I worked with a couple recently who was about to have their second child. They came to me because they wanted help figuring out if they could afford to live off a single income so that the wife could stay home with the kids.
Looking at their situation purely from a financial standpoint, the answer was clear: they would be better off if the wife kept her job. She made good money with good benefits and that income would have made it easier for them to save money and reach some of their other goals faster.
But here’s the thing: they didn’t come to me asking for the best financial decision. They came to me because their top priority was creating a life where the wife could stay home. That’s what would make them happiest and they just wanted some help understanding whether they could make the financial side of things work.
And you know what? They could. And that’s exactly what this personal finance stuff is all about! First you decide what kind of life you want to live. Then you get to work creating a financial plan that makes that life possible.
It’s life first, money second.
When money gets in the way of happy
It’s pretty common to do things the other way around. With all of the personal finance “rules” out there (spread by people like me), it’s easy to start basing your life around making the best financial decision at the cost of your personal happiness.
You put off starting a family because you worry about how much it’s going to cost.
You stay in a job you don’t like because it pays well.
You focus so hard on cutting expenses that you feel guilty for spending on just about anything.
These decisions are made in the name of responsibility. And they very well may leave you with more money in your bank account.
But do they make you happy?
This isn’t about forgetting all of the personal finance lessons you’ve learned. This isn’t a call to raid your savings and go on a shopping spree.
This is about being happily responsible.
There’s a common saying that you can have anything you want, but you can’t have it all at the same time. I’m not sure where it originated, but I read it most recently in Chris Guillebeau’s book The Art of Non-Conformity.
I love it. It’s empowering and real at the same time. You can have the things that matter to you. But to do that, you also have to know what doesn’t matter to you, or at least what doesn’t matter as much, and you have to give those things up.
In other words, in order to reach some goals you have to sacrifice others.
But the real key to that saying is the first part: “you can have anything you want”. The second part, the sacrifice, is only relevant if you’ve got the first part nailed.
So what do you want? What kind of life will make you happy? Is it finding work that empowers you? Is it growing your family? Traveling the world? Retiring early? Buying a house?
Whatever it is, the financial goal should be to find a way to make it happen. You don’t need to make “the best” financial decision possible all of the time. What you need is a financial decision that makes your ideal life “doable”.
Think back to the couple above. There were no rash decisions being made. They weren’t ignoring their goals or being irresponsible.
It was actually the exact opposite. They knew what they wanted and they thoughtfully sought out a plan that could make it happen. They still had to make sacrifices. Some of their other goals had to be put on hold for a little bit. They needed to find a way to cut back on some of their regular expenses.
They still had to be responsible. They just chose to be happily responsible. They decided to bypass the “optimal” financial decision in favor of the one that brought them more joy while still meeting their basic financial needs.
Isn’t that what it’s all about?