If you wanted to leave some money to your children, how would you split it between them? You could come up with numbers based upon their likely need for help. Or you could simply divide it equally…after all you love them all, well…equally. Equal distribution is probably the most common way of dividing assets. Yet, what about the situation where one of the kids is very successful financially and has no need for your money? What message does an unequal gift send? Conversely, if you were one of the children on the receiving end…what if mom and dad left all (or even most) of the money and investments to your sibling because you ‘don't need it?’ You might feel ‘less loved’, or slighted in some way, left with a nagging feeling that perhaps they really did love them a bit more than you.
People tend to embrace this statement. It sounds true: surely only shallow, materialistic people would insist that money could buy happiness. To utter the thought aloud is almost like a declaration that we aren’t materialistic (and hopefully not shallow!) Scientists have long been perplexed about how to measure such a thing as happiness. Studies that examine relationships between money and happiness raise the idea that although money may not directly bring us happiness, it has the potential to. Believing that money can’t buy happiness is a bold and sweeping generalization that weakens under scrutiny. The authors of the book, Your Money or Your Life present a “fulfillment curve.” As the curve in the diagram shows, money spent to meet basic needs brings the most precipitous rise in satisfaction.
In a workshop I gave some time ago, a woman named Lisa related the following story. She had been sent to the store with money to buy milk for dinner. As she was leaving the store, she spotted a cute little stuffed bear. She had change in her pocket and thought, “I can buy this!” All the way home she was excited as she anticipated showing her mom what she had bought. But when she got home, her mom screamed at her, ordering her to return the bear and bring back the change! The little girl was traumatized...
Back in 2008 a woman in her mid 50’s came to my office for an initial meeting to discuss her personal finances. She had rescheduled at least three times. About half way into our meeting I asked her, “So, how was it for you gathering your information to come see me?” Her response displayed such vulnerability and courage I’ll always remember it. She said, “I’m am so embarrassed! I’m so disorganized! I’m at a point in my life where I feel like I should be more together. I’m ashamed that I don’t have more saved.” Whether you earn a little or a lot of money you can find yourself having similar feelings.
Consider the following scenario. You are perusing the menu at a restaurant, deciding what to order. The fresh, local salmon in a piquant sauce with sun gold tomatoes and basil has your mouth watering. It is $32. You definitely want fish, but immediately conclude that the salmon is simply “too expensive.” No, can’t do that. So you order cod, perfectly respectable, broiled – but plain – at $22. It arrives. It’s OK – but it isn’t what you really wanted. We’ve all experienced this type of automatic compromise that seems so sensible we accept it as the “right” decision. Such thinking may become an unconscious principle behind our money decisions. This is the smart thing to do. But is it? Why do we so often deny ourselves what we really want? One obvious answer is that it is about the money. Ten dollars is . . . well, ten dollars.
It’s the sort of thing people ask friends and acquaintances. Recently at the gym I happened to overhear a conversation that began with this question. Unfortunately, I was on my way into the shower and didn’t get to hear the answer. It’s an intriguing question. What is a “good investment guy” anyway? At some point, you may want to find some investment guidance, too. What should you be looking for?
In Part 1 of this series, women shared stories from learning when to ask for more money to never assuming that someone else will take care of you financially. Here, a few women share more lessons learned. Hopefully these stories will help you plan your own finances, rather than realize your errors in hindsight. Taking Time Out to Raise Children For those planning on taking time away from the workforce to raise kids, Lori had this to say. “I was astounded how difficult it was to find work (that paid well and utilized my skills) after having been away just a few short years.” Her advice was to do something — anything — part-time rather than leave the workforce altogether. Keep up your contacts and your skills. “Getting back to where you were earnings-wise can be a real challenge.” Being Emotionally Tied to a Home She Couldn’t Afford Madeleine’s wake-up call came in 2008. Her husband told her that he had decided to move out and seek divorce. Even though half the household income just walked out the door, she continued to spend like she and her husband were still together.
I’m beginning to wonder if how much money we have is less important than how we feel about it. I suspect that if I spent as much time exploring how I felt about my money as I have trying to earn it, I’d be a much happier person today. Is the person who is wealthy yet miserable just a cliché? What about people living in poverty who seem joyful and display incredible generosity? Before we dismiss these extremes as stereotypes, perhaps there is more to be learned by looking below the surface. As a financial planner, I have heard people express the gamut of emotions when it comes to finances. Often, just talking about our money issues can be very liberating.
When facing life’s struggles, it is natural to look for a quick solution — the “one simple thing” that will solve the problem. The financial equivalent of the magic bullet tends to be the thought, “If I just make more money, my problems will be solved.” It is a fanciful notion; life is seldom that easy. And yet, on that skeptical note, I’m setting out to tell you there really is one thing you can do that will have a profound impact on your financial life. Are you ready? It’s not magic. The one simple thing is to pay attention to your money. What the heck does that mean? And, how will that possibly make an impact? Paying attention to your money is a three-step process.
This week I’ve been reading Thinking Fast and Slow by psychologist Daniel Kahneman. The author received the Nobel Memorial Prize in Economics for his work on cognitive biases in decision-making. Where finances are concerned, we all like to think we make rational decisions, based upon well-considered reasoning. The studies examined in this book suggest otherwise. What is really behind our financial decisions? Here’s a personal example – my “lettuce story.” I am standing in front of the produce section at the grocery store, eyeing a beautiful head of organic romaine. But I’m frozen.
We’ve all heard the saying, “Out of sight, out of mind.” I am reminded of a woman who came to see me a few years ago for help with financial planning. She had rescheduled the initial meeting several times. When she finally came in, I could tell that she was upset. After she had talked for awhile I asked her, “How was this process for you, gathering your information for our meeting?” She admitted that she felt embarrassed about being disorganized and not having saved as much as she “should” have at her age.
A couple, I’ll call them Tom and Sally, get together for a second date, wine, and appetizers. They had gone out for coffee a few days earlier and shared an immediate sense of having met someone special. Sally had mentioned she’d be traveling for work; they would not be able to see one another again for more than a week. Tom decided to find out if his initial feelings about Sally were true. So he asked her out three days later. Glad that he’d taken the initiative, she happily accepted. Now, on that second date, they are savoring each other’s company when the check arrives. Neither one makes a move. There is an unspoken moment of uncertainty. What to do?