Your Money_ The Missing Manual - J. D. Roth [9]
It's Not About the Money
If vast riches won't bring you peace of mind, what will?
In a 2005 issue of the Review of General Psychology, Sonja Lyubomirsky, Kennon Sheldon, and David Schkade looked at years of research to figure out what contributes to "chronic happiness" (as opposed to temporary happiness). Based on their survey, they came up with a three-part model:
About half of your happiness is biological. Each person seems to have a happiness "set point," which accounts for roughly 50% of your sense of well-being. Because this set point is genetic, it's hard to change.
Another 10% of happiness is based on circumstances—external factors beyond your control. These include biological traits like age, race, nationality, and gender, as well as things like marital status, occupational status, job security, and income. Your financial situation is part of this 10%—but only a part—which means it accounts for just a fraction of your total happiness.
The final 40% of happiness comes from intentional activity—the things you choose to do. Whereas circumstances happen to you, intentional activity happens when you act by doing things like exercising, pursuing meaningful goals, or keeping a gratitude journal.
According to the authors, because circumstances—including your financial situation—play such a small role in your general contentment, it makes more sense to boost your bliss through intentional activity, by controlling the things you can and ignoring those you can't. (You can read the entire article at http://tinyurl.com/hmodel.)
Although your financial situation plays only a small role in your overall happiness, most people believe it's more important than that. Because of this, many Americans spend their lives striving for more money and possessions—but find that this materialism makes them less happy.
If you're caught up in the rat race, you may be dealing with things like credit card debt, living paycheck to paycheck, fighting with your spouse over money, and working a job you hate. These problems all stem from one issue: lack of control. When you feel like you have no control over money, you're worried and stressed. By taking charge of your finances, you can get rid of many of these stressors and be happier. Wealth gives you options and makes it easier to focus on things that can make you content.
This book will teach you specific ways to gain control of your finances. The first step to leading a rich life is learning how to set priorities.
On The Money: Happiness by the Numbers
In their book Happiness, Ed Diener and Robert Biswas-Diener talk about the happiness formula, their attempt to quantify all this psychological stuff about money and well-being.
They found that a larger income generally makes people happier—but not always. It's not just how much you make that determines how satisfied you are with your life, but how that money relates to your desires. You might say that happiness is equal to what you have divided by what you want.
Say, for instance, that you're a famous author earning $200,000 a year. On paper, that sounds like a lot of money, but if you yearn for expensive luxuries and experiences, you may actually feel poor. On the other hand, if you're a struggling writer bringing in $40,000 a year, you can be happy as long as your expectations are low—that is, if you don't want more than you have. This is why frugality is so important. (Chapter 5 is chock-full of tips for spending less.)
For another attempt to quantify well-being, take a look at this happiness formula from Dilbert creator Scott Adams: http://tinyurl.com/happy-dilbert.
Living a Rich Life
Living richly means figuring out what to spend your time, money, and energy on—and what to ignore. Since you can't