By Lena Lindsay
“Fun can be bought with money, but happiness cannot.
”
In December, I was faced with a difficult situation when the clutch in my car went out right after I paid for my tuition for the following semester. I spent multiple months of paychecks out-of-pocket, and I wasn’t expecting it to happen at all. Luckily, we had just enough savings that I could use. Instead of being stressed and having to turn to others for help, I was able to pay for it myself. Paying for it myself was still highly inconvenient but did not cause me any additional stress—save for the pre-existing worries about my car giving out on me.
Many of us can agree that monetary stressors, while are often not in the forefront of our everyday lives, are one of the enduring difficulties that we face. From the time we started saving our allowance for a cool toy, financial worries seem to continually reappear. “Financial peace” - a term popularized by Dave Ramsey in his first book—is something that many people seek. This being said, we can use simple financial adjustments to enhance our well-being in areas of optimism, supportive relationships, community, values and purpose. First, let us discuss how finances are related to these areas.
Optimism
“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”
Optimism is “not wishful thinking, denying the negative, or forcing a rosy outlook. It is the ability to accept the full spectrum of inner experience and choose the perspective that maximizes well-being” (Warren et al., n.d.). When we are financially at peace, we can feel optimistic about ourselves, the world around us, and especially about our future (Ramsey & Ramsey, 1995).
Supportive Relationships and Community
“He who loses money, loses much; He who loses a friend, loses much more; He who loses faith, loses all.”
Many of us enjoy the presence of loved ones, but arguments can greatly inhibit our relationships. Whether it was our parents, guardians, other relatives, people in our favorite TV shows, or even us personally with our significant other, financial arguments may not have been uncommon. Relationships can be free from undue stress when needs are met (Gudmunson et al., 2007). This lack of stress causes the types of supportive relationships that we often yearn for.
Community is also an influencer of our well-being (Kobliner, 2017). When we are able to spend more to support local restaurants and businesses, it encourages community. By investing in our local community, we find belonging and connection. Our love for the community can grow and many will benefit from our little contributions.
Through our financial safety, we are able to foster connection and relationships that increase our well-being (Hill et al., 2018). Because of the positive effect that financial safety can have on our relationships, we can feel happier when we can maintain financial safety.
Values and Purpose
“Too many people spend money they earned..to buy things they don’t want..to impress people that they don’t like.”
“Too many people spend money they earned..to buy things they don't want..to impress people that they don't like.” --Will Rogers
What are your values? What purpose do you have in your life? What drives you to do what you are doing? These things are all important questions to ask, and even more important questions to relate to our use of money. For example, a value that I hold near and dear is that of family. I enjoy spending time with those that I love. Money is a vital part of our relationship, which includes having a roof over our heads, food on the table, and entertainment. When I invest in these things, my value can be much more fulfilled.
Finding purpose in your life can also help you to use your money in ways that help you feel fulfilled (Hill et al., 2018). If you feel as though your purpose is to be involved in sports and accomplish big things in that area, then it is of worth for you to spend your money on equipment, gear, and training. If your purpose in life is more along the lines of traveling and experiencing cultures, then spending on those same pieces of equipment and training will not be as fulfilling to you. Whatever your purpose or values may be, investing in those endeavors monetarily will help you achieve greater well-being (Lyubomirsky, 2007).
How can I increase my financial stability?
Now, let’s discuss five ways that you can increase your financial stability today (all this can be done from home!):
Make a budget
There are many ways to make a budget. You can do it on paper, using a spreadsheet (Excel, Google Sheets, etc.), or using an online platform (mint.com is a good example of a free site, but there are plenty of others).
Make categories and figure out where all of your money will go. Don’t leave any of your paycheck unaccounted for, and if you notice you will spend more than you earn, cut down on a few expenses this month.
Put the budget somewhere where you will remember it and review it regularly.
2. Start an emergency fund
You want to have some funds set aside in case of an emergency, like an unexpected car failure in my case, or a medical emergency, or losing your job. A lot of stress can be avoided if you have an emergency fund. Begin by calculating how much it would cost you to live for 3-6 months without an income. Then begin setting aside money every month until you have saved the amount that you calculated.
It is a good idea to put the money in a place that is accessible whenever you might need it. Here are some options of where you could put it:
-a separate savings account (so you aren’t tempted to use it for other things),
-a Certificate of Deposit (CD), where you must pay a fee on the interest that you earn if you take it out earlier than the allotted time
-a Money Market Account (MMA), which is like a savings account but often requires a large amount and the interest rate fluctuates with the current market interest rates (Hill et al., 2018).
Do not take this money out unless it is a viable emergency. That means that you wouldn’t want to use it if your TV broke, but if your computer broke and now you can’t work from home, that might be considered an emergency. A vacation is not an emergency, but a flight to attend a funeral could be considered an emergency.
3. Invest in your future
There are many different types of investments; the safest ones earn money much slower than the risky types (Kobliner, 2017). Take time to learn about investment opportunities you have and maybe try some out. Be safe though! You don’t want to lose your money. Chances are, if it sounds like it’s too good to be true, then it probably is too good to be true (Hill et al., 2018).
Some important things to remember going into your investing: understand the risks you are taking, diversify your investments, find tax-efficient and low-cost investments, learn to be aware of your portfolio performance, and search for other things that will help you be safe and maximize your earnings (Hill et al., 2018). Investing can be scary, but if you can be smart about investments and keep these tips in mind, it can be a strong way to be financially secure.
4. Commit to sleeping on future financial decisions
This is one thing that I find very interesting. Whenever you desire to make a purchase, especially a large one, it is crucial to understand a few things.
Never buy something when you are Hungry, Angry, Lonely, or Tired (Hill et al., 2018). You can remember the acronym HALT. This will keep you from making undesirable financial decisions when you are vulnerable.
One good thing to remember is that if it is truly worth it, you can wait 24 hours to make the purchase. Go home, talk to someone about it, make a good dinner, sleep well and maybe even take a nice walk. If you still feel the desire to make the purchase, then you will probably still appreciate it just as much in a few months (Hill et al., 2018).
5. Learn more about hedonic adaptation
Hedonic adaptation is often discussed in the context of purchasing or receiving something that we desire, only for the excitement to diminish over time until we no longer love the thing we so dearly sought after (Warren & Salazar, n.d.) There are probably some things that you bought that you no longer use; try to think of ways to use and learn to appreciate them again. By doing so, you may avoid making further purchases in which you will become accustomed to and cease using.
If you already have these five things under control, then find something that will work specifically for you. Investing time in your money is well worth it, but it is a very personal matter. By starting with our five financial endeavor ideas, we can enhance our well-being especially in areas of optimism, supportive relationships, community, values, and purpose.
References
Gudmunson, C. G., Beutler, I. F., Israelsen, C. L., McCoy, J. K., & Hill, E. J. (2007). Linking financial strain to marital instability: Examining the roles of emotional distress and marital interaction. Journal of Family and Economic Issues, 28(3), 357–376. https://doi.org/10.1007/s10834-007-9074-7
Hill, E. J., Sudweeks, B. L., Jorgensen, B. L., Li, X., & Ricaldi, L. (2018). Fundamentals of family finance: Basic principles you can use (2nd ed.). Brigham Young University Academic Publishing.
Kobliner, B. (2017). Get a financial life: Personal finance in your twenties and thirties. Touchstone.
Lyubomirsky, S. (2007). The how of happiness: A practical guide to getting the life you want. London Piatkus.
Ramsey, D. (2015). The legacy journey. Ramsey Press.
Ramsey, D. L., & Ramsey, S. (1995). Financial peace. Lampo Press.
Warren, J., Fuhriman, R., Clement, Z., & Hunsaker, A. (n.d.). Optimism. My Best Self 101. https://www.mybestself101.org/optimism
Warren, J., & Salazar, G. (n.d.). Understanding hedonic adaptation. My Best Self 101. https://www.mybestself101.org/hedonic-adaptation