Relate Wisely to Money

Assess wants versus needs

The first step is simply getting to know your relationship with money a little bit better. Even if you think you already have a good sense of how you spend, it can be helpful to track your money more diligently. Write down in a notebook every dollar that is spent for a month, and then look to see how much you are spending on your wants (eg, entertainment and treats) versus needs (eg, housing, food necessities, bills). Sometimes we can get caught in the idea that money buys happiness and spend money on things we don't need in order to satisfy a deeper longing for pleasure, escape, or connection.
 
It is quite natural to seek out pleasure in life, and there are times when a new kitchen appliance or concert ticket can truly bring a spark of joy that inspires a sense of purpose or briefly distracts from stress. But if we spend so much on these purchases that there isn't enough to meet our most basic needs, the short-lived pleasure these purchases can bring isn't worth it.

Find new rewards

Think about what your "want" purchases are satisfying, and how you might be able to meet those needs for yourself without spending money. Does a $5 morning coffee feel like a reward for dragging yourself to work every day? Imagine other habits that could take its place - such as a morning exercise routine - which could ultimately be more satisfying.
 
If you find that all of your money goes toward "needs" in life - and may not even be enough - it is still important for you to find ways to experience joy, purpose, contentment, and connection that don't cost money. Here are some ideas:

• Check out books and movies from the library
• Meet friends for a picnic in the park
• Spend time in nature
• Get active
• Come up with new recipes with what you have in your pantry
• Learn mindfulness meditation
• Find local free activities in your city (there is almost always a calendar if you search online)

Spend to bring happiness

As research shows, spending money on material goods doesn't bring lasting satisfaction. But there are ways that money can make you happier.

1. Spend money on others. Experiments show that when people spend “bonus” money on personal items or material goods, it doesn’t boost their happiness; but when they spend it on someone else or donate it to charity, they experience a significant increase in their sense of wellbeing.
2. Buy experiences, not material goods. Experiences directly increase your wellbeing and the wellbeing of others you share them with. They can enhance relationships and promote connection to purpose and community. Moreover, we are less likely to have buyer’s remorse with experiences, and they don’t lose their value over time—instead they can create happy memories.
3. Buy (or barter for) more time. Think about ways that you can create more time in your life for fun and friends. If money is short, see if you can barter with friends to trade time and tasks. For example, get a babysitter or exchange with a friend, so you can enjoy an evening with your partner or friends, or just have some down time. Hire help for the yard or house work, or trade a task you do well for one you don't like.

Avoid comparing

We tend to compare our income to others and only be satisfied if it is relatively higher. If we are offered a raise, but everyone else is too, we are less satisfied.

This is not limited to money, by the way. If we win a race, we will initially be elated, then begin to compare ourselves to someone who is even better—someone who won a bigger race.

Comparing ourselves to others and focusing on income is a never-ending treadmill of dissatisfaction, and it only makes sense to make a deliberate effort to get off. Set aside time to reflect upon what you like and respect about yourself—without comparing to other people. Focus on how you have improved or grown without worrying about how you rank. Take satisfaction in how hard work and experience develop your skills or speed.

Adjust your goals

Take a good look at your budget. While humans have a tendency to adjust our expectations upward as our income goes up, you can consciously change that. Instead of wanting more expensive things and more of them, you can choose to save new income. Instead of buying things, you can give yourself the security of having enough money.

One way to help yourself change your spending habits is to establish incentives that will motivate you to meet your goals. These can be rewards for meeting goals or punishments when you don’t. Yale Professor Ian Ayres, author of Carrots and Sticks, has developed the StickK website that lets you specify your goals and the incentives you will give yourself, and helps you keep on track.

Nudge yourself to save

Credit cards can lead us into temptation because they separate the pain of payment from the pleasure of purchasing something new.

Saving works the other way—we have the pain of less money to spend right up front, and don’t necessarily see the pleasure of having money to live on in the future. So you need to find ways to increase the incentive to save.

One way to do this is to set up default savings that automatically come out of our paycheck or bank without us having to choose the “pain.” Tom Rath calls this “setting positive defaults.” Richard Thaler, in his best-selling book, Nudge, suggests a particularly good way to do this—Save More Tomorrow. In this plan, you tell your employer in advance to put any raises that you get in your retirement account (or savings if you prefer). That way, your take-home income never goes down, so you aren’t losing spending money, but you increase your retirement savings.

If you face unemployment, reduce your losses

Unemployment is one of the most difficult situations we face. It can be devastating to a family's financial security on many levels. One British study found that unemployment had a larger negative effect on Don't lose connection wellbeing than divorce. And this is true, even if unemployment does not significantly impact income. A loss of a job, not only impacts income, but brings other major losses: social connections, status, the intrinsic satisfaction of using your skills.

Recognizing this can help you enlist strategies to minimize your losses. For instance, you can search for other ways to use your skills and feel productive while you are looking for a job. Make sure you connect with your social network for support throughout.

Know (and use) your resources

No one should have to compromise their health and wellbeing in life because of their financial situation, and in most communities, there are resources you can access to help in times of hardship. Don't be afraid to search out and use external resources, from food banks and charities to government assistance where available. If you don't know what is available in your area, you can do a search on a computer at your local library.
 
No matter how little (or much) money you have, your life has value and your wellbeing should be a priority.