A few years ago my practice conducted a series of focus groups with female attorneys to learn about their biggest professional, personal, and financial challenges. We wanted to understand why so many of these women had so little money saved, despite their healthy incomes.
We learned that, even though these women put in long hours and worked hard at their jobs, most of them were very unhappy, both professionally and personally. They had pursued law because of the quality of life they thought it would promise. They believed that if they worked hard, they would earn good money, live a good life, and be happy. Unfortunately, what they found was that they earned good money, but their quality of life was awful, and they justified their unhappiness at work by spending all their money, saving next to nothing. These smart, successful women were on a treadmill of consistently poor financial decisions and could not get off.
It was a very sad story, and one I’ve heard repeatedly over the course of my time as a wealth advisor to professional women. The reality is that as women, many of us work hard, take care of everyone but ourselves, and at the end of the day, have very little to show for it financially. We make poor decisions about money that affect our lives negatively in the long run, like buying an expensive purse for short-term gratification when we should be thinking about the future and contributing more to a retirement account. But we can change that.
It boils down to a very simple fact: If you like what you do, you make better financial decisions, which leads to more financial stability. One study of 9,300 people, conducted by Australian economist Satya Paul, found that “happy people liked their jobs, worked more, and earned more money.” Specifically, those who rated their own happiness at the top of a zero to 10 scale earned about $1,766.70 more than those at the bottom, and an individual’s income increased by $176.67 for every one point higher the person was on the happiness scale. Paul noted in his study — the results of which were shared in the Sydney Morning Herald — that the happy people fell into two buckets. There were those who liked their jobs and thus worked more hours, earning more money; and those who took steps to create a work-life balance (think: using vacation days) and thus felt more happy and productive at work. On the flip side, according to a Harvard University study, “The Financial Cost of Sadness,” sad people tend to make impatient financial decisions, focusing more on getting money now than on maximizing their earnings in the long run.
So, how can you ensure you’re happy and thus get more out of the money you earn? There are two phases we often reference in financial planning and advising: discovery and solutions. Discovery helps provide clarity and define what is important in your life. Once you have an understanding of that, you can move into the solutions phase. So how exactly do you work through these phases to become happier and more financially secure? Follow these three steps:
Step 1: Understand what you want from your job and in your life.
Spend some time here. Get a clear picture of what is important to you by determining your goals and prioritizing them. Ask yourself some real questions: What makes you happy? What gives you joy? Are you happy in your current career? If you were here three years from today, what would have to have happened in your life for you to feel that you have been successful personally, professionally, and financially? Write down the five most important values to you in both life and work (things like family, happiness, leisure). Having a clear understanding of these values, and the answers to all of these questions will help dictate the action steps you need to take.
Step 2: Assess your current circumstances.
Take a good look at your personal, professional, and financial life to see where you stand in relation to where you want to be. Are you living out the values you wrote down, or are they just wishful thinking? For example, if family is your No. 1 value, but the big paycheck you’re bringing home is preventing you from spending time with them, something likely needs to change. Evaluate your daily life as it relates to those goals you identified in step one, and identify the specific problem areas.
Step 3: Make incremental changes.
This is the solutions phase. You now know where your problems lie, and can start to address them. This can be an overwhelming step, but we find that breaking down your solutions into more manageable, bite-sized changes is a successful strategy. Rather than tell yourself, “I need a completely different job if I want to be happy and spend more time with my family, but that’ll take months to find,” look for changes you can make in the immediate future until you’re able to get to that end point. Perhaps that means sitting down with your boss to set some boundaries as far as your working hours (“I’m happy to work late or come in early when certain urgent projects require it, but I plan to leave the office at 5:30 pm at least three days a week to have dinner with my kids.”). Or, maybe it’s making yourself take those vacation days you’ve felt too guilty to use and planning a special trip with your family. When you set these smaller goals for yourself, you’re more likely to accomplish the larger ones in the end.
Consider this an opportunity to make a change for the better. Remember: Happy people make better financial decisions, which ultimately affects your financial security. In investments we believe that you always give something up to get something else. With money and lifestyle, there are also tradeoffs. Can you have it all? No, not all at once. But we know that happiness at work is one of the most critical factors in maximizing your money. So, if you’re not where you want to be financially, take a good look at your career and the job you have and ask yourself, “Am I happy?” Your financial future may depend on it.
Bridget Grimes is a wealth advisor at HoyleCohen and a member of the DailyWorth Connect program. Read more about the program here.