Money as an Ingredient for a Vital Life


It's harvest time, and that has me thinking about the idea of abundance. And sometimes abundance comes to mind when we are feeling its opposite. This is especially true when it comes to money. Many of my conversations with clients about career decisions include some variation of this statement, “I know money shouldn’t matter, but . . . . “

We Americans have a love-hate relationship with money. On the one hand, we live in a nation that was built on capitalism, a system built on maximizing profit for those who own resources. Our national mythology is centered on the self-made person who pulls herself up by her own bootstraps and goes from rags to riches. In the nineteenth century, some of the most popular novels were pulp fiction titles in the Ragged Dick series, by Horatio Alger. Ragged Dick began life as a poor bootblack living on the streets of New York City who parlays virtue, intelligence, and hard work into middle class respectability.  We Americans love the story of the self-made millionaire.

On the other hand, many of us know that unbridled greed is the source of many of our social ills, and we feel that it is somehow a little bit shameful to “do something for the money.” We vacillate back and forth between wanting more money and feeling like we should make do with less. Yet we’re well aware that a lack of money can leave us one illness or major car repair away from financial disaster. Our ambivalence about money can tie us up in knots, and it can get in the way of making good decisions about the place of money in our lives. 

A certain amount of money is necessary. In his book How to Worry Less About Money and his School of Life video on the topic, author John Armstrong distinguishes between money troubles, the actual state of needing more money to pay essential bills, and money worries, a psychological need for more money that often grows out of envy and wanting to have the things that people around us have.  Armstrong says that “Money can be seen as but one ingredient in a happy life.”

I’ll repeat that:  money is ONE ingredient for a happy life. In other words, money is a necessary ingredient, and we can't cook up a happy life without some minimal amount of it. But what are the proportions of ingredients we need for our own particular recipe for a vital fulfilling life?

The first step to developing a healthier relationship with money is to take a step back and decide what our financial goals are. And this doesn’t start with dollar figures. It starts with figuring out what money will let you DO.  As one of my students told me many years ago, “Money is choices.” Among the choices money gives humans are:

·      Freedom to decide where and how to live

·      The ability to care for ourselves and our loved ones

·      Freedom to decide the conditions under which we will work (in other words, when we can say “take this job and shove it” when conditions in our work lives aren’t optimal?)

·      Flexibility about how to spend our leisure hours

We all need a certain amount of money to live, but we don’t all need the same amount. Some people are just minimalist by nature, and they want a lifestyle that doesn’t require as much money as others. Other people care deeply about the things that money will buy—not just material goods, but the prestige that comes with acquiring name brands or living in wealthy neighborhoods. Most of us fall somewhere in the middle, and we care more about spending money on some items than on others.

I’ll offer a personal and oversimplified example. As long as my car is dependable, I could care less whether the paint is faded or that its 15-year-old body has a lot of dings. The important thing to me is that it gets me where I need to go so that I can save more money for eating in nice restaurants and extended travel. On the other hand, I have friends who really want that fancy sports car, even if it means their only vacations consist of weekend trips in that beautiful care with the top down as they shuttle from one Holiday Inn Express to the next. And another friend wants to own a beach house while I’d rather put that money into—you guessed it—travel to exotic locales. There’s nothing wrong with any of our choices. They are simply choices.

Of course, all those examples assume the control of a certain amount of discretionary spending, but the truth is that much of the time, circumstances beyond our control dictate our money needs. Some of these circumstances grow out of past choices, current occupational realities, or even the stage of life we are in. Maybe we have big student loans to pay off or live and work in a very expensive city or have chronic and expensive health issues or we’re raising children or grandchildren or caring for aging parents. All these circumstances require money.

The thing is that too often, we just feel that we don’t have enough money, but we don’t have a really clear picture of how to make our financial resources to our goals for our own lives. That’s enough to make us feel chronically deprived.

I won’t pretend to be an expert on money, and I won’t pretend that I don’t worry about money more than I should. But I have learned a few things about figuring out my financial goals and then working from there to achieve some of them. It all starts with knowing what the goal is.


First, ask yourself some basic questions[i]:

1.    What is your basic survival budget? What are your monthly bills right how—for rent or mortgage, health insurance, utilities, transportation, clothing, student loans, and other obligations? These are just the essentials—not frills like cable, vacations, or fancy clothing. This number will vary a lot from person to person. Your job is to know your number. It can be kind of scary to look at your finances like this, but it might also be pleasantly surprising to see how little you need to survive if need be. 

2.    What kinds of debt do you have and how much? Is it debt that comes from a long-term investment in your future like a student loan or a mortgage or is it short-term debt like credit card debt?

3.    What do you value? Are there categories of goods and services that bring you satisfaction? Are there things make you feel deprived when you are forced to do without them? A caution: When assessing things we value, we often judge ourselves, telling ourselves that we SHOULD NOT care about buying this or that.  Don’t fall into this counter-productive trap. If not having your morning mocha from your favorite coffee shop will make you feel deprived, that’s ok.  (Or you’re a photographer, and you want a great camera. Or you’re an athlete, and you want your gym membership.) There’s probably something else you don’t care so much about, and you can figure out how to make the trade-off. There may still be times when you have to forego the morning mocha, but knowing that it’s important to you will help you develop your financial goals.

4.    What are your mid-range financial goals—things you want to do in the next 3-5 years on your path to a more vital life. Is it additional education? Moving out of your parents’ house and into your own place? Buying a house? Quitting your job to travel the world for six months? How much money do you need to achieve for that mid-range goal?

5.    What items or experiences do you need to have in your life to feel it is a life of vitality? This is the long-term thinking. Maybe you want to start your own business or retire at age 60. Or perhaps you want to cover your children’s college educations.

6.    Finally, what are your safety nets? What would you do if you found yourself in a dire bind for money? It’s better not to find yourself in this situation, but it can give you peace of mind to have thought through your safety nets.

Too often, people avoid doing this kind of deep thinking about our financial needs. A recent Gallup poll found that only about 1/3 of Americans keep a budget, and that most of the people who do are people who earn over $75,000 a year. If you’re like me, you’re reluctant to put your money situation on paper because it might be too scary-looking to see it all in black-and-white like that. But that’s a mistake. You can’t harness your money to live a more vital life unless you look your situation square in the face and plan. And it will be easier to make decisions about how to MAKE money--like whether to take on a second job or to cut back to part-time work or whether to take a promotion in a new city—once you know what your short-term, medium-term, and long-term financial goals look like.

Once you’ve looked at the numbers and assessed where you are and where you need to be, it’s time to figure out how to get there. I don’t have all the answers, but I do have some suggestions. First, you need an emergency fund. Financial advisor Dave Ramsey says you need $1,000, and that’s a great start. It’s enough to ensure you don’t have to put an emergency home or car repair on your credit card, and that’s important (more on that in a minute). A study found that almost 70% of Americans don’t have $1,000 in emergency savings. Make it an immediate goal to start a separate savings or checking account and stash money here until you accumulate at least $1,000.

Then focus on paying off your consumer debt. This is the debt for the things we consume every day—whether it is big ticket items like cars and appliances or the small stuff like that latte and the new purse and the evening out with friends. While I don’t share Dave Ramsey’s aversion using to credit cards, I do share his aversion to credit card debt.  Using credit cards for convenience is fine, but accumulating credit card debt for anything less than an emergency is financially crippling. For all the hype about student debt (and it IS a problem), a recent CNBC study noted that 17.5% of Americans carry student loan debt, a whopping 62.4% of American adults carry credit card debt balances. Use Ramsey’s snowball method of paying off your consumer debt, by starting with the smallest bills first, paying them off and then moving on to the bigger ones, making the biggest payments possible.

Student loan may feel daunting, but there are ways to make it more manageable. You can work on paying off your student loan early. There are no penalties for early repayment of federally-backed student loans.[ii] I paid off my undergraduate loans in three and a half years by paying a little extra each month. Some months it was only $10, and some months I was able to double the payment amount, but each and every dollar of that extra payment went toward principal and not interest. The end result that I paid off the loan early, and I paid much less in total than I would have if I had let interest continue to accumulate for the life of the loan. Now I’ll admit that I went to college in the good old days when you could graduate with less than five figure (much less six-figure) loans, but the same principle can help you whittle away at your loan balance. (You can do the same thing with a lot of mortgages, by the way.)

Once you’ve paid down that consumer debt (even if you haven’t paid off your student loan), put the money you were using to pay off debt into building a 3-6 month emergency fund that would help you weather a job loss, being out of work because accident or illness, or some other unexpected financial setback.  

If you haven’t already begin investing for your future. I’ve written about this before, so I’ll just hit the highlights here. If your employer offers a 401K or matches an IRA, take advantage of that plan. Open a savings account and sock a little away each month. A few months ago, at a speaking engagement, an audience member told me about ACORNS, a micro-investing platform that allows you to invest tiny amounts of money for the future. You can invest small amounts (as little as $5) on a recurring basis or you can make additions whenever you have a little extra money. You can also set the app to round up your purchases to the nearest dollar and invest the spare change in your Acorns account. The person who told me about the app, a graduate student living on a very limited income, had already managed to save about $200 in spare change in only a few months of use. However you do it, begin saving for emergencies and for you mid- and long-term goals.

Many of my best ideas come from you, my readers. So let me know your best tips for managing money in order to build your most vital life. I'd love to hear from you in the comments. 

[i] I’m indebted to Emilie Wapnick whose book How To Be Everything: A Guide for Those Who (Still) Don’t know What They Want to be When They Grow Up, provided the seeds for this financial goal-setting checklist.

[ii] If you have refinanced your student loan with another lender, be sure to read the fine print on whether there are pre-payment penalties. Even then, they may be small enough to save you money overall through early repayment.