MP Dunleavey's book Money Can Buy Happiness jumped out at me because instead of dwelling on the stressful side of money, it focuses on how to use it to get the life you want. Dunleavey, a columnist for The New York Times and MSN Money, advocates investing in activities that really matter, like family time, instead of the ones that might cost more but leave you feeling empty, like unnecessary shopping. I recently E-mailed Dunleavey to ask her about the changes she's made to her own money habits and to get her best advice.
As a personal finance writer, how did you get the idea to write a book that focuses so much on being happier?
One of the first things you notice as a personal finance writer is that money pretty much makes people miserable and stressed out—no matter how much or how little they have.
So at first glance, the old cliché that "money can't buy happiness" appears to be quite true. But the deeper question that occurred to me (and I don't think I'm unique in this), is: Why doesn't it?
The question of money and happiness grew to preoccupy me, particularly as my columns began to explore the question of debt and spending more deeply. Debt seems simple: You're living on borrowed money. But people can't seem to get themselves out of debt—or to live reasonably and well on the income they have—because they think they need more money, and more stuff, to make themselves happier.
That's the trap.
The core of the idea for the book came from an article by the Cornell economist Robert Frank called "How Not to Buy Happiness." In it, he provides the spark to a new solution: Maybe your money can make you happy—you just have to spend it on different things.
You explain that many of the activities that make people happiest aren't necessarily the most expensive ones. Do you think people forget this and focus too much on what money can buy?
Well, that's true. Happiness doesn't have to cost a lot. On the other hand, sometimes investing thousands in, say, the right hang glider or a custom-made guitar can make you really happy.
What I emphasize in the book is that every individual needs to look long and hard at what their own happiness consists of—and realize that happiness is a series of financial choices. Typically, most Americans do focus too much on "getting and spending." Idle purchases. Things. Gadgets. Clothes. Cars. Shoes. Stuff that's forgotten almost as soon as you bring it home.
I dug into the research on positive psychology and behavioral economics to show that there are a handful of key areas of life that tend to be really rewarding: relationships, being as healthy as you can be, challenging yourself, giving to causes you find meaningful, creating financial security, etc.
There's not one item on that list you haven't heard a thousand times before. But few people consider the connection between these qualities of life and how and where and why they spend their money. In fact, I'd argue we have a real disconnect in this culture between what we really want out of life, and where our money goes.
By investing your money in quality of life—just as you might invest in a portfolio of stocks—you increase your happiness returns in ways that acquiring mere stuff can never match.
Since doing the research for this book, have you changed any of your own spending habits?
OH. MY. GOD. YES. Case in point—and this is just one of many examples: I have one pair of jeans. One. I know people with 12 or 20. It's not that I don't shop. I do. I think I'm an L.L. Bean Preferred Customer. But writing this book taught me something my grandmothers knew: You only have so much. Make sure you spend on what you really want, what you really need, what truly matters.
Another adjustment: I pretty much stopped spending money on eating out. It helps that my family and I live in a small town, of course, but even when I was still living in NYC, we cut way back. I wanted to invest my money in many other things—getting out of debt, traveling, my house. Fifty dollars on pasta and wine—forget it!
What kinds of stories have you heard from people who read the book who say it inspired them to make a change?
It's interesting—the main feedback I've gotten was on the section about buying yourself peace of mind. In other words, spend money to make life easier, less stressful, less hectic. People really like that, I guess because it made them feel less guilty about spending money on certain services.
Your "60 percent solution" recommends using 60 percent of gross income to pay for essentials. What if that feels impossible?
For most of us, it is impossible because that 60 percent is supposed to include taxes! Hah! But the magic really happens when you focus on saving those 10 percent buckets.
By trying to save 10 percent of your gross income for emergencies, 10 percent for short-term unexpected expenses, and 10 percent for retirement [the remaining 10 percent is for fun and spontaneous expenses]—or at least aiming for those targets—you force yourself to trim the fat from other areas of your basic budget.
Most people's basic monthly list of expenses is full of stuff they don't need, don't want, can't use. Get rid of all that baggage! Spend the money on enjoying life!
Plus, when you ramp up your savings like that, you create so much security for yourself, it's incredible. Nothing makes me happier than my fat little ING Direct savings accounts.
You are so honest and forthcoming about your own struggles with money issues, including getting out of debt. Do you ever hesitate or have second thoughts about sharing your own mistakes?
Never. People are always so grateful that I'm honest. So many people walk around being afraid to own up to their mistakes and miscalculations. Oops, shouldn't have taken out that five-year adjustable-rate mortgage!
No one is perfect, especially when it comes to finances. And that's OK. It would be better if we had more freedom in that regard, less fear of censure, so we could talk to one another about what we earn, what we spend, what's a reasonable way to live. That's the only way to make financial progress.
What's next for you—are you working on any more books or big projects?
I am hoping to sell the paperback rights to Money Can Buy Happiness! Especially right now, this book has a message about how to enjoy life with the money you have—and how to live a financially sane life—that would take a lot of pressure off people. The economy feels very shaky right now. But part of what is making it feel that way is that so many of us are overextended. There's no need to live beyond your means. What you need to be happy is within reach, right here, right now.