In my post the other day, I detailed my five biggest financial pitfalls. Number one was this:

“Things will be better when…” syndrome. Katherine commented: “I read a study somewhere that most people think they will be financially comfortable when they reach that next $10K bracket of income. I am no exception- I catch myself thinking that all the time!” I identify with that like crazy. It’s a trap that can keep you from ever really learning to be satisfied and secure right where you are.”

As I shared yesterday, our income has grown significantly since we started our lives as a young married couple. For the first few years after I starting freelancing, my income goals were simply “earn more than last year.” Finally it got to the point where we were earning what I’d always thought would be a very solid, very comfortable household income, but I found myself wanting to earn still more.

I’ve asked many people, especially self-employed folk like myself, “How do you know when you are earning enough?” and often get some version of this response: “When I have enough for everything I need and a little left over for what I want.” But that doesn’t really answer the question, does it? I’m sure most of us can answer that health insurance is a need, but is a low-deductible plan with fabulous wellness coverage a need or a want? Food is a need, but is organic produce a need, or a want? Let’s say travel is a “want”: are we talking road trips to a neighboring state or summers in Greece? And so on. Of course, each person’s answer to those questions is personal and unique, but it definitely influences your own definition of “enough”.

I am trying to remind myself that right now, we have enough. Enough to cover our basic needs, many wants, and some left over for the future. Honestly, going by that definition, we had enough 10K ago, and 10K before that. But I still feel the pull for more – a nicer house, a fatter retirement account, more family vacations. I don’t think there’s anything wrong with wanting to earn, but I also don’t want to work ever harder to accumulate money just for the sake of having “more”. If it’s not actually creating a happier life, what’s the point?

I know a lot of this is highly personal, but I’m curious if you have your own definition of “enough.” What does “enough” look like to you? Are you there yet, or are you thinking it’s still around the corner…you know, when you hit that next 10K or so?

This is the third post in a series about money and finances here at The Happiest Mom. You can find part 1 – my five financial pitfalls – here, and part 2 – all about creating financial goals – here.

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It's hard to follow a map if you don't know where you're going…or why.

This is the second post in a series about money and finances here at The Happiest Mom. You can find part 1 here.

The year after we had our first child, our yearly household income didn’t even reach the high teens. First we lived with family, then “graduated” to a cheap one-bedroom apartment. I clipped coupons, scoured the Tightwad Gazette books daily for money-saving ideas, and kept our weekly grocery bill to a strict $43. When money is that tight, there’s barely even room to dream.

Our biggest problem, obviously, was lack of income. So I was convinced that as soon as we had more money coming in- twice as much as we were making at the time seemed like a good start – we’d be golden. But though our household income grew steadily and surprisingly quickly through our twenties, we never reached that magical point where suddenly the clouds parted, the angels sang and everything fell into place. I’d always thought earning more would be the ticket; but I had never thought through the next step: what to do with more.

True, not being so close to the edge financially absolutely did make a difference – we were able to do things like, say, arrange for a tow and repair for the broken-down car rather than just leaving it in the grocery store parking lot until payday. But I didn’t feel much more secure – in fact, strangely, I had felt more in control of our money when we were flat broke.

Huh?

It makes a twisted sort of sense if you think about it. When we had barely enough money to cover our expenses, there weren’t many decisions to be made. Food, rent, gas and utilities used up almost all of our cash. Sure, there was stress, but at least I knew that if I covered the basics, I was doing the “right things” with our money.

The more we earned, though, the more decisions we had to make with the “extra” money and the less clear-cut it was which choices were right. Without knowing exactly what we wanted to do with our cash, it was only too easy to fritter it away, and for those jumps in income to mean a lot less, at the end of the day, than we’d assumed they would. Not having specific goals kept our income from working for us.

Yesterday I outlined my personal top five financial pitfalls, and in future posts I am going to delve further into each one. But there is one major thing that ties into each of the 5 obstacles I wrote about yesterday: having specific goals. In fact, I’d say the five pitfalls I defined are actually symptoms of not having goals. Why?

• Without specific goals, it’s very difficult to really get organized. Sure, you can make a budget, but how much should you allot to each area? And what should you do with anything that’s left over? For me, not knowing where I’m going leads to spinning my wheels. And it’s really hard to get a handle on your money when you’re stuck.
• It’s no fun to communicate with your spouse about money if you don’t have attractive goals to talk over. Bills and debt can be overwhelming and depressing, and don’t make for inspiring conversation unless you’re working toward something larger together.
• Without goals, it’s impossible to know how much is “enough.” This is especially important if one or both of you are considering changing jobs or are self-employed. For years, my only earnings goal was to “make more”. But when does more become enough? If we’d had a goal in mind, I would have been able to say a long time ago.
• Not understanding what kind of lifestyle our income should “buy” usually happens when we look to other people too much to set the standard for us. If you have your own goals to work toward, what other people around you are doing just matters less.
• Without goals that mean something to you, discipline fatigue is even more wearying. It’s hard enough passing up that expensive dinner out or new sofa when you know why you’re doing it. But when you don’t have an objective in mind, you can’t really visualize how the sacrifice will pay off.

When I finally faced the fact that earning more money hadn’t bought me the instant results I thought it would, I realized it was because I’d never gotten past a vague “what” when it came to money. I wanted our family to be financially secure, but had never defined what that would look like. I was trying to draw a map without knowing where I was going. 

So I thought that right off the bat it might be helpful for us to name a specific financial goal or two that we’re working toward. Try to be as specific as possible with not just what, but  also why. Say you want to pay down debt-how much debt do you need to zap? In what way will your life be better when you’ve reached that goal? Or maybe you want to “start investing.” How much per month? What will that get you at retirement age?

I’ll go first:

Goal: Six months’ living expenses in the bank

More specifically: Reach this goal within 18 months

Why: Having a fat emergency fund will allow me to confidently take more risks and be more creative with my business while still feeling secure. Jon can also make better long-term decisions about his business.

Look, shiny! alert: It’s not going to be easy to sock that much money away and will require a lot of sacrifice. We just bought a house last year and the list of (money-sucking) projects we’d like to do is long. We’ll have to put a lot of those projects on hold.

But it’s worth it because: Once we have a nice big safety net under us, we’ll feel more relaxed about putting money into home renovations and other “fun” stuff. We’ll also be in a position to make our individual businesses stronger and more profitable, because we’ll have the freedom to think long-term rather than short-term.

Your turn. Any big or small goals you want to share? And any advice for me to help me ignore that un-landscaped back yard and cruddy old vinyl flooring for another year or two?

Of course, after you make a goal you have to have a plan. We’ll be discussing that and much more over the next week or so. Hope you’ll keep tuning in! Feel free to subscribe to my feed so you don’t miss any of the conversation.

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Wow, it has been a busy couple of weeks. Our discussion about hiring household help-and my follow-up post debunking some myths about hiring a cleaning service-really seemed to strike a chord with other women in the blogosphere! Thanks to Saving Naturally, Motherese, Rookie Moms, Simple Mom, and Lisa Belkin for keeping the conversation going. (Did I miss anyone?)

Other highlights:

• Even though I tell readers to “aim low and go slow” I actually have big dreams and goals for myself. How can those two concepts go together?
• Do you covet a top-loading dryer or an induction cooktop, like me? What appliance features can you do without? Household technology: the nice, the necessary, the pointless.
• In related news: all those gadgets and gizmos can make our lives easier-but they can also complicate things if we let them. (With thoughts from Lillian Gilbreth, the original “Cheaper By The Dozen” mom)

As much as I love talking about cleaning and household management, it’s time to move on-to another sensitive topic: Money. In my two years of writing this blog, I’ve only discussed money once as part of a larger discussion about the difficult choice to work, postpone work, work less, or not work at all. I know why this is: frankly, I have a lot of money hang-ups, and it’s taken me the better part of my adult life to get to the point where I face my financial future head-on instead of squeezing my eyes tight and hoping everything magically works out for the best. I’m far from being a money whiz now, but I have learned two things:

1) My satisfaction and happiness levels are directly related to the amount of control I feel over our financial lives. Note: that doesn’t mean I’m happier when I have more money; in fact, sometimes it’s the opposite. But when we are managing the money we do have well, I always feel more secure, less stressed, and a lot happier.

2) Like anything in life, financial issues become less scary, shameful and foreign the more you face them head on.

So, let’s bring money out in the open. What are your financial strengths and weaknesses? Did you learn to handle money as a kid or did you have to muddle through, learning as an adult? Do you talk about finances with your spouse? Your kids? Are you saving for any big goals, following a specific plan, or just limping along from paycheck to paycheck? How do you know when you have “enough”? Do you believe there’s a connection between the state of your finances and the state of your mood?

Can’t wait to discuss for the next week or two!

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