Do you spend to live, or live to spend?

Most people will agree that money shouldn’t dictate our life choices. Rather, the life we want should be what dictates our financial decisions. The trick is to have a clear idea of what kind of life that is before recruiting an expert to assist with money management.

In another article, we ask whether you have “happy money” to help identify your emotional relationship with spending. If the answer is no, it’s time for you to think about whether there may be a disconnect between the life you want and how you use your financial resources. Your banker is there to point you in the right direction, but they certainly can’t take your place or guess what your deepest aspirations might be. They are there to facilitate the day-to-day management of your finances and help bring your plans to fruition, so that you can approach life’s milestones with optimism. But to do that, you need to have at least some idea of the value you attach to money and the path you want your life to take. It is particularly important for your banker to know what your wants and needs are when working out an investment strategy for you.

Let’s take a closer look at what we mean by “the life you want”. Can you articulate it for yourself? And is what comes to mind really what you want, or do you find that societal pressure has you following someone else’s path?

My life, or yours?

Imagine that most of your friends have taken out 20-year mortgages to afford big family homes. However, they’ve had to accept living far away from the city centre, and some even have significantly longer daily commutes. You have a nice flat in town, but you’re still feeling an urge to follow suit. Especially because your friends can’t stop gushing about all the space, peace and quiet they now have.

So what should you do? If it’s not something you really want deep down, you can bet that investing your money in an expensive piece of property will end up causing you more heartache than anything else. If you like the city life, hate spending time in the car (or on the train), and use weekends to venture far from home, why bother investing in something at odds with that? Why move and make a financial commitment that it could take decades to repay? Your money would be better placed in an investment that could one day finance your children’s studies abroad, or a trip around the world with your partner. In this example, owning property is just as unlikely to deliver the life you want as holding the money forever.

Recent economic studies have shown that people who value spending time with their loved ones and having great experiences are happier than those who simply pursue the goal of amassing more wealth.

Generally speaking, recent economic studies have shown that people who value spending time with their loved ones and having great experiences are happier than those who simply pursue the goal of amassing more wealth.

What can money buy, anyway?

What do we learn from this? It could be that spending all those extra hours at the office just to get promoted and earn a little more won’t improve your life as much as you think. It could be that buying a house in the suburbs will be a bigger source of frustration than the little flat in the centre you have now. Of course, living in a big house in the countryside could be an end in itself, and one that can easily make up for long daily commutes. But if it’s not part of the life you want, spending two or more hours a day in the car or on the train could make you chronically unhappy.

To find out what your financial management needs are, take the time to talk to your family about your priorities and the life plans you’re truly excited about.

To find out what your financial management needs are, take the time to talk to your family about your priorities and the life plans you’re truly excited about. Even a sabbatical from work to spend time with your children can be successfully financed and paid off. The key is to take the time to plan it in advance with your banker, who will know what to advise to help you put the necessary savings aside.

All this suggests that while money helps some people achieve greater stability, for others it’s a way to enjoy more freedom, or to find more purpose in their professional lives. What really matters is knowing what path you need to follow to have “happy money”, even if it means having less than you do now.

In the eye of the beholder

As a general rule, money makes people happier when it’s spent on experiences or to have more time with loved ones. More recent studies on the economics of happiness go even further, showing that money is truly well spent and makes people happier when used in accordance with the individual’s personality, values and tastes.

Money is truly well spent and makes people happier when used in accordance with the individual’s personality, values and tastes.

This means that someone who places a lot of importance on social relationships will probably take great pleasure in spending more to go out with friends more often. This will create priceless memories, and even though it’s high, the person’s dining out budget won’t upset them. But for someone else – say, an introvert who loves rare books – a happiness-inducing financial experience could be slowly building their collection of valuable first editions, and eventually displaying them in a real home library. For a homebody looking to buy a place to settle in for good, the ideal way to build savings and invest will be totally different from a person whose dream is to experience other cultures by changing countries every few years.

All this simply goes to show that money ill spent can never buy happiness, no matter how much of it you have.

What to remember

All this simply goes to show that money ill spent can never buy happiness, no matter how much of it you have. It can even feed feelings of dissatisfaction and make you believe you’ll never be content with what you’ve got. This is the start of a vicious circle of more, more, more… one that only leads to more problems!

By contrast, money spent in accordance with the life you really want can go a long way to supporting your and your family’s happiness. As long as you have enough to cover your basic needs, this will be true no matter how wealthy you are. This also means that there are as many ways to have a happy relationship with money as there are forms of happiness itself. The most important thing is to be honest with yourself about your deepest desires, and make sure you’re not chasing somebody else’s dream.

Now that all this is clear, it’s high time you made an appointment with your banker to review your past financial choices! If you bring them clear ideas, they can give advice that works for you.