I don’t think personal finance is about deprivation. It’s really about making the choices that will support your highest priorities – the things or activities that will bring you the greatest joy or the deepest satisfaction.
Here is the newest Ask the Expert question from CNN Money
Question: I just turned 24, and the constant pressure from financial advisers to “save save save” for retirement makes me anxious that I’ll never be able to retire. I contribute 10% of my salary to my 401(k) each year – some of which my company matches – and I recently took on a second job to save for a home. Still, I feel miserable. My friends cruise around in BMWs, but I’m afraid to spend a dime on myself lest I ruin my future. I’ve looked at retirement calculators, but most don’t let you enter an age below 25. So I have no idea whether I’m doing enough, too much or just the right amount. What do you think? Are my worries are justified? —Jessica, Boston, Mass.
I read this question, and my first thought was… personal finance shouldn’t make you miserable. (My second thought? Spending money on yourself does NOT equal ruining your future. If that’s true, my road to cat-food retirement is paved with shoes, dresses, and lots and lots of food!)
I hope Jessica knows how well she is doing. She is saving for retirement, AND taking a second job to save even more. But I believe that if something makes you truly miserable (be it a job, a relationship, or a personal finance strategy), you won’t be very successful at it for very long, and that misery will likely poison other aspects of your life.
If your personal finance is making you miserable – some adjustments are in order:
(1) Expectations: If I expect to be driving a BMW at 23, living in a luxury high-rise, and dining at Spago every week, then yes, I might be pretty miserable in my current lifestyle, which includes none of those things. If I compared myself to friends who have a $100K trust fund set aside for them, that comparison probably won’t make me feel any better. In that case, I’d need to adjust my expectations to make sure that they aren’t making me miserable. Expecting to save 50% of your income on $40,000, while living in Manhattan is probably as unwise as expecting to dress head-to-toe in Chanel straight out of college.
(2) Savings rate: When I operated on a fairly strict budget trying to save 40%+ of my gross income every month, I wasn’t very happy and wasn’t very successful at all. Now that I’ve scaled back (and have pledged to make up part of the difference by saving all of my bonuses), I’m much more satisified with my lifestyle. This also means that instead of failing every month to achieve the 40% goal, I’m succeeding fabulously at saving almost a third of my income every month. This principle can be taken too far (how much more successful would I be if I just aimed to save 5% of my income?!). But if I am honest with myself, I know which goals will allow me to prepare for my future AND live well today, and which goals will make me miserable by neglecting quality of life today.
In conclusion? If you are reading this blog, know the importance of saving, and are doing something to prepare for your future? You are already doing well. Make sure that your personal finance reflects your personal situation and priorities, and please, personal finance should be a source of joy in your life (okay, that might be the PF blogger in me talking), not a source of misery and distress.
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