Money and happiness a guide to living the good life

Happıness

Money • &

Happıness

A GUIDE

TO LI VING

THE GOOD LIFE

LAURA ROWLEY

JOHN WILEY & SONS, INC.

Money • &

Copyright © 2005 by Laura Rowley. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Rowley, Laura.

Money and happiness : a guide to living the good life / Laura Rowley.

p. cm.

Includes bibliographical references and index.

ISBN 0-471-71404-6 (cloth)

1. Finance, Personal. I. Title.

HG179.R693 2005

332.024—dc22

2004027092

Printed in the United States of America.

10987654321

To my parents, Eugene and Jane Rowley

CONTENTS

Acknowledgments ix

Introduction xi

1 Wealth and Values 1

2 Identifying Your Values: Family,

Community, Personality 21

3 What Do You Believe about Money? 42

4 How Money Relates to Your Happiness 58

5 Managing Spending and Banishing Debt 81

6 How to Save 105

7 Get Your Retirement Plan in Gear 129

8 Fear, Greed, and Money Mistakes 167

9 Money Milestones 181

10 The Final Word on Money, Values, and Happiness 207

Notes 215

Resources 225

Index 231

vii

ix

ACKNOWLEDGMENTS

T

hanks to Lisa Queen of IMG for believing in this project and being a

first-class agent and person. Thanks to a talented group of profes￾sionals at John Wiley & Sons, Debra Wishik Englander, Greg Fried￾man, and Kim Craven. Thank you, Deb, for your infinite patience and

voice of reason and calm.

I am privileged to work with an amazing brain trust at Self maga￾zine: Lucy Danziger, Paula Derrow, Holly Pevzner, Kate Lewis, and

Dana Points. Thanks for your creative insight and continuing support.

I am indebted to Dr. Richard Easterlin, Dr. Tim Kasser, and Dr.

Sonja Lyubomirsky for help in reviewing the research on subjective

well-being; certified financial planners Doug Flynn and Kevin McKin￾ley, and CPA Richard Berse for your excellent feedback on the technical

aspects of investing. Thanks to Seton Hall intern Brian Matthew for as￾sistance in crunching the survey numbers.

Thanks to my sisters, Barbara Scherer, Therese Rowley, Mary Moye￾Rowley and Ann Gilbert for your feedback and encouragement; my

brothers Gene, Ed, John, Tom, Paul and Dan (webmaster extraordi￾naire) Rowley for your friendship and advice. To Cynthia Rowley, a

swell cousin and a swell muse—you rock!

To writers and kindred spirits Lynne Pagano, Amy McCall and Judy

McLaughlin—your enthusiasm for the craft means more to me than I

can say. To the many women who agreed to long interviews for this

book: It is a privilege to tell your stories. I am awed by your honesty

and generosity in sharing your money lessons—instructive, amusing

x ACKNOWLEDGMENTS

and heartbreaking—that will no doubt help other women to better

manage their financial lives.

Thanks to the two people who inspired this book—my mom, Jane

Rowley, for your remarkable wisdom and faith; and my dad, Eugene

Rowley, who taught me everything I know about money and values.

Finally, thanks to Jim, Anne, Charlotte, and Holly Hilker, for your

steadfast love and support throughout the course of this project, and for

reminding me every day where true wealth lies.

xi

INTRODUCTION

I

was once asked to give advice to a reader of Self magazine who I will

call Mia. Mia is in her mid-20s, working for a social service agency in

a major city, earning $42,000 a year. Her ultimate financial goal is to be

a millionaire. “I want to live the way I want to live and never worry

about making ends meet,” she says. Mia isn’t thrilled with her job; she

hopes to quit and start a public relations firm. She has a busy social life,

dining out three to four times a week at $75 a pop. She attends parties

and premieres that demand a designer wardrobe at a cost of about $500

a month. Asked to name her most important investment, Mia describes

a $540 Louis Vuitton handbag. She is maxed out on 13 credit cards, on

which she carries an $8,000 balance. She owes another $28,000 in stu￾dent loans, but hasn’t started paying them back. She has no savings and

doesn’t contribute to her firm’s retirement savings plan. “I always feel a

little panicky that I’m not going to be able to pay my bills and have

money to live,” she says.

Obviously, Mia needed an extreme financial makeover. There was a

gigantic disconnect between her goals—becoming a millionaire, start￾ing her own business—and the decisions she made about money. But

ironically, I have met other women through the Self column who didn’t

struggle with debt, had some savings, education, and good jobs—and

felt every bit as anxious as Mia. For some women, money is a like a guy

who can’t commit—it shows up with flowers, wine, and dinner reserva￾tions, but disappears at the mere mention of long-term goals. For oth￾ers, money is like commuting to work; it must be confronted on a daily

basis, but brings minimal pleasure. For still others, money is like a

xii INTRODUCTION

computer that arrives in a million pieces—it’s exactly what they need,

but they have no idea how to make it work for them. Money can be a

source of fear, dread, envy, guilt, regret. It can also be a tool that brings

confidence, peace, and happiness. It all depends on what money means

to us, how much we know about it, how much control we exert over

it—and most importantly, how closely money is aligned with our larger

values and goals.

When I was a journalism undergrad at the University of Illinois, I

had a brilliant professor named Ted Peterson, an author and expert in

media theory. He stood barely five feet tall with a shock of white hair,

thick-framed black glasses, an unlit pipe clenched between his teeth. I

recall one morning stumbling in late to his seminar, guilty of not read￾ing the assignments due for the day. He paused while I slid noisily into

my seat, leaned back in his chair, gazed at me intently, and said, “So,

Ms. Rowley, what’s the meaning of life?” Caught off guard, I answered

his question with a question: “To be happy?”

What I didn’t know at the time was that nearly 2,500 years of phi￾losophy supported my off-the-cuff response. In 400 B.C., Aristotle sug￾gested that we are all born with a purpose in life, and by cultivating our

reason and working toward our highest calling, we can achieve happi￾ness. While my journalism degree led to a career covering personal fi￾nance and business for CNN and other media, Professor Peterson’s

question inspired a side trip to divinity school. I now write the money

column for Self and teach a university course called “Contemporary

Moral Values.” Those experiences culminated in what is hopefully a

very different kind of personal finance book. Most money guides oper￾ate under the assumption that if you have enough information and take

action, you can build wealth and be happy. But that leap from wealth to

happiness is neither easy nor obvious. I believe that you first have to de￾fine what “the rich life” means to you, what ideas, activities, and rela￾tionships you value, and what you’re striving for personally—then use

money to build that life. Too often it works the other way around:

Someone chooses a particular career to get money, and then lets money

define what she does, what she values, who she is, and what her life

looks like. Or, like Mia, someone creates a life that’s unsustainable and

results in massive debt, because there is no rational connection between

the goals and the money. That connection is essential. I occasionally get

e-mails from readers that say, “I have $1,000 to invest. What should I

do with it?” My response is always: What is the money for? What do

you value? As my wise old instructor Ted Peterson would ask, “What’s

the meaning of life?”

This book offers a road map to wealth with practical financial tools

and positive strategies for creating “the good life” in a personally mean￾ingful way. It looks at how to identify our authentic values and over￾come unconscious beliefs and personality traits that frustrate our efforts

to manage money in a healthy manner. It also explores decades of re￾search into behavioral economics—uncovering how to be happy with

whatever you have, while you move toward your larger financial goals.

It offers the stories of real women who talk about their money tri￾umphs, failures, and lessons. Because so many of those lessons are so

personal, the women I interviewed for this book did not want their full

names disclosed; some allowed me to use their real names and last ini￾tials; others asked that a pseudonym be used. But they are all real peo￾ple and real money situations—there are no composites here.

Why is this personal finance book for women in particular? Because

our money situation is unique: We live longer than men; earn less on

average; often bear the financial brunt of divorce; and are more likely to

drop out of the workforce to care for family members (the average is 10

years). In addition:

• Women are more than twice as likely as men to live their retire￾ment years in poverty, and twice as likely to live in a nursing

home, according to the Administration on Aging.

• More than half of the elderly widows now living in poverty were

not living in poverty before their husbands died, the Administra￾tion found.

• Among women 35 to 55 years old, between one-third and two￾thirds will be impoverished by age 70, according to research by

the National Endowment for Financial Education and the AARP.

• The average woman born between 1946 and 1964 will likely be

in the workforce until she is 74 years old because of inadequate fi￾nancial savings and pension coverage.

INTRODUCTION xiii