Money and Karma

money karmaWhen it comes to money you reap what you sow.

Or, if we want to get a little more esoteric in our thinking, positive energy put forth can result in positive energy coming back to us.  This may apply to money, like many other things in life.  A little “New Age” personal finance for you, right here at Squirrelers :)

I had a couple of recent examples where being straightforward and above board in some money-related situations proved to be a good thing.

The Grocery Store

First of all, this example is not at all one that involved a lot of money.  Keep in mind that it’s the bigger idea of integrity paying off that I’m exploring.

I was at the checkout aisle, and emptied the cart while the cashier was scanning items.  Spinach, bananas, oatmeal….the items were scanned one by one.  Then, the case of sparkling water I wanted to buy (in lieu of soda, which I gave up a few years ago) came up for the cashier to scan.

He tried to scan it, and nothing came up.  Tried again, and once again didn’t the result he wanted.  At that point, he turned me and asked me how much it was.

Instinctively, I told him how much I thought it was: $4 for the case.  He seemed surprised, and said that sounded like a lot.  He asked me if I was sure that it was $4.

I told him, yes – I’m pretty sure it was $4.  Not 100% sure, but that’s the price I recall seeing.

The guy said that it seemed like a lot, and since he wasn’t sure of the price himself, he’ll just charge me $2.99 for it.  I told him that I’d gladly pay $4 or wait for someone to verify the price.  He told me, to my surprise, that I seemed honest by giving him a price that sounded reasonable or maybe a bit more, so he felt like he could just charge me $2.99 and all would be cool.  If I had given him a low price, he would have gone to check.

In a subsequent trip to the store, I did see that the cases of sparking water were in fact $4 each.   So, I was in effect “rewarded” for being honest (with no agenda) by getting a 25% discount.

Parking Garage

This example happened some time ago, but also illustrates how there can be some “good karma” in terms of money.

I had parked in a city garage on a day when parking was really tight, and the garage was basically full.  This was a garage that had to be at least 6 or 7 stories high.  On that day, people were circling around, driving up and down the garage to no avail when trying to get a spot.  It took being lucky and being at the right place at the right time to swoop in when somebody got their car to leave.

So, I was fortunate to find a spot, and then stayed for a couple of hours.  The cost would have over $25 if I recall, and the only reason I was there is because I had an interview.  So, it was totally out of pocket for me.  Not cheap!

The only thing is, I did something quite unusual for me: I lost the parking ticket.  I normally don’t lose things like that very often at all, but that day I did.  So, when trying to pay, I couldn’t the “autopay” machine and had to go to the customer service desk to explain that I had lost the ticket.

When I approached, the first thing out of the lady’s mouth – before I could say anything – was something to the effect of “did you have trouble finding a spot”?

She was probably going to waive the cost, I would think.

However, I told her that no, I actually did find a spot and was there for a few hours.  The issue is that I unfortunately lost my ticket.  So, I wanted to know if I could pay her since I had lost the ticket.  Frankly, I was also worried that they would charge me for the day.

My worries were eased, as she mentioned that since I was being honest, she would just waive the cost and let me through.  If I recall, an attendant let me get past the gate.

Now, perhaps she was lazy and didn’t want to deal with going through the process of charging me.  Who knows.  But the way it worked out was that my being straightforward and not playing games ended up rewarding me.  In this case, it was a 100% discount!

Bottom Line: Being straightforward in situations where the could be some wiggle room to avoid spending could bring some good money karma that helps you anyway!

My Question for You

Do you have any examples how being straightforward and ethical have directly paid off in such ways?


Money Mindsets: Scarcity vs. Abundance

money saving mindsetOf course it would be a personal finance blogger who has a real life, philosophical discussion about the merits of different money mindsets. I was that person recently, having taken part in a conversation that went down the path of discussing the merits of a “scarcity” mindset versus an “abundance” mindset when it comes to money.

Yes, I know. I’m a money nerd.

How the Conversation Started

We were talking about how here in Chicago, there are a lot of younger people buying pricey condos and living it up not long after graduating from undergrad, or perhaps grad school. I was one of those people back in the day (post-grad school), at least to some extent. It was a great time, but I compare my finances to people I know who lived at home with parents for a number of years at the same age, and they were able to plow money into savings at a much greater rate.

Consequently, that money – which was then invested, presumably – has grown to the point where these people are in really good financial position. Compound interest worked its magic, and while they may have sacrificed a little bit in terms of lifestyle at that age, they’re reaping the benefits later in life.

I thought that the people spending and living it up are being a bit shortsighted and should have chosen to live conservatively and save for the proverbial rainy day. My friend though that doing that when really young is living scared, and that it’s better to have a positive “can-do” approach toward making money and having marketable skills.

Scarcity Mindset

So, my position was described by him as a “scarcity” mindset. In other words, a way of thinking about money that makes it seem like something that’s difficult to make. The criticism was that having such mindset causes people to not think expansively, and be scared with money.

The problem (according to the critic of this way of thinking) would then be that by being defensive, less risks would be taken in general. And risk-aversion could theoretically impact your willingness to aim high with goals, maybe not pursue new jobs, not actively network with others, and even be scared to invest intelligently. With investing, there is of course a risk/reward component to things, and every percentage point of rate of return can really matter over the long term.

My view, as I defended it, is that money is not necessarily easy to make. Things change in life, and people’s lives can take many twists and turns over the years. Life is not a linear, step-wise process with a guaranteed upward trajectory for everyone. Industries consolidate, jobs change, accidents and health issues can arise, divorce can happen, and any number of things could occur.

So, with my view, we should not take anything for granted when it comes to money. Hang on to it, because you’ll need it throughout your life for reasons you might not even be able to predict. You never know, so be careful.

Now, this doesn’t mean one should shy away from incorporating risk with investments. Obviously, historical stock returns are much better than keeping all cash! I’ve written quite a bit about stocks before. But when thinking about how we can build and keep wealth, while income generation is where it all starts, if we don’t save money and manage risks, we could be in trouble later.

With the 20-somethings I mentioned earlier, my recommendation would be to save as much as possible when younger. It’s not necessary to spend big time on a dream home or condo, drive a great car, or take exotic vacations all over the place. To the latter point, I do think experiences can matter a lot more than material things, so I’m not suggesting never traveling (I traveled a good deal). Rather, I just think it’s important to focus on saving as much as possible when young, rather that splurging. Have fun with whatever you have left over after meeting aggressive saving goals.

Abundance Mindset

So, his viewpoint was more along the lines of living with confidence in yourself that you’ll always be able to succeed. In his view, by thinking positively, your actions will be positive and subsequently so will your results. Think like a winner with a never-lose mentality, and you’ll never lose. Rather, you’ll be able live a full, rich life without being held back by fears of not having enough money.

To this way of thinking, by being open and willing to live for your enjoyment in the moment, you’re not delaying gratification for some rainy day. Instead, you’re truly making the most of your time. And by doing so, you’ll be more likely to actively take risks in your life that will lead to a better outcome for yourself in terms of making money. Even if you might spend more to enjoy the moment, this mindset would also make its way to your investments, where you would be again willing to take risks that could yield big returns later.

In other words, this is something along the lines of “Life is short, so go big, or go home!”

For the same 20-somethings buying nice condos, cars, vacations, etc – this fits right into this way of thinking. Don’t limit your life, the thinking goes. Get what you want, and be confident in your ability to make it happen in the future as well.

Meet in the Middle?

Yeah, I think it’s probably good to strive for balance, as I think of it more. But ultimately, I’d rather do so while leaning toward the scarcity mindset. So while striving for more and of course living for today, we can plan for tomorrow and save for our future expected and unexpected needs.

So on a scale of 1 to 10, with 1 being the scarcity mindset and 10 the abundance mindset, I’d say I’m at about a 3.5.

My Questions for You

What do you think of these two mindsets?

Where would fall on the 1-10 scale of scarcity vs. abundance?

You Don’t Have to Be Defined by Your Financial Past

financial storyA tiger can’t change its stripes. But can it change its financial situation?

Yes. Well, maybe not a tiger – but we certainly can. It may be easier for some people than others, depending on one’s circumstances, but it’s possible to turn around finances and make things a lot better. This could mean going from bad to good, or perhaps good to exceptional.

Case in point: someone I know who went from negative net worth about 15 years ago, to becoming a multi-millionaire now.

In looking at how he did it, I can point to several different factors based on what I’ve heard over the years:

Genuinely Working Hard

He was not someone who simply clocked 40 hour weeks. He absolutely strove to be excellent at his work. At times, that did mean working more hours than his peers or what we be “expected” on the job. But it also meant working smart, and putting in the time to know how to do the job well and efficiently – no matter what the job.

Focusing on Education

He went back to school to get a graduate degree, from a globally premier school. He invested his time and some money to do so, and just as he did professionally, he worked hard. What he didn’t do is spend an arm and a leg to do so, as I believe his employer might have covered a sizable percentage of the cost. Now that’s a setup for a good ROI! Clearly, he understood the importance of education and net worth. Also, he gets that we must always look to keep on learning and improving ourselves.

Marrying Someone Who Gets It

How many marriages feature someone savvy with money being paired with someone who just doesn’t get it – and doesn’t care to understand, either? Wouldn’t that be a bummer? Thankfully for him, this wasn’t the case. He married someone smart who also works hard and is a responsible person. In reality, I should probably re-characterize this as how “they” accomplished it.

Keeping Healthy

This guy is highly physically fit, and has tremendously improved in this regard. This helps in several ways. First, he looks the part, which I’m sure can only help out one’s career. Second, and likely more important, it probably gives him the energy to focus, be productive, and make good decisions.  Not to mention that later in life, if you’re not healthy, you might not be able to work at all.

Avoiding Materialism

At one time this guy was much more materialistic. From clothes to cars, he would spend money for nice things. However, he has become wise – and simply doesn’t care to impress anyone with material items. He just doesn’t care about that, and has avoided Big Hat No Cattle syndrome.   Rather, he realizes that one must save early and often.  It’s something that has come up in conversation.

Striving to Achieve Long-Term Goals

This guy talks about not wanting to work late into life, and to able to be young enough to retire and be healthy enough to relax and travel. There is clearly a vision, and I’m sure there’s a plan to make that happen. He has a strong sense of direction in his financial life, and it shows.

Bottom Line: There are plenty of examples of people who have not been held back by their financial past, and have made changes in order to eventually put themselves in a much better position. To be fair, people can go the other direction too. But thinking positively, we can rewrite our financial story if we put our mind to it, work hard, and perhaps get some good luck to help us along the way.  We have to believe in ourselves!

My Questions For You

Have you ever thought about how your past experiences with money have shaped the way you think about it today?

Has there been a time when you have consciously tried to change your approach to managing your money?

Do you know anyone who has broken free of past financial situations to become very successful in this area?

3 Ways Relationships Can Make a Huge Impact on Your Finances

relationships impact financesAs we get older, we presumably get wiser. Right?

Well, hopefully in my case I’ve managed to learn a few things and actually apply some of this experience. When it comes to money, as you know if you visit here regularly, I love sharing my own lessons learned and experiences as they relate to money. Some things are through my life, and I’ve made enough of my own to learn from :) Of course other learnings have come by observing different people other than myself.

Either way, it comes down to keeping an open mind and embracing continuous learning in order to grow.

Along those lines, one of the things I’ve come to believe is that our success in one area of life can truly impact other areas of life. It really seems as though health, wealth, and relationships are interrelated In other words:

  • Health impacts wealth
  • Wealth impacts health
  • Health impacts relationships
  • Relationships impact health
  • Wealth impacts relationships
  • Relationships impact wealth

You get the idea. I’ve written about this in a prior post, with a simple diagram that illustrates how these factors impact each other.

Lately I’ve been thinking about the 6th bullet above: relationships and wealth. Really, this is something that makes a lot of sense when you really think about it.

Here are 3 examples of how relationships can impact wealth:

Career Networking

It’s sometimes said that what’s most important is not necessarily what you know, but who you know. While I don’t think that’s always the case, it sure does apply to many situations. In a lot of cases, it can help a person with his or her career.

For example, let’s say two people are equally qualifies to get hired for a new job. However, one person knows somebody in the company who can vouch for her, and the other has no personal contacts. If you were hiring manager, wouldn’t that potentially tip the scales in the first candidate’s favor?

Going further, what if you actually knew the first person? Well, in that case she’s even more of a known commodity. Thus, she has a bigger advantage.

Of course, this is assuming that the person without contacts in that company will even find out about the job opening. Some positions aren’t highly promoted via advertisements or posting, and even if they are it helps to have an advocate for you ahead of time.

Personal Relationships

In terms of personal relationships, whether we like it or not, money can be intertwined in our life. One example would be the choice of who to marry. By this I mean that while marrying for money is shortsighted, marrying someone with very bad financial habits (no control over spending, no interest in saving, etc.) can directly impact your life. Beyond this, people that divorce end up – in many situations –worse off.

There could be other benefits or drawbacks to our personal relationships to other people. Some people might be very kind and help us in a time of need. Generosity is a good thing, and anybody can truly be generous.   Of course, there are some money extractors out there too, so it goes both ways.

Consumer Knowledge

I don’t know about you, but I seem to get smarter the more I interact with intelligent people. Sounds funny, but I think there is something to that saying that we are like the average of the five closest people to us.   Some of this can apply to knowledge of products, services, and other purchases.

For example, if you’re going to get work done on your car, it helps to have someone give you a recommendation based on great service they got in the past. Another example might be if you were considering buying a home in a certain area, it would be great to know someone with insider knowledge on the neighborhood, future retail construction in the area, school district changes, or other pertinent information that could impact your ultimate satisfaction with your purchase (as well as resale value).

Here’s an offbeat example: this past autumn I was getting my haircut, and was making small talk with the lady cutting my hair regarding seasonal fall traditions. I mentioned that we always go to a specific place for apple picking, and she told me of a place that I’d never heard of but was much better and about one-third the cost. Had I not been open to a friendly conversation, and instead just sat quietly uninterested in other person, I would have spent around $50 more and not discovered a fun place for the family to visit.

You get the idea. Quality relationships and knowing people, even casual acquaintances, can help us make better purchases and save money and/or get better value for our money spent.

The Bottom Line: relationships can impact our finances. If we’re generous ourselves, and spend time with positively-oriented people, our finances can truly benefit in some direct and many indirect ways.

My Questions for You

Do you ever think of things in this way, that one aspect of life can impact other aspects of your life?

Do you believe that relationships can impact your finances?


Social Pressures and Financial Independence

social pressures financial freedomYou know, perspectives on things can really change as we get older. And these changes can be somewhat complex.

For example, I find that as I’ve gotten older, I’ve become more empathetic and compassionate toward other people. Not that I wasn’t before (at least I hope not!), but it sometimes takes life experience to understand how we each take our own individual journey to get to where we are. Kindness and compassion trump judgment and generalization. It’s something I’m continually developing on.

Another example, almost counterintuitively, is that I’m caring less and less about what others think of me. Maybe better put, I’m not worrying about being judged by others as much as I might have in the past!

To the latter point, I’ll illustrate by briefly sharing my clothes shopping and haircut experiences and how they’ve changed.

For clothes, I would – in the past – only buy really good quality stuff from Nordstrom or small handful of other places in that category. Not only for work, but for cool casual things for going out on weekends. These days, I don’t do that at all. I’d be more likely to buy something very inexpensive (but nice) on sale from J.C. Penney.

That’s huge difference is “prestige”, and I’m fine with it.

For haircuts, in the past I would’ve spent a decent amount of money – to the tune of $40 for a men’s haircut. Now, I’ll drop $15 for a cut. I wrote about this before, in a post on how much to spend on a haircut. Clearly, I’m fine with it.

Frankly, I don’t see how those more expensive purchases in the past made that much difference in my life. Did paying 2 to 3 (or more) times more back then give me that much more for my money? Probably not. I simply felt good about it, and that I was keeping up with others that way. Maybe not consciously, but at least subconsciously.

I think that this type of spending behavior just might be one of the biggest obstacles to people reaching financial independence (a topic I was reminded of in a recent post on Messy Money). Or, at least it’s something that actually prevents them from even trying to achieve it – even if they know that it would be a great place to be!

Why wouldn’t someone want to be financially free?

I’m not, and have quite a ways to go. It’s not close.

But clearly, I value the concept of being financially responsible. And I don’t really care anymore how it might look to others if I don’t have the same material things.

Here is one way to look at it:

  • Would it be worth it to you to have financial independence, but have a worse house, car, clothes, etc. than your friends and peer group? Keep in mind, they would all know that they had nicer things than you, and you would appear to be worse off to the untrained eye.
  • Or, would you rather have equivalent house, car, clothes, etc. than these important people in your life – but have to work quite a few more years and not have financial independence? To know that you look good to them.

In other words, having low perceived status but totally quiet freedom you get no social credit for?

Or, having good perceived status (or maybe even “big hat, no cattle“), but keep on plugging away for many years like everyone else in your circle?

I think you know what I would choose.  Here’s to actually living within one’s means!

My Questions for You

What about you? Which path sounds better, and more realistic to you?

Do you think keeping up appearances and worrying about what others think is a reason why many people don’t seriously pursue financial independence?

Want to Retire Sooner Rather Than Later? Do These 3 Things

retire sooner“Sooner rather than later” is a concept that resonates with impatient people. Meaning, get your task done or reach your goal sometime in the near future instead of a long time from now.

Talking to people and even (especially) reading personal finance blogs, many want to accelerate the timeframe of when they will be able to retire. Retiring sooner rather than later is enticing, isn’t it? Sure, maybe we really love working and clearly need to work now. But wouldn’t be great to work because you wanted to, instead of because you had to?

To get to that point, there are a number of things we can do to put the odds more in our favor. One could probably come up with a long list, but let’s focus on 3 for now. Here they are, 3 things we can do to help us retire when we choose to do so:

1) Never forget that the day will come when we’re either physically incapable of working, or that employers will lose interest in us because we’re old.

Yes, this can happen. Rather, it will happen at some point. I’ve read comments by people on blogs where they say things such as (paraphrased)

  • “I’ll probably be working for the rest of my life”
  • “I’m in good health now, I’m sure I’ll be fine later”
  • “If you stay current, there is no reason you can’t work until 70+”
  • “My grandfather worked until he was 82, and was as sharp as a tack until he chose to retire”

That’s all great, but I’m trying hard not to fall into that trap. I realize that we can’t predict the future, but clearly in the game of life, father time has never been defeated – as a friend of mine likes to say. By keeping in mind that we need to plan and save for retirement, it puts the requisite pressure on us to make it a priority.

By doing so, we can take some control of the situation, rather than let the situation control us entirely. When we have some control, we can take positive steps to work toward retiring sooner rather than later in life.

2) Always Make Sure You Have Marketable Skills

This is really a bigger picture issue of making sure that you protect and grow income. Where I’m going with this is that without income, we simply won’t be able to save money. Using all the coupons in the world isn’t going to get us too far if there isn’t adequate cash inflow. Or worse yet, none at all.

I’ve seen people go through protracted periods of unemployment, and in some cases give up and do something different. These transitions can be hard on people. Instead of dealing with rough patches like that, it’s better to stay on top of things and make sure we know what skills the market wants. I’ve seen the flipside too, and noticed a few people of my parents’ generation be able to stay current and essentially reinvent themselves as middle-aged people and end up living quite well.

After all, if a person operates as an employee, then he or she is the product and the employer is the customer. If the customer’s needs change over time, then you have to be aware of it.

3) Aggressively save as much as possible, as early in life as possible

Take advantage of things when the going is good, that’s really what this comes down to. The more we can save when younger, the more thankful we’ll be when older.

It’s all about compounding. And, in some cases, avoiding temptations of spending on silly things when younger. Yes, I did spend on a few unnecessary things when younger – and don’t necessarily regret them to be honest. Traveling to some nice places out of the country, when I didn’t quite have the funds to do so, brought me some amazing life experiences that I still remember and cherish.

That being said, a few things is different than having an entire lifestyle that’s either living totally in the moment without worrying about the future, or living for today and paying for it tomorrow – which is even worse.

Avoid consumer debt, try to avoid car loans, and don’t get trapped into buying a “dream home”. We can all enjoy life to the fullest without some of these extras that are wants rather than needs. The payoff is that as we save money and let compounding work its magic, we’ll put ourselves in a situation to retire earlier rather than later.

My Questions for You

Do you think about trying to retire sooner rather than later?

What are your thoughts on these 3 things we discussed?

Do you have any other tips to add?

Small Financial Victories are Fun, Big Financial Victories Mean More

financial victorySize matters. Sure it does, when it comes to the personal finance issues we should be focusing on.

Sometimes we can get caught up in the emotion and excitement surrounding those small victories in life, that we can lose sight of the bigger picture things that are more important. I really think that this happens a lot when it comes to our money, and how we spend our time trying to save or make it.

Someone I know, a great person and otherwise very smart, is a good example of this. Here are two things this individual does that I think we can learn from in terms of opportunities to reprioritize our focus:

Focusing on Side Income to the Detriment of Primary Income

The whole concept of side income is one that I actually endorse.  Multiple streams of income are a good thing, and often our hobbies and skills can help us make extra money. In the best of cases, this could even mean a sustainable income stream that could evolve into a new lifestyle altogether!

That being said, I wonder if the idea of side income can sometimes be so tempting that many folks take their eyes off the ball? Side income has been all the rage in some personal finance blogging circles, and to be sure, some have succeeded wildly. At the same time, many others are simply chasing a dream.

A more concrete example is someone I know who is always selling things via eBay or craigslist, and talking about it quite a bit. Now, as I mentioned above, I think extra income is great! However in this case, he’s really into it and gets quite excited over selling something he didn’t need for $20.

I’m not at all knocking that part of it, but it’s the time and energy spent on it that I would like him to consider. Let’s say it takes 3 hours to take pictures of an item, place the advertisement, respond to inquiries, and then actually complete the transaction via shipping or meeting the buyer. What is the effective hourly wage in this case? Less than minimum wage.

Perhaps if a lot of that time was reallocated to one’s career, financial goals could be achieved quicker? Then we can focus on side income for what it is: extra money that’s nice to have and fun to earn. Seems like a win-win!

Spending Excess Time on Saving While Forgetting the Value of Time

This concept is similar to the one discussed above, in terms of where to invest our time.   The idea is that our time has value, and we should always respect ourselves by remembering this! It’s something that I’ve had to learn over time.

Here’s where I’m going with this: sometimes the time spent trying to save money makes the whole endeavor not worth it.

Let’s say that you spend 15 minutes searching for coupons online, or clipping coupons, so you can save $1.50 on some purchase. Time adds up. So, in this case, it’s like an effective hourly rate of $6.00, which is not quite minimum wage.

Similarly, driving somewhere further to save money is also an example of this. Driving an extra 10 minutes to go to a cheaper grocery store might save some money, but how much? Let’s say you’ll save $3 on your total bill. Well, for 20 minutes of driving, this means that the effective rate is $9.00.

However, then we can factor in the cost of gas. If that 20-minute round trip costs us ½ gallon of gas, that might be another $1.75 gone. Then, your effective hourly rate goes down to $7.25.

Bottom Line: Sometimes it helps to remind ourselves that while the little victories are fun (and low-hanging fruit should certainly be taken advantage of), it’s the bigger victories that matter more for our lives!

My Questions for You

What do you think about the idea of focusing on the big wins, and not sweating the smaller things as much?

Do you ever do any such calculations on the value of your time, in terms of whether or not some course of action is worth it to you?

Do you have any other examples to share?


More Money Can Lead to More Happiness!

money and happinessOkay, up front I know that a lot of people will strongly disagree with that statement in the title.

Taken at face value, it might be misinterpreted to say that money itself can make someone happy. This is something that some people might believe, and many others might not. Hopefully, we can all agree that there is much more to life than money!

So, can more money lead to more happiness? It seems popular or at least commonplace to downplay money’s influence on happiness. It’s an oft-discussed topic, but I haven’t really talked about my thoughts on this too much here. So let’s do it now.

Depending on how one views this topic, I say YES. More money can lead to more happiness. There might be studies out there saying at a certain income level, the impact of more money levels off. While that may be true, I wonder how things would look if you controlled for all variables when making such an assessment. Does more money cause people to voluntarily bring on additional stressors into their lives, thus decreasing the extra enjoyment that should have accrued from more money?

Let’s say that a person is making $50,000 per year. Based on that income, it allows for a certain lifestyle which includes aspects such as home, car, entertainment, and so on. Plus, of course, a certain level of potential savings.

Then, let’s pretend that this person got a sudden raise which doubled his salary. Now, he is making $100,000. Wouldn’t this make him happier?

I would think so. With more money, you have more options and more of a buffer in case something goes wrong. You can also, potentially, do more than obtain the basics in life. Rather, you can start living with some nice things. Not just material, but also health care and other things.

Now, let’s say that this person double his income again, going up to $200,000. Assuming the same purchasing power of the dollar, this person has a lot more at his disposal now. I would think life would become less stressful at this point.

So, with more money, a person would have the opportunity to:

  • Save more money, which allows him to :
    • Save more for retirement
    • Have more of a buffer/emergency fund
    • Feel less stressed about expenses
    • Be closer to financial independence
  • Spend more money on improving his life, including:
    • Having money for procedures, and not bypassing them due to lack of money
    • Investing in better (healthier) food and gyms/fitness equipment
    • Invest in better – or additional – education and other learning opportunities
  • Provide more help to others
    • Assist kids with their college education expenses
    • Provide their kids with better enrichment and extracurricular activities
    • Help aging parents who might truly been in need, and lacking resources
    • Give money to help others in need, or perhaps give to their religious affiliation

And yes, there are other fun things people can do as well. Perhaps take some nicer vacations, live in a more comfortable/geographically convenient home, and so one.

Ultimately, I think the key is not taking on additional liabilities, or expanding one’s perception of needs vs. wants. If someone can keep a good head on his or her shoulder, and be mature, it stands to reason that money can make one’s life better.  Wouldn’t better educational opportunities, better health, and more ability to help others lead to some increased happiness for a lot of people?  I think health, wealth, and relationships can all influence one another.

Of course one does not need to be rich to be happy. We are often as happy as we choose to be in any given moment; at least I see it that way. Nevertheless, it could only help to have more money than less for the aforementioned reasons.

My Questions for You

What do you think?

All things being equal, do you think more money can lead to more happiness?

4 Key Personal Finance Questions

personal finance questionsObviously, being a personal finance blogger, I enjoy helping others think about their money.  Sometimes this involves sharing stories, and other times it might involve some analysis.

It can also involve asking questions.  Or, maybe more accurately, suggesting some questions for everyone to ask about their own finances.  Keeping an open mind and really inquiring about one’s own finances could be helpful.  A fresh perspective can be a good thing!

Here are four key personal finance questions to ask:

Are we making the most of our earning potential?

It stands to reason that income is a key part of the foundation of personal finance success.  If we don’t make money, we can’t save any.  Makes sense, right?

So, we want to make sure that we are making full use of our earning potential.  Income is important, and your career is like the engine that drives your finances.  Beyond that, side income seems to be more and more popular, as people try to monetize just about anything.  Money doesn’t grow on trees, so we need to work to bring in cash flow today and in the future (from our savings).

Are we saving enough of our income?

So, let’s say we have the first part covered and are making money.  That’s good! But if we aren’t saving any of it, we’ll be running in the proverbial hamster wheel until we get old.  That’s not good!

The more we can save, the better off our future can be.  When it comes to savings rates, every percentage point matters.  I know it’s often easier said than done for a lot of us, and to some degree it’s easier to save more money the more we make.  But really focusing on saving more of our hard-earned income will allow us to avoid working hard when in our later years.

Are we earning a solid rate of return on investments?

Now, we each have our own risk tolerance, investment timeline, and personal goals.  This impacts how we allocate our assets to different investment classes.

That being said, rate of return can have a big impact on net worth.  So, a portfolio that’s all cash and held for the long-term isn’t likely to outperform one that’s balanced between different investment classes.  There can even be diversification within a given class, such as funds instead of individual stocks, help keep returns from being extreme either way.

Are we managing our risks?

The last point, keeping returns from being extreme either way (especially to the downside), is important.  Just doing the math, it’s clear that rule number one is don’t lose money!  The basic example is that if you have $100 and lose 20%, you now have $80.  If you then want to get back to $100, you have to gain 25%.

Managing risks goes beyond investing of course, and could involve buying the right type of insurance.  This might even mean considering overlooked insurance policies, depending on your situation.  It could also involve preventing job loss, being smart when buying a home, watching our health, and so on.

Bottom Line:  If we stop periodically to ask ourselves these four questions, we can make sure we’re on track to do our best to grow our net worth and achieve financial success.

My Questions for You

Do you ever stop to ask yourself these questions from time to time?

Any other key personal finance questions to add?