The Role Personal Finance Plays in Your Life

We’re going to go down a road for a while that seems to have little to do with personal finance, but bear with me for a while. I think you’ll find the journey interesting.

It isn’t very often that I can say with complete seriousness that an article changed my life. How Will You Measure Your Life?, an article by Clayton M. Christensen that appeared in the Harvard Business Review in 2010, meets that threshold for me.

When I read that article, my primary motivation in life was to simply secure a “good life” for myself and my family. That motivation had led me to frugal living and some difficult but rewarding career decisions, but it hadn’t really changed who I was as a person. The reason was that, at least at the time, I didn’t really have any clear concept of what a “good life” meant.

That article struck a deep chord with me and started me down a long path of figuring out what exactly I wanted out of life in a large sense and, perhaps even more importantly, how that related to my own choices on a day-to-day basis.

I really started with a single question, one that I actually wrote down on paper and thought about a lot for a while. How can I ensure that my relationship with my family proves to be an enduring source of happiness? What would my relationship with my family members have to be like such that it would continue to be an enduring source of happiness for me throughout my life?

On one level, it was kind of easy to answer that. I want to have a really good marriage with Sarah, one where we’re connected on lots of levels, and an enduring relationship with my children that begins when they are children and persists (though changed in many ways) as they become independent adults with very distinct identities and lives.

OK, great, but what does that really look like? What does that mean?

Part of the difficulty of a lot of goals like that is that they inherently rely on things outside of my control. The success of my marital goal, as I describe it there, relies a lot on Sarah. Her choices, completely independent of me, could render that goal completely obsolete. A similar thing is true with my children. True success with that goal, as I thought of it, relies so much on the choices and efforts of my children. I could do everything perfectly and those goals could still completely fail.

I am reminded of a quote from Jean-Luc Picard, the ship captain from Star Trek: The Next Generation (a television series that was enormously impactful on me growing up):

It is possible to commit no mistakes and still lose. That is not a weakness; that is life.

This led me to a simple realization: I cannot measure my success in life by what others do. Rather, the only real measure of success in life is by what I do, by what I contribute to the world, and by what I put into myself and into others.

If I can genuinely look myself in the eye and truly know that I did my best to build a great relationship with my children that helps to shape them into independent, thoughtful adults, then that’s all I can ask, even if I don’t necessarily end up with the relationship I dreamed of. Rather, I will know that I did everything I could to maximize the chances of that great relationship and, honestly, that’s enough. Nothing else can be asked.

So, if I make this list of what I think my best life would be, one that I could lay on my deathbed and look back on with basically no regrets, it would involve mostly things that rely on certain behaviors and actions from other people. Since I can’t really control that, I inherently need to focus on what I can control: my own behaviors and actions.

What can I do to ensure the greatest likelihood that I have a marriage to Sarah that lasts and involves connections on many levels?

What can I do to ensure the greatest likelihood that I have a great relationship with my children now and as they grow up to be independent adults and good people?

What can I do to have a large number of truly great friendships?

What can I do to ensure that all of those important people in my life, as well as the people in my community and the people that I help through my work, live the best possible life that they can?

In the end, measuring my life boils down to assessing my own progress at those things (and similar questions related to all of the other things I want for my life). If I am not putting forth the effort to make those things happen, they’re far less likely to happen. The only real way to measure my own life is by my own efforts toward making the things I want most from life happen (or to avoid the things I don’t want).

So, how do I measure that? To put it simply, I define what I want out of life, consider what I need to do daily to make that most likely to occur, and then ask myself whether I’m doing my best each day in those efforts.

What about fun, though? If life is about measuring things in this way, doesn’t that take the fun out of life? For one, doing these things well is inherently fun. It feels really good to know that you are consistently putting forth effort to make those life goals happen, and the steps that I take are often fun on their own. Writing a really good article feels great. A bonding moment with Sarah or a kind or a friend feels fantastic. For another, there is plenty of room for rest and leisure in this life, because without that rest and self-care and leisure, you can’t do the other things well. A life where you’re completely burnt out is a life where you’re not doing anything particularly well, just getting by. For me, a lot of self-care comes from making sure I get good sleep and exercise, reading books, hiking, making foods, and playing tabletop games, and sometimes those overlap nicely with other life goals like building friendships and being a good parent or spouse.

Thanks to that article, I spent a lot of time figuring out exactly what I wanted out of life and how to measure it in a meaningful way, by developing daily systems and personal behaviors to get there and considering whether I did my best each day to do what I could to make those things happen.

Great, but how does all of this connect to finance?

Very few people truly have a life goal centered around wealth accumulation. They might have good financial health as a goal, but it’s usually secondary to the other things they want to achieve. In other words, their goals tend to rest on a foundation of good personal finances. It’s not about the money itself, but what the money can give them the freedom to do.

I don’t want to be rich, but I do want to maximize the flexibility of my time. I don’t need to have millions in the bank, but I do have a list of things I want to do that aren’t free.

Because of that, sound personal finance is a foundational part of the life I want to lead, and thus my financial state is one of the things I measure when I’m measuring my life.

What can I do to ensure the greatest likelihood that I have a marriage to Sarah that lasts and involves connections on many levels? Not having money stress is certainly one big aspect of this, as is having the financial resources to actually do some of the things we dream of doing together.

What can I do to ensure the greatest likelihood that I have a great relationship with my children now and as they grow up to be independent adults and good people? Being able to support them securely and pay for their educational opportunities when they’re young is a part of that, as is the financial ability to remain a part of their life when they’re older by traveling to see them wherever they may go.

Healthy finances simply underline a lot of my life goals because healthy finances keep my daily stress level low, allow me to focus on doing other things, and open up opportunities going forward. In other words, having a reasonable level of financial success is indeed one of the elements by which I measure my life. I don’t expect or even particularly want exorbitant wealth, but I want enough financial security so that I can do the other things I truly want to do in life, executing everything that would make me feel as though I lived a good life when I’m in my final years.

Because of that, I see healthy personal finance as a daily choice, one that is a fundamental part of the overall life I want to live. The ordinary, daily financial choices I make are genuinely important in shaping my life. Those choices support my desire to be a good husband, a good parent, a good friend, a good citizen, a thinking person, and other goals.

(I feel the same thing about personal health, too, though the development of that viewpoint came along a little later.)

Simply put, if I choose to spend money on something that isn’t genuinely in line with the other things I truly want out of life or isn’t highly likely to bring me some significant level of lasting joy, it is almost always the wrong choice.

Again, it’s easy to think of this as “never spending money on anything fun or spontaneous,” and that’s not the case. There are a lot of fun expenses and quite a few spontaneous expenses that are either directly in line with the big things I want out of life and also quite a few that are potential sources of lasting joy. The trick is really knowing which is which – some expenses that seem appealing in the moment really aren’t in line with anything I want out of life and really aren’t bringing me any lasting joy, either. Spending money on those things are mistakes.

The challenge, then, is knowing which expenses fall into that category of “in line with life goals or likely to produce lasting joy” and which expenses do not, and that’s a constant challenge. In fact, for me, that’s the daily challenge of personal finance, as most of my bigger financial choices are almost entirely automated through online bill pay and automatic savings plans.

Let’s see how that really plays out.

Ordinary small spending decisions really do connect to the big things you want out of life.

Let’s say you’re standing in a grocery store and you need to buy some dijon mustard. It’s an ingredient for a lot of things that you enjoy making – sandwiches, sauces, and so on – and cooking at home is something that you do frequently.

You come to the condiments area of the grocery store and there are a lot of options for dijon mustard. Several different brands in bottles and containers of different sizes with wildly different prices.

Which one do you buy?

Here’s the answer I’ve come to over the years, and it’s one that I’ll walk through carefully in just a minute: I buy the least expensive one available unless I know that brand hasn’t served me well in the past; usually, I buy the store brand one.

If a dijon mustard is good enough that it makes an appealing sandwich topping and works really well in the sauces and dressings that I make with it, then it serves its purpose.

Spending more on an ostensibly “better” dijon mustard, one where I really can’t tell the difference or the difference is slight, is a poor use of my money. Unless there is a truly significant difference between the “least expensive good” dijon mustard and a truly great mustard, the difference in cost is an expense that doesn’t bring me any noticeable real-life benefit. At most, it might bring me a very brief burst of pleasure, one that’s gone almost immediately because it’s not significantly any different than the cheaper mustard.

Thus, the money I spent to buy more expensive mustard that isn’t significantly better than the “least expensive good” mustard is money taken away from supporting all of those other things I want out of life.

Sure, you can argue that it’s just a dollar or two, but what am I getting out of that dollar or two? Furthermore, if I continually justify spending a dollar or two extra on things that bring me only the slightest, most temporary additional pleasure, over and over again, where is all of that money going?

Here’s the thing to remember: this is a daily process, one where I ask myself each day if I’m doing my best to create a financial life that supports all of the things I want to do. Spending extra money on things that do nothing but provide an instant of extremely fleeting pleasure — or no real benefit at all compared to the “least expensive good” version — don’t serve that.

Again, this doesn’t mean “no fun spending” — it just means choosing opportunities to spend money on fun that’s really meaningful or lasting.

For example, if I’m spending the day out and about with my daughter and we discover a sushi restaurant we’ve never seen before and she’s just having a great day with her dad and is excitedly looking in the window, then the $25 (or whatever) we spend there is a very good spontaneous expense. Yes, it’s probably $10 more than we’d spend on lunch, but this is a moment that has a high likelihood of creating a lasting memory for us and it’s going to be a genuinely enjoyable meal for both of us — we share a love for sushi. That’s $10 incredibly well spent, in my opinion. It is very likely to provide lasting pleasure in a way that restaurant meals rarely do because of the shared experience with her, plus it’s strongly in line with my life goal of having a strong relationship with my daughter.

I am getting so much more value out of the extra money spent on that sushi meal than I am out of buying three name brand products at the store and a forgettable coffee at a drive-thru. Thus, in order to ensure that I can always afford things like that sushi lunch without even thinking about it, I make constant effort to forego forgettable low-value things like name-brand mustard instead of store-brand mustard and forgettable drive-thru coffee instead of coffee at home and buying a book I may or may not like instead of just getting it from the library. Those things are forgettable. A great meal with my daughter that’s very likely to be a memorable father-daughter moment is not forgettable at all.

Instinctively knowing the difference between a meaningful expense and a non-meaningful one — and acting appropriately — is vital.

All of this comes down to a simple truth: a huge part of successful personal finance is making consistently good spending choices, day in and day out, and for me, that comes down with understanding how spending choices are in line with how I measure my life as a whole. A good spending choice is one that is in line with doing the best I can to have the life I want, and a bad spending choice is one that is not in line with that.

I’ll be honest: this takes a lot of reflection. This is a topic that has been tossed around in my mind for years in various ways, not just in understanding how my spending choices really connect to these things but also in simply understanding how I want my life to be measured.

However, the closer you get to a real understanding of what you truly want from life and how to measure your effort toward those things, the clearer and easier spending choices and other financial decisions become. Spending that isn’t in line with or directly supportive of those things you want out of life feel more and more wasteful, and financial decisions that do support the things you want out of life feel more and more joyful.

Yes, you most certainly can feel pretty joyful about not spending money on something temporarily fun and instead putting it aside to support something meaningful later on.

For me, this started with that key question I shared earlier, which I’ll share again here: How can I ensure that my relationship with my family proves to be an enduring source of happiness? In really, truly, deeply answering that question, I wound up with a much deeper understanding of what my spending choices really mean and how they affect me.

Here are some ideas for getting started on this path.

First of all, spend time thinking about how you measure your life. What is your idea of a good life? How do you want to live out your remaining years, and how do you want to be remembered?

Then, start translating those thoughts into daily actions. What can you do today to make sure that those things are happening, that those things are moving forward, that those things are supported and will be supported by my finances and my health?

The more you think about those things, the more you begin to see your financial decisions — even the little ones — as stepping stones for the life you want to live. Buying something frivolous that only brings momentary pleasure before it’s forgotten begins to seem really wasteful, even when it’s a small expense. Rather, the expenses that begin to seem more meaningful and more joyful and more pleasurable are the ones that are directly in line with or supportive of those big things you want out of your life.

Most of all, stop blaming others for your problems, or, if you must do this, ask how that blame translates directly back into personal action. Yes, there are times where life is incredibly unfair, but no good outcome ever arises if you don’t step up and take action in your own life. When you blame others for your problems, you are giving yourself permission to not put forth effort to improve your own situation. As long as you draw breath and think clearly, you have the capacity to make decisions that will put you in a better place or give you a better opportunity for a good outcome. Don’t sacrifice that out of self-pity due to the unfairness of life. Make the best outcome out of the hand you’re dealt, every single day. This isn’t to say that people don’t deserve help, but that the surest route to a better life is through your own consistent positive actions, no matter how bad the hand you’re dealt is. No one else can do that but you.

Think about what you want your life to be like. Then, ask yourself what you can do to maximize your chances of that life. The rest flows from there.

Good luck.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.