The Simple Dollar Reading Guide: What’s Missing?

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tsd bookEvery Sunday morning for the next few months, I’m going to “riff” on a chapter from my book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams by reflecting on particular pieces of it that I’ve had further reflections on or particularly excite me, including some elements that were removed from the final draft. You can find out more about the book by reading some of the life-changing experiences the book has given readers or reading the Amazon reviews.

Even though the book opened with a chapter on debt (which, as I explained last week, was put there simply because debt is the most urgent personal finance problem that most people face), this second chapter begins what I consider to be the heart of the book. It addresses the fundamental question that I think drives people to pick up personal finance books (and other self-help books): a sense that there’s something missing in their lives. They want more out of their life than they currently have. They feel somehow trapped by their situation.

Based on the many, many emails I’ve received from readers, these are the kinds of feelings with which people begin to approach personal finance issues if they’ve not worried about money before. They come around because they’re finding that their lives aren’t going the way that they want them to. Dreams are being abandoned. Choices are being limited. Their paycheck is constantly being drained.

One solution that people often come to is that if only they had more money (with which to buy more things), they would be happy. I don’t believe that to be the case, and I back that up a bit with some research on pages 17 and 18:

Quite often, people assume that if you’re rich, you must be happy. In truth, the idea that riches bring happiness is an optical illusion, an artifact of our competitive nature.

Daniel Gilbert, professor of psychology at Harvard University and author of Stumbling on Happiness, puts it succinctly in a talk in 2004: “[A]fter basic needs are met, there isn’t much ‘marginal utility’ to increased wealth. In other words, the difference between a guy who makes $15,000 and a guy who makes $40,000 is much bigger than the difference between the guy who makes $100,000 and the guy who makes $1,000,000 [...] [O]nce basic needs are met, further wealth doesn’t seem to predict future happiness. So the relationship between money and happiness is complicated, and definitely not linear. If it were linear, then billionaires would be a thousand times happier than millionaires, who would be a hundred times happier than professors. That clearly isn’t the case. On the other hand, social relationships are a powerful predictor of happiness – much more so than money is.”

To put it simply, once you meet a minimum level of financial success – and the cap is pretty low – additional income itself doesn’t make you happier.

What does? I summarize some additional research on page 18:

In short, happiness doesn’t revolve around financial success. Instead, it revolves around simple elements that we can all foster in our lives: building positive relationships with other people, cultivating low-pressure situations and minimizing high-pressure ones, and improsing our personal energy level all contribute heavily to a personal sense of happiness. These things together also produce financial and career health as well.

So why am I writing about personal finance?

Personal finance is an incredibly effective tool for achieving all of those things. Why? Because, quite simply, good personal finance management buys you the one thing in the world you can never have enough of: time.

When you have your money in order, you’re not losing time to “unwinding” from a stressful job. You have the freedom to leave it.

When you have your money in order, you’re not losing personal time to never-ending overtime. You have much more control over the hours that you work.

When you have your money in order, you can make career and personal choices based on how you want to spend your time, not how someone else tells you to spend it in exchange for a few extra dollars.

What keeps people from reaching that point? There are a lot of reasons, and I’ve talked about many of my own on The Simple Dollar. One big one that was true for me (and true for many others based on emails and conversations I’ve had with readers) was the sense that life is a competition and the person who “wins” that competition is the person with the best stuff. I riffed on that a bit in an earlier draft of this chapter, which I’ll share here:

During most of my adult life, I was driven by competition. I needed to win, and my sense of how to keep score was how much money you made. Since people typically don’t go around wearing their account balances on their shirt, I competed in the only way I knew how. I spent money on things that made it appear as though I were winning.

Eventually, I realized that the game provided only empty victories. I was “winning,” sure, but all of that stuff I was buying was only valuable to others, not to me. I looked like the “big winner” to others, but as I sat at home at night, I would often get a sense that I was in fact losing – and losing badly.

Competition is a great motivator, but no matter how hard you compete, you’ll still lose the game if you’re keeping the wrong score.

If you measure the success of your life by what other people think of you, you will never get ahead. There will always be someone else to impress or some other tool to win their fleeting awe. It all passes, though, and you’re left with, well, just you.

When you realize that the fleeting awe that others give you really doesn’t matter much at all and that what really matters is you and becoming the best possible person you can be, personal finance often snaps right in place in this kind of complete life.

Take control of your life. Figure out what you want, set your own goals, and use your money as a tool to put you where you want to be. Stop wasting time (and a lot of money) on what other people think.

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7 thoughts on “The Simple Dollar Reading Guide: What’s Missing?

  1. “Having more money” definitely does not lead to happiness in my opinion. I often hear people who make hundreds of thousands of dollars complain about the stress they have – because they complicate their finances. And friends who make less than $50,000.00 per year (but with no debt) have the opposite outlook.

    A never ending drive for more, more, more money is simply at the other end of the money/stress spectrum in my opinion. At one end, you have people drowning in debt. At the other, it’s people who seem to have more than anyone would ever need, but it’s never ehough. It’s right in the middle – having “enough” money to live a decent life with security and without financial fear (and accepting it) – where the sweet spot is – for me.

  2. thank you! I really needed this article, as I’ve been trying to fill a recent gap by window shopping and dreaming of buying something. I will refocus and figure out what is missing.

    elinor

  3. Ok, Trent, what the heck? Why has my email address (grumpyrumblings) been blocked from posting comments on your site? Is it personal or is it an overactive spam filter?

    I’m sorry I dissed your white bread. Jeez.

  4. This chapter is mainly about the ultimate purpose of life – which for most people is happiness and contentment. After the basic physical and emotional needs are fulfilled, the law of diminishing returns starts operating with increasing wealth. The suggestion to make lists of things that makes one happy and unhappy, and then working on them is practical. I also think that making a list of values( as outlined in your ’30-days….’ booklet) and then drawing goals and action plans from them would work even better. It would really help us to align our actions with our true self.

  5. Read reviews of Trent’s new book at Amazon. Two basic points: 1) if you read The Simple Dollar, you don’t need it. 2) Trent writes for young folks, his generation – say 20s and 30s. Older folks like me learned most of what he has to say in the school of life. And don’t get near the word “retirement” — he hasn’t got a clue, and why should he?

    For “boomers” read through his posts to glean the few things you don’t already know. And if you’re any kind of a “foodie”, give him credit for trying to learn to cook and check back in 10-15 years.

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