Someone won $750 Million last night. They don’t need any more money for the rest of their life. Assuming that person isn’t reading my blog, you are probably wishing you had a higher income or more money saved. Shocking! What I want you to do now is think about the reason you want more money. For some people, they want to be able to pay off debt and start an emergency fund. For others, they want to be able to buy a new car/house/boat or all the above. Some families just want stability to pay the next electric bill and still put food on the table. When it comes down to it, money is primarily used to 1) Pay for living needs, and 2) Do things that make you happy. If you had won the lottery yesterday, how would you spend your time each day? Would you be happy doing that for the rest of your life? To answer that, you must identify the values you want to live by.
Making yourself happy seems easy enough. Unfortunately, too many of us spend money on things that don’t truly bring us happiness. We struggle to define our values which in turn leads us to waste money without thinking. That’s why it is important to define your values first, and then focus your finances on make those values a priority. Let’s look at some examples of values and goals.
1) Security: I want to save $1,000 in case of an emergency – This is a great goal! Having an emergency fund will help you get through random expenses such as an auto accident or medical need. The emergency fund reduces your stress when those things happen. Set aside a specific dollar amount out of each paycheck until you hit this goal. You will know exactly how long it will take to establish some security for you and your lifestyle probably won’t change drastically.
2) Adventure: I want to visit Europe next year – This one is common. Many people want to see the world. However, they think that it is impossible because they don’t make enough money. I’m here to tell you that it is possible. Figure out where you want to go, how much it will cost you, and if you can find deals to make it cheaper. Then look through your last three months and see where your money has gone that you would rather have put towards saving for a trip. Every Starbucks and Target run that you eliminate will get you closer to your dream trip. Although, you may value those more than travelling and there is nothing wrong with that.
3) Freedom: I want to quit my job within five years – Here is where it gets interesting. This can be either retirement or quitting your 9-5 desk job to become your own boss. Retirement doesn’t have to be an age if you have enough money to live the life you desire. You don’t need to work a typical office job to survive. If freedom is your most important value, you just need to figure out how much money you need to live the life you want. It may not be possible to quit your job tomorrow, but it is probably more realistic than you imagine.
Think seriously about your life and ask yourself what is truly important. If fitness and health are some of your most important values, then pay extra for the gym membership you want. Why? Because you value it enough to make it a priority in life. A typical gym membership can be paid for by cutting out a few dinners or bar tabs. Not to mention that would probably improve your health as well. Try it in your life. Pick something small that would make your life better based on your values. Figure out how much it would cost, and go find out what you could have cut out of your life to pay for it. You will probably realize that what you spend money on isn’t what truly makes you happy.
I want you to think of money as a tool to create happiness. I know, “Money can’t buy happiness.” You’re correct. You need to make yourself happy first, or no amount of money will help…not even $750 Million. You must define what you value in life so that you know what actually makes you happy. Once you do that, put your money to work. It won’t buy happiness, but it will fund a wonderful life focused on what is most important to you.
Mike Zeiter, CPA/PFS