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How to let your money buy you happiness
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Today I want to introduce you to a superb financial writer with whom I have a passing acquaintance and tell you about a new book he’s published called “How to Think About Money.” You may recognize his name, Jonathan Clements, from his many years as a columnist at Forbes and The Wall Street Journal.

In my own writing, I focus on the steps you should take to save money and invest it properly. Jonathan, on the other hand, is focused on getting you to think properly about your money. He believes, and rightly so, that if you think properly, you are likely to act properly.

In my 2011 book, “Financial Fitness Forever,” I included a chapter on where to put your trust. If you get that one decision right, it will lead you in the right directions regarding most of what you should do. Likewise, Jonathan believes that if your thinking is sound, you’ll be more likely to do the right things.

In his introduction, he says 31 years of writing and thinking about money led him to realize “that very few of us will beat the market, that saving diligently is the key to amassing wealth, that money buys limited happiness and that much of the time, we are our own worst enemy.”

There’s so much good stuff in this relatively short book (158 pages including his source notes at the end) that I would love to describe the whole thing, along with my comments. Instead, I’ll list his five main chapter topics, share a few of his practical tips, and then focus on one chapter that I think is particularly important.

Making the most of your money

Toward the back of the book, Jonathan recaps his message with 12 practical “suggestions for getting the most out of your money.” To give you a flavor of them, I’ll paraphrase just four.

  • Design your life so you can spend your days doing what you love.
  • The harder you try to beat the market, the more likely you are to fail.
  • Of all your financial goals, retirement is the most important and the most expensive; it should have that priority in your life.
  • Protect your savings from the ravages of excessive investment costs, straying too far from a global indexing strategy and the failure to buy insurance to protect you from major financial risks.

Money and happiness

With the rest of this column, I want to focus on Jonathan’s first chapter about the relationship of money and happiness. This topic does not get enough attention, partly because our culture and our media focus overwhelmingly on getting us to spend more money in every conceivable way.

Jonathan believes that once you have met your basic needs, buying more and better things won’t make you much happier:

“There is a connection between money and happiness, but the relationship is far messier than most people imagine. If we want to get the most out of our dollars, we need to think much harder about how we spend and which goals we pursue.”

Let’s look at three specific ideas about money and happiness. Each is backed up by extensive academic research. Remember, these are not instructions so much as valuable ideas worth thinking about.

1. Most people place too much value on possessions and not enough on experiences.

When you’re deciding how to spend some discretionary money, do you focus on buying new things (or better things than what you already have)? Or do you think about buying experiences you would savor?

Jonathan believes (and I’ve seen this many times) that we are often happier when we spend on experiences rather than things. Experiences give us the joy of anticipation and memories that often grow fonder over time. That’s more than you’re likely to get from replacing your furniture.

He makes another point I had not thought of that relates to the familiar treadmill known as “keeping up with the Joneses.” No matter how much you spend on things, there will always be somebody else who has more and better things. We often compare our wealth to that of neighbors or friends, and we can feel relatively deprived.

But people who have more money to buy things “won’t necessarily have better experiences,” Jonathan writes. He says you’ll likely get more happiness from your dollars if you forget about new electronics “and instead go for the memorable vacation.”

2. Spending money on others can make us happier than spending it on ourselves.

This may seem counterintuitive, but I have seen it in my own life, and the lives of many friends and former clients. There’s something about being generous that is richly satisfying.

  • First, your generosity is an implied statement that you have more than enough, that your needs are met.
  • Second, your generosity makes an impact on the world, whether it lands directly on a friend or a relative or whether it supports a cause or organization that you care about.

Here’s an idea worth thinking about: Generosity makes you a bigger person (your sense of self extends beyond yourself), a more important person (you are making a difference in the world) and a more connected person (there’s somebody on the other end of your giving).

What’s not to like about that?

3. We are often happier when we have fewer choices than when we have more.

For an extreme example (mine, not his), imagine going to an ice cream shop that offers six flavors. You wouldn’t have much trouble deciding on one that’s likely to make you happy. But what if the shop offered 120 flavors? (There are such places in Los Angeles and New York.) No matter what flavor you finally chose, you probably would have “given up” dozens that you would like to try. Which experience would give you more happiness?

As Jonathan writes: “The freedom to choose is much valued in American society, but it also breeds uncertainty — and uncertainty can be the death of happiness.”

If you are unhappy with where you live but can’t afford to move, he writes, you will probably accept this and adapt. But if you have enough money to move, you might struggle with this issue daily, or you might constantly move from place to place to place, always seeking “the grass that’s greener” somewhere else.

Jonathan: “Happiness lies not in the choice, but in making a decision and eliminating the choice.”

I really hate to stop here, because this book is full of delicious food for thought. I hope you’ll buy it for yourself. And if you know a young person starting out in life, it could make a thoughtful and useful holiday gift.

Here’s a link to Jonathan’s announcement of the book. For more of my thoughts, check out my podcast titled “10 big money lessons in ‘How to Think About Money.’ “

Richard Buck contributed to this article.

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