One of the best ways to make sure those
basics are covered is to create a spending plan that
allots money for day-to-day expenses and also provides
funds for emergencies that crop up. "We all have
a need for quick money at some point," says Julie
Stav, author of "The Money in You: Discover Your
Financial Personality and Live the Millionaire's Life."
By creating an emergency fund for those expenses,
you'll avoid having to depend on credit cards and the
stress that comes with paying hefty interest fees in
Taking care of the basics also means making sure you're properly insured. Life insurance, health insurance and disability insurance all cost money, but by purchasing them, you can avoid the stress of financial ruin if a calamity such as sickness or death occurs in the family.
Creating a vision
Once there's enough money to take care of basic needs, the rest can be used to maximize happiness. But in order to do this, you must first consider your life goals.
"You have to know what's most important
to you," says Jeff Harris, founder of The Family
Legacy Forum, an organization based in Lake Wylie, S.C.,
that helps families preserve wealth. Once you do that,
"put it down in writing in a vision statement,
which becomes the family's mission statement,"
At that point, allot funds to those priorities. "If your priority is, 'I'm going to set aside funds for my future and for my well-being,' then you make that a priority, and if you don't have enough money left over to go to the bar and buy a drink, you don't do it," says Harris.
It's also important to note that you will be tempted to spend your money on items that don't contribute to your long-term happiness.
"We quickly adapt to improvements in our circumstances and we always seek more," says Rowley. "You have to recognize that your brain is always going to want you to trade up and you have to stop and ask, 'What's that really going to cost me in terms of other things that make me happy?' "
For example, you might think a bigger
house will make you happy. However, if you buy that
house you'll have a higher mortgage, higher taxes and
higher utility bills. If paying for those additional
items will mean you have to work more and spend less
time with the children, you must decide whether you'd
be happier with the bigger house or happier spending
more time with your children.
Allotting for change
The other thing to remember when using money to maximize happiness is that one's idea of happiness will likely change over time.
"Changes in your life will affect your values," says Rowley.
For example, at one point in your life, a child's welfare might be critical to your happiness. At another time it could be owning your own business or a parent's health and well-being.
For that reason, it is important to reflect on your financial plan at regular intervals to make sure it is still in line with the goals that make you happy.
"You need to spend some quality time, say, once every six months, sitting down and looking at what's really important to you," says Harris. "Are the things you're doing going to get you there? If they are, just keep doing them and if they're not, change them."