How Much Money Do You Need to be “Happy”?

I frequently hear this in a client meeting. “Okay — this now doubles as our marital counseling session.” And, while I’m not a therapist (nor do I play one on TV), I do know that relationships can live and die with issues of money and sex. The two key areas are the money we have and the money we spend.

I am well aware that looking at your monthly expenses can be about as much fun as getting a colonoscopy. Despite the discomfort, it still is just as important. When doing important planning, it’s critical that your planner understands what your current save or spend pattern is. When I work with clients, my role is not to judge what or how much one spends, but to see where things are. Because in order to run a scenario or stress test to see how an individual or couple is tracking for an event like retirement, funding a college education, buying a beach house, etc., knowing the whole picture is important.

The psychological trick for yourself is how to take the emotion out of figuring out your spending or saving rate. We all view it like getting on the scale to weigh-in. You must remind yourself in the beginning that it’s merely a “data point” that we work from.

Most often, people are horrified with their monthly number. Most of the time it’s simply that people are out of touch with how much it costs to live, even a modest lifestyle.

While working with hundreds of clients over 18 years, most frequently, the ones with the biggest balance sheets are the ones that have lived with lower expenses over a long period of time. They also have not short changed themselves completely with their consumption costs. They are more in line with the concept of the “millionaire next door” as opposed to their high income, high expenses counterparts.

This begs the question…How much do you need to spend to be happy?

Scenario 1:

A couple that makes $500,000 (after taxes), lives in Buckhead with their BMW 5-Series, barely make ends meet and constantly discuss pulling money out of their savings account. Their monthly spend is $18,000 per month.

Scenario 2:

A couple that makes $120,000 (after taxes), lives in Woodstock on $4,000 per month, and has managed to save $1.2 million in their retirement plans.

Many times, the couple in scenario 2 tends to be “happier” and less stressed.

Which begs more questions:

  • What is living within your means or your income for you?
  • Where is the balance on your monthly consumption vs. your monthly saving?
  • Do you take happiness now or a delayed gratification?

These are not either/or choices, but rather require an in depth discussion around how can you be “happy” now with a monthly consumption goal, while still feeling like you have some future security in your savings strategy. Balance is the key.

Your individual spending “happiness factor” and “living within your means number” can be very different — but they don’t have to be.

Creating rules for yourself

Most people fear that they cannot be happy if they are spending within their means and saving money at a rate necessary to meet their goals? Why is this? Is it not possible to be financially responsible and still happy??

It is the psychology. How you work on your own psychology to avoid being sucked into the ‘keeping up with the Joneses’ mentality is critical to managing your monthly expenses and consumption costs. Knowing where you are is the first step in getting smoothly to where you want to go.

Here is a prudent plan of action to help you get started:

  1. Do a deep dive into what your current monthly expenses are (remember, this is just a data point).
  2. Spend time together and see what you minimalistically need to just SURVIVE with your expenses.
  3. Compute what the monthly difference is between #1 and #2 (above).
  4. Begin a conversation with your partner on what is realistic to change and what is not.
  5. Seek guidance from a professional comprehensive financial advisor that addresses these matters.

Your personal expenses are the dark secret that no one really wants to know. But understanding your expenses literally can have the effect of saving a relationship, and your happiness.



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