Your Money + Happy Plan, Part 1: Do You Have Enough?

Allow me to introduce you to the most badass self-made rich lady in all the land, Jennifer Lopez. She dropped this music video for her song, Dinero, which makes every dream I’ve had about living a rich life seem like child’s play.

After watching that money manifesto, I want every. single. one. of us to feel as prosperous and happy as J Lo roasting marshmallows over a pile of burning Benjamins.

Sounds easier said than done, doesn’t it? I’ve heard that skepticism from the “golden handcuff” crowd — folks who’ve worked their way up the corporate ladder and watched their paychecks get bigger while their joy got smaller with each passing year.

There’s a perception that income and joyfulness have to be at two opposite ends of a paradoxical career spectrum. If you have money, you don’t have much happiness. If you optimize for joy, you have to live paycheck-to-paycheck for the rest of your life. And if you shoot for something in the middle, you have only moderate happiness and mediocre pay.

For a relentless optimist like me, this feels like a dire diagnosis. That vision of adulting doesn’t inspire a lot of hope about the coming decades, does it?

Luckily, this money versus happy belief — while quite common — is also just that: a belief. It’s not a fact.

As a career coach, I’m all about helping people debunk money beliefs so they can set themselves up with financial gameplans and do whatever the hell they want: make a career change, start a business, take a break from work, you name it.

One of the biggest reasons my clients (and probably most people considering a career change) talk themselves out of it is because they don’t think it will allow them to make the kind of money they want — both now and in the future. They choose to optimize for money at the expense of happy. And making that tradeoff sucks the fun right out of life.

As luck would also have it, I’m an economics nerd. So, coupling my love of numbers with my mission to infuse joy back into our careers, I put together this guide to the ways you can feel fulfilment, satisfaction, and, yes, joy from our day-to-day work while hitting your financial goals.

This won’t be quite like those “millionaire next door” books all about the person with humble beginnings who saved their pennies and ended up retiring early (although we will cover that). Instead, I know every person’s ideal Money + Happy strategy is unique, so we’ll cover the different pathways to financial peace so we can take back our power and will never make excuses about money being in the way of our happiness ever again.

Over the next four weeks, we’ll cover these four core strategies so you can find the right Money + Happiness equation for you:

1. How to set goals for money that will enable you to be happy
2. Being strategic about your current spending decisions to lead to more happy
3. Making your current money work harder for your future self’s happy
4. Making more money in the here and now without sacrificing happy

Ready to add the fun back into the moolah? Let’s do this.

Discovering the psychological worth of your values

Let’s start with some science, because before we can get to the happy, we have to understand the psychology of money.

What role does money play in your life? Is it purely transactional, where you trade dollar bills for the possessions you want?

For most people, the way you think about money shows what you value.

“Money is emotional and carries a lot of energy,” says Kristen
Prewitt, Private Wealth Advisor at The Prewitt Group. “Each individual must define what financial success means to them. Is it living the lifestyle you want? Having freedom of schedule to be able to travel when you want? Or is it wealth accumulation? There is a freedom that comes with having enough in investment assets that the option to work is just that — an option. Financial success starts a clear and personal definition — from there decisions to move towards that goal become easier.”

None of these choices are wrong — and all of them represent how you prioritize your values.

So the first step in putting together your Money + Happy Plan is to identify what you value and want to use money to achieve.

For some of my clients, money plans helped empower them to act on their values. I’ve had 4 clients in the last year quit their jobs and take a sabbatical after we mapped out their financial runway. One worked on passion projects and creating her jewelry line. Another is starting her own motivational speaking business. And two other folks are taking this time as a detoxification and “active recovery” to refresh before jumping into their next jobs. Everyone valued taking a break, and, once they saw they had the financial safety net in place to make it happen, they went for it.

For me, seeing what I value comes down to how I’ve made choices to spend my money. After spending 90 days traveling the world in 2017, it’s clear I value (and invest in) adventure and freedom. Choosing to move back to Colorado in 2018 to be close to my mom shows that family is a core value. And working for myself from home creates big feelings of abundance and freedom for me. (Ramit Sethi, a power player in the personal finance and empowerment world, calls this “living a rich life.”)

Ask yourself what your current and past decisions indicate you value: do you prioritize using money to help with adventures and travels (you value options), or to have a year’s worth of expenses saved up as an emergency fund (you value protection)? Would you rather invest your next dollar into real estate investments that might pay for your retirement (a higher risk strategy), or are you more interested in putting money into a trust for your children’s college education (a predictable but lower growth strategy)? Or are your values and your money out of whack, and you’re reading this to start figuring out how to align them? All of these are valid and important, and you can create a plan to help yourself honor those values with your spending decisions.

Defining “enough.” Full stop.

Now that you’ve started to map out what you want money to help you feel, the second step is asking yourself to define “enough” so you know what it takes to feel those values in your daily life.

Remember when J Lo was just Jenny From The Block? You probably started out making less and needing less back in the day, too. Financial educator Grace Pomroy said, “I started life after college as a graduate student, so it felt like at my first job I was making a lot of money. I had exactly enough money to do the things I wanted to do: to save, to spend. When I think about ‘enough,’ I think about what’s enough for me today to live a life that’s generous and can support my community.”

I’m not saying you should limit yourself and only earn up to your “enough” line — far from it! But you’ve gotta know what amount of money it will take you to cover current expenses — and the exact figures to get to your financial goals — to know how to make smart decisions to achieve them. If you don’t know what the goal amount is, you’ll constantly be pursuing money at the expense of everything else important in your life.

And sometimes your financial goals are a LOT closer than you think! Pursuing money endlessly for the sake of being able to dive into a bathtub full of gold coins, Scrooge McDuck-style, is an easy way to accidentally prioritize earning over your other values and leave you feeling totally depleted and depressed.

If you’ve seen people do this, you know how acutely painful it can be for them to trade all their values for dollars: like your friend working at a job he hates with a boss he resents because he feels like money is more important than joy, even though he has enough in savings that he could take a work sabbatical for an entire year. (And you’ve stopped texting him to hang out because he’s not fun to be around anymore.) Or the mom who’s shocked her 2-year old is speaking in multi-word sentences because she’s worked so many 60-hour weeks at the job she doesn’t care about that she hasn’t been home to see her toddler’s development.

When I think about the goals I want to prioritize using my money for so I know what’s “enough,” I divide my targets into a few different categories:

• Short-term emergency cash coverage: About 3–4 months’ worth of living expenses. (For me, the number that feels good for this cushion comes to roughly $10,000.) Many financial advisors recommend that you have more than this — often 6–12 months’ worth of cash — but I know I have other assets I could liquefy if I need more. This feels like freedom for me.
• Freedom to have fun in my life right now: For me, this means not thinking twice about going to see a concert or a show once or twice a month, being able to go out to brunch with girlfriends, and buying some super cute new jeans if I want ’em. This totally scratches my freedom and adventure itches.
• Allowing me to invest in achieving two big dreams in the next 2–5 years: On this one, my dreams are home ownership in an adorable part of Denver and paying for my own wedding without taking on debt. This makes me feel abundant and like I’m creating a sense of family and home.
• Having enough for a fun retirement: I’d ideally like to live with ease and be able to afford vacations to visit my grandchildren. :-) Yay for abundance, freedom, adventure, and family!
• Giving charitably: I’m taking the 1% giving pledge that Salesforce.com started! This feels like the ultimate statement of abundance.

Remember, this is me. You might want your money to do all these same things to lead to your happiness… or you might think these are stupid and want your money to go completely different directions! Maybe you value feeling luxurious in your underthings and want to follow J Lo’s example by budgeting for lacy lingerie to grill ribs in. You do you, boo!

Take a moment to write down exactly what you want money for, both short term and long term. Use this downloadable worksheet to keep track of your ideas!

It can be tempting to define “enough” in your emergency fund as hundreds of thousands of dollars. It’s a common belief, Grace says: “There’s a lot of fear: fear they might run out of money when they retire, fear that they might lose their job and become destitute.”

But if a disaster happened, you’d be much better off investing in lower-cost ways to take care of yourself than having that millions in cash. For example, having all the insurances that feel necessary to you (health, car, short-term disability, life, etc.) is a much more cost-effective way to protect yourself and limit risk.

And even if you don’t have every base covered before an emergency hits, listen to Grace’s personal story: “My husband was injured in a serious car accident — the worst thing I could picture happening to someone. Suddenly we are trying to figure out medical bills, not having him able to work for a couple months. The situation taught me that it is important to be prepared, but community is one of the most important things you can have. Others stepped in to fill the gaps for us financially, emotionally, with meals — and that time of community support is what usually gets you through the worst of times.”

So as you’re defining the specific amounts it would take you to achieve your goals, remember this truthbomb from Alison of the Awesome with Alison podcast: “Enough is a decision, not an amount.” If you don’t draw a line somewhere, nothing will ever be enough, so make the decision about “enough” for you so you can develop the plan to get it.

Time to find the gap. (No, not the clothing store.)

The last step in understanding your current financial situation is illustrating the gap between where you are and where “enough” is. Knowing where your money is going can help you understand where you want your money to go.

Click here to download a step-by-step worksheet to help you crunch the numbers to understand your current financial picture.

Let’s figure out your logistics. To map out where you want to go, grab your calculator (So either track down your trusty TI-83 or open up a worksheet like this one I created just for you, because we’ve gotta crunch some numbers.) The easiest way to see how far away your goals are from your current situation is to open up Google and start pricing out the things that you want.

Let’s say you want to buy a new car. The easiest way to do that is to search for the type of car you want.

Once you pick out the car you can totally picture yourself cruising around in, circle the date you want those wheels on the calendar, and divide the total cost by the number of months between now and when you want the keys in your hot little hands. Now you can see how long (and how much) you’ll need to save to make it happen.

Notice that when you calculate out the monthly savings you need to get there, you have a couple different numbers you can play with: the total cost and the timeline to get it. You might realize that a brand new CR-V is fun and has that oh-so-delightful “new car” smell, but it would run just as well as a 2014 CR-V from CarMax, and you’d get a big ol’ cost saving by going for something just as effective at a lower price point. You might also realize that you’ve got a lot of purchases coming up this year (traveling for a million weddings, finally making it to the personal development conference you’ve been dying to attend), and it might make more sense to wait and buy the car next year instead. Adding time or decreasing cost can make goals much more achievable.

Using my example scenario from earlier, here’s how the “goal gap” calculus works out for me:

• Short-term emergency cash coverage: This one I feel good about, based on what’s in my bank account, so I don’t need to increase this contribution at the moment. Woohoo!
• Freedom to have fun in my life right now: The cost of adding 2 pairs of show tickets ($200) and an indulgent brunch ($40) to my budget would be $240/month.
• Allowing me to invest in achieving a big dream: On this one, my dreams are:

1. Home ownership: I used mortgage calculators like this one or this one to calculate that I’m aiming for a down payment of $50,000. I’d love to be able to do this in the next 3 years and currently have $6,000 in cash saved toward a down payment and an additional $18,600 in personal investments. That means I’m looking to save $25,400 in the next 3 years. If I take $25K and divide it by 36 months (3 years), that means I need about $705 per month in additional savings to make it happen — if I make no other changes to my life.
2. Paying for my own wedding without taking out debt: I’d love to have $15,000 to put toward a wedding within the next year. So if I make no other tweaks to my spending, I need $15K/12 months = $1,250 extra per month to make it happen. Want a helpful resource for setting these goals? Mint.com is great for creating a plan for monthly savings contributions.

• Having enough for a fun retirement: I’d ideally like a fully paid off home in retirement so I can live off $45,000 a year with ease and still be able to afford vacations or visits to my grandchildren. :-) I use Wealthfront (which I love!!) to manage my investments and retirement assets, and, based on their pacing calculation for me, along with what I project I’ll get in social security (fingers crossed!), I need to be contributing an extra $500 per month to be at the total assets I want by the age of 65 to retire with ease. (You can use a retirement calculator like this one if you don’t have a rad investment company that calculates this for you.)
• Giving charitably: This requires no additional income but does require me to put my business profitability on track to ensure I can give 1% of total revenue at the end of the year.

So, after my calculations are done, my big hairy audacious financial goals leave me needing to allocate this much money directly toward my goals: $240+$705+$1,250+$500 = $2,695/month.

Calculate this number for your financial situation, too — yours might be significantly different from mine! (The worksheet makes this way easier on you, I promise!)

Once you do, if you’re looking at this figure and feeling a little freaked out — don’t give up!

Knowing what you want is the first step to getting it.

Plus, there are TONS of ways to close that gap between what you want and what you’ve currently got. The next articles in this series will show you all the tools you already have to achieve your J Lo-inspired Money + Happy plan dreams.

This is Part 1 of the Money + Happy series. Read Part 2 (spending), Part 3 (saving and investing), and Part 4 (making more moolah) after you’re done!

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Lisa Lewis is a career change coach who helps unfulfilled individuals create lucrative, soulful, and joyful new career paths. Don’t love your job? We should talk. Learn more at GetCareerClarity.com or check out The Career Clarity Show podcast on Apple Podcasts, Stitcher, Spotify, and Google Play.