Money and happiness

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We all know money doesn’t buy happiness. We also know that having no money can really affect happiness. But can you handle money in specific ways to increase everyday happiness? I’ve been reading The Happiness Project by Gretchen Rubin, and one idea really caught my attention.

Rubin talks about two different orientations: in simplest terms, the underbuyers, who put off buying things until they run out, wait out pains or illnesses to see if they’ll go away, and never pop for the expensive haircut or premium manicure. Then, there are the overbuyers, who have far more sheer stuff stashed and spend on things that make them feel good. Enough stuff, and they may even be thought to be wealthy (read, the oversized house and pretentious car).  In fact, whether things make you feel good may be one way you can tell which you are. Another way—check how much toilet paper is currently in your house.

Of course, few of us are purely one or the other. I tend to fall on the underbuyer’s side, but I have plenty of toilet paper (that problem will get me out to Sam’s Club in a flash), and book buying, er, we won’t go there. Nevertheless, people I see with a lot of money stashed in investments tend to pursue an underbuying strategy, in the main.

While we might think underbuyers hold onto their dough better, it can produce a lot of stress to be out of essentials or unwilling to spend on care or services you really need. Safety, serenity, health, security, and pleasure have real monetary and non-monetary value, and time is the most expensive commodity of all. On the other hand, so many things we purchase are the whim of a moment, and delaying that purchase may eventually mean no purchase at all, and money saved. I think just-in-time inventory and thoughtful spending are a reasonable mean, and I think Rubin would agree. Frugal, not cheap—cheapskates who try to shift expenses to other people (e.g. the guy who never picks up his full share of the check) are reserved for one of my personal rings of hell.

Overbuying tends to diminish wealth for two reasons: waste and cost of inventory.  It’s not wealth if it’s rotting in your refrigerator or still has the tags on it in your closet. Storing our overbuying has made Container Store a fortune. And, that money spent on too much could have stayed invested and growing. But pleasure is worth something, too. As long as it really does give you pleasure. My mother used to keep a fully stocked freezer in the kitchen. And another one in the basement. And another one in the garage. When she died there was so much meat it took us nearly two years to eat through what we didn’t have to throw out based on label dates. But she had known real hunger as a child, and if that made her feel secure, well, they could afford it.

Mom and Ms. Rubin are both on to something. Small splurges can make for happiness. Buying things you truly want, and paying for services you really need, make for happiness. And ultimately, in many more excellent chapters, Rubin sees happiness in balance. Michael Pollan has a now-famous dictum on everything you really need to know about eating: Eat food. Mostly plants. Not too much. From this book, I think I could derive a few simple money rules. Spend thoughtfully. Mostly on experiences. Just enough. Not as pithy as Pollan, but if most of us did it, we’d be both happier and wealthier.

How to choose a financial adviser

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Simple, but not easy. Anyone and their brother can call themselves a financial adviser, advisor, planner, investment specialist, wealth manager, etc. And let me tell you that you would be shocked by the brouhaha in financial trade journals over whether or not advisors should have to be compelled (!!) to adhere to a fiduciary standard. A fiduciary standard simply means that the advisor is legally obligated to put YOUR best interests first, rather than, say, the product that pays him the best commission, wins him the free vacation contest, or allows him to meet his sales quota and keep his job.  People who are not fiduciaries are SALESPEOPLE and, uh, maybe what they’re peddling to you is somewhere in the realm of possibly being remotely suitable for you. If you hear any of the following terms, hold onto your shirt and wallet and run: non-traded REITs, master limited partnerships, most annuities, whole life, hedge funds—wait, the list is getting a little long.

 

But don’t take my word for it. Gregory Karp, who writes a column called Spending Smart for the Chicago Tribune, recently had an excellent article about how to choose an advisor. You can read it for yourself.  I couldn’t have said it better myself, and I welcome anyone who wants to quiz me on any or all of his criteria. I particularly like that he highlighted the difference between fee-based (you’re talking to a broker/salesperson who is getting a fee AND commissions), and fee-only (you’re paying solely for advice, which should be free of owing any commissions or referral fees to anyone).

 

My only complaint about the article is that the Trib tends to bury consumer financial articles in the business section, where the people that need to see it often don’t. If only we could get this information into the features section, next to the gardening, decorating, recipes, and parenting advice.

 

Triage when you’re laid off

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When companies need to merge or downsize, you can hear the insect buzz of layoffs in the wind. It used to be that the first hired would be the first fired, but the trend I’m seeing now is to lay off the employee over 50 years old, as the most expensive and shortest “useful life” to the company. Makes you kinda long for the days of seniority and unions. If that’s you, well, you can just retire early, no? These guys have hearts of gold.

I offer a dozen ideas, below. It’s a tough time for you, no doubt, but realize it was a business decision, not really having much to do with you. How do I know? Because I’m seeing it over and over, company after company.

  1. Negotiate hard for outplacement counseling. You want professional advice on shaping up your resume, looking your best, and planning out a battle strategy. If your company doesn’t offer it, or you can’t guilt them into it, invest the money in a career counselor for yourself. It’ll be one of the best $2,000 you ever spent on your career.
  2. Seek out every professional organization in your field, join them if possible, and attend meetings (and conferences if possible). You need to expand your network.
  3. Learn how to do a decent job on your LinkedIn Profile. Most people just park a profile, but you are going to need to work it. Look at all your connections’ connections and seek introductions.
  4. A lot of people keep Facebook for personal friends. You should still contact them to let them know you’re in the job market. Most people would love to help, but they have to KNOW.
  5. While I usually advocate paying off credit cards monthly, this may be the time to make minimum payments. You need to marshal your cash.
  6. Make every effort to live on severance and unemployment, and plan for one year. This may mean cutting expenses to the bone. It’s not forever.
  7. If you can’t cut, downsize—instead of eating out, downsize to coffee. Netflix instead of movies out. Vegetarian one night. You get the idea. The mantra is prudent and frugal (not cheap and desperate).
  8. Absolutely don’t beat yourself. I’ve seen plenty of clients in your position. This is just a corporate juggernaut, not your individual fault. Now, you make good business decisions to manage your career.
  9. Don’t cash out your IRA. However, if it looks like your income will be very low (evaluate towards the end of the year), this might be a great opportunity to convert a traditional IRA to a Roth.
  10. Find a part-time gig, teach a class, freelance, whatever you can think of to get a little money coming in. Don’t, however, decide to start a business which requires materials or equipment or anything that needs funding.
  11. Don’t do anything rash. Even if you have to sell your house, try to make the decisions when you’re calm—maybe you can rent the house temporarily.
  12. If you have children in college, notify the school immediately. They may be able to re-evaluate financial aid.

People over fifty do find jobs. It can take longer, and it may not be at as high a salary as your former position. You may need to revise your retirement plans.  It may not be quite the same future as you thought, but what ever is? You do have a future, and you can make revised plans for it.