoy my life outside ____ ____ of work.
39. I notice and appreciate small daily pleasures. ____ ____
40. I feel in control of my life. ____ ____
41. I have a strong sense of self-respect. ____ ____
42. I participate in the life of my community. ____ ____
43. My life has a spiritual dimension. ____ ____
Scoring the Wealth Assessment
The assessment is based on a broad definition of wealth, including material needs and comforts (questions 1 through 5), health (questions 6 through 10), education (11 through 16), and assets and liabilities (questions 17 through 32). Finally, questions 33 through 43 list intangible values that create a rich life-from the quality of relationships to the ability to control your destiny and develop as a human being. We'll get to that section in a moment. First, let's look at how your wealth compares to others. On questions 1 through 32, give yourself one point for every time you answered "yes."
Part 1: Basic Needs
1. I have easy access to food and clean water. Some 840 million people in the world are chronically undernourished, meaning they consume too little food to maintain normal levels of activity; 1.2 billion people lack access to a reliable water source that is easonably protected from contamination. In the United States, about 11 percent of families-or 35 million people-were "food insecure" in 2002, meaning they lack the means to ensure themselves of healthy meals and are vulnerable to at least a mild form of chronic malnutrition.
2. I live in a home that has heat and running water. About 924 million people, or roughly 15 percent of the world's population, lived in slums in 2003.
3. I feel safe in my home and in my neighborhood. The most recent government survey found 29 percent of Americans say there is an area near their home where they would be afraid to walk at night. Worldwide, more than 9.7 million people were refugees from their home countries in 2003 because of persecution related to race, religion, nationality, political opinion, or membership in a particular social group.
4. I can comfortably spend more than $2 a day. In 2003, more than 2.7 billion people lived on less than $2 day, about 43 percent of the world's population.
5. I am employed, or supported by someone who is. About 6 percent of Americans were unemployed in 2004.
Part 2: Health
6. I exercise regularly. Just 40 percent of Americans do the regular physical activity recommended by the U.S. Surgeon General (30 minutes of brisk walking a day). One-quarter of all U.S. adults are not active at all.
7. I get at least 8 hours of sleep a night. Only 37 percent of Americans get the recommended eight hours of sleep needed for good health, safety, and optimum performance.
8. I have health insurance. Almost 45 million people-about 15 percent of U.S. population-were uninsured in 2003.
9. My children have access to basic medical care if they need it. More than 10 million children die each year in the developing world, the vast majority from causes that could be prevented by good care, nutrition, and medical treatment.
10. I fully expect to live until I'm 75 years old. In 2003, life expectancy worldwide is just over 65 years; in sub-Saharan Africa, 46 years.
Part 3: Education
11. My children are enrolled in a decent school. Worldwide, 115 million school-age children are not enrolled in school at all.14
12. I graduated from high school. 84 percent of Americans ages 25 and older have completed high school. The average annual salary for a high school graduate was $25,900, compared to $18,900 for nongraduates.
13. I have an associate degree. People with an associate degree earned an average of $33,000 in 2000.
14. I have a bachelor's degree. About one in four Americans ages 25 and older has attained a bachelor's degree. Average earnings were $45,400. Over an adult's working life, people with bachelor's degrees earn an average of $2.1 million, compared with $1.2 million for high school graduates.
15. I have a master's degree. For someone with a master's degree, average earnings were $55,641 in 2000. Over a lifetime, those with a master's degree earn an average of $2.5 million.
16. I have a PhD. Average earnings were $86,833 in 2000 for people with a doctorate, and lifetime earnings averaged $3.4 million.
17. I have a professional degree (law or medicine). Average earnings for this level of education were $99,300 in 2000. Professional degree holders average lifetime earnings of $4.4 million.
Part 4: Assets and Liabilities
18. My household income is at least $43,300. This is the median income in the United States. Half of incomes are above this mark, half are below. Nearly 36 million people-about 12.5 percent of the population-lived in poverty in 2003. The poverty level is defined as annual income of $18,810 for a family of four; $14,680 for a family of three; $12,015 for a family of two; and $9,393 for individuals.
19. My household income is at least $50,000. 57 percent of Americans earn $50,000 or more. A survey by researchers at the Centers for Disease Control and Prevention found Americans with incomes of more than $50,000 reported fewer days of feeling "sad, blue, or depressed" than those who earned less.
20. My household income is above $75,000. Some 28 percent of Americans earn more than $75,000.
Excerpted from Money and Happiness by Laura Rowley Excerpted by permission.
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