Sue Stevens 03.01.10

Accumulating money for the sake of stock piling it will never really be satisfying. At some point, there comes a time when you question why you are working so hard and why you never seem to be happy.

Truth be told, there are many, many people with lots and lots of money who are unhappy. The amount of money you accumulate, in itself, is just not enough.

Add to that, a weak economy, a housing market that continues to deteriorate and not enough jobs, and you might start to feel depressed or even angry about the state of your finances.

But it doesn't have to be that way.

By giving your personal finances some extra attention, you can start to gain confidence in your choices. Those choices can be congruent with how you want to live your life. And that can finally bring you some happiness--no matter what is going on in the world. That's what I mean by "put your money where your heart is."

Step One: Know Where You Stand

Do you know what you're worth, financially speaking? When you add up what you own and what you owe, what's the net effect? Most people don't have a clue.

But that's a mistake. You don't want to add it up so that you can feel superior or inferior to anybody else. You want to add it up so you can take a step back and start to see patterns that will emerge in your Net Worth. From that vantage point, you can start to take action so that you can find more satisfaction with your financial situation.

What kinds of patterns might you see? Well, one of the first patterns that shows up for lots of people is that they spend too much and don't save enough. Sounds simple, doesn't it? Kind of like "eat less and exercise more." All well and good, but deceptively difficult. If your Net Worth shows very little liquidity and lots of other types of assets, you may be cash poor which can be a constant source of frustration. The best way out of that trap is simply to save more in taxable assets. And that usually means spending less elsewhere.

If you don't know where to start, completing a Net Worth Statement can give you an idea of where you stand. I like to look at proportions--balance in everything. When you look at your own Net Worth Statement, see if you have a balance between your cash and investment accounts, your retirement savings and your house. Too much (or too little) in any one area is potentially a red flag. It's the kind of pattern that can scream out "unhappiness." For example, too much house for the overall financial picture is bound to cause pain. Or if you see everything tied up in retirement plans with no emergency funds, it may signal trouble if you were to lose your job.

Just understanding your Net Worth is the first step in gaining more control over your financial life. Analyzing the patterns you find will give you insight into what may have been holding you back for so long.

Step Two: Make Conscious Spending Decisions

If you own 80 pairs of jeans, then you're wearing your money. If your credit card statements show big grocery and restaurant charges, then you're eating your money.

But is that really what you want? Couldn't those types of things be masking insecurities about who you are? How would it feel to take a look at all of your spendable money and start over with how you allocate that to your different needs?

I encourage you to do just that. Abraham Maslow created a now famous hierarchy of needs that shows what we all require in these areas: physiological, security, love and belonging, esteem, and self-actualization or transcendence. Why not think about those needs as it applies to your money? If you want to be happy with your life, you need to consider all of those needs.

To do this exercise right, you need to figure out what you're spending your money on now. You will need to look at credit card statements and your check book register to see just where your money goes. Categorize those expenses and then think about how you are meeting each of your hierarchy of needs. If you don't like what you find, then be prepared to make a change. That may not be easy at first.

There are tools you can use to make this process easier and more fun. You will find electronic worksheets at www.financial-happiness.com for both your Net Worth Statement and your Spending Hierarchy of Needs. Mint (www.mint.com) is a free online service that can give you ongoing feedback about your assets and liabilities, your spending by category and overall reports on your progress.

Step Three: Review Your Investments Holistically

Before you get to bemoaning or boasting about your investment performance, take a moment to think about what you really want from life. You may find you've created a big barrier between "your money" and "what you want from life." But I'm telling you, if you want happiness, the two need to go together.

What does happiness mean for you? Think about this for at least 15 minutes (take as long as you like, but don't gloss over this process). Perhaps happiness means spending more time with your family. Or finding the time to contribute to your community. That may mean you need a different job or you just need to cut back on your hours. How could you make that work? Perhaps it means different training for a different job. Or making your money go further with a smaller paycheck. That may be the price for more freedom.

Next, what kinds of money goals do you want to set for yourself in the next year? Think about where you want to go over the next few years and that may help you know what you need to accomplish in the next twelve months. For example, you may want to set a goal about how much debt to pay off over the next three years. Or perhaps you want to tackle saving for a major purchase in the near term. Once you have the goal in mind, you'll find the inspiration to take a fresh look at how you can achieve your dreams financially.

Make sure you think about saving. You need to have money to fall back on--an emergency reserve. That should cover at least six months of expenses in this economy--perhaps more if you are in a higher paying job.

Now look at your mix of investments: how much do you hold in cash types of accounts, stocks and bonds. If you want a balanced portfolio, you'll need some of each. The proportion will vary depending on how much risk you choose to take. If you can stomach more risk, then you can hold more stocks. A very basic rule of thumb is to hold your age in cash and bonds. Investing can be much more complicated than this, but it's not a bad place to start if you want to keep it simple.

Many people are choosing to invest their money in socially conscious companies. That may mean finding a balanced proportion of assets that are invested in environmentally friendly stocks. Or stocks that consider human or animal rights. When you know what your money is invested in, not just some blind pool that you don't care about, it can make the process more rewarding. But you need to do your homework to make sure it's a sound investment too.

Next, integrate your investment picture with the other areas of your financial life. Look at your tax return. How much did you generate in interest and dividends? In this historically low interest rate environment, the answer might be "not much." If you're not happy about that, think about how to change your investment mix of assets within an appropriate level of risk. Perhaps you want to increase dividend-paying stocks. Or use tax-exempt bonds instead of taxable.

Continuing your holistic review, think about your retirement investments. How is the balance of those accounts versus your non-retirement assets? Do you want to change anything? In 2010, anyone can convert a traditional IRA to a Roth IRA. That will benefit some people, but not all. Basically you need to think about paying tax now to be able to convert those assets with the potential benefit of paying no tax in the future.

If you have an estate plan, you need to make sure your investments are integrated in this area too. Check your beneficiary designations to make sure your money goes wherever you want it to. If you have trusts, make sure they are funded.

Step Four: Envision Where You Want to Go and Plan Accordingly

A recurring theme in following your heart through your money is "vision." You need to think about where you want to go and what you want to do. That's true no matter where you are in life.

You don't have to do the same thing throughout your whole life. I've helped many people make bold life changes that took planning and foresight. It can be exciting to make a change, but it takes preparation too.

If you choose to make a major life transition, and this includes the transition to retirement, think about these things:

• Where are you going to live?
• What are you going to do?
• How much will that cost?
• Have you accumulated enough money to take that chance?
• How will you stay connected to the people and communities you love?

Step Five: Leave a Legacy

It's important to consider what will happen to your assets when you're gone. Anyone with a family, or other people that count on them, needs an estate plan. It can be as simple as a will or it may need to be more complex and include trusts of various types.

It's also equally important to write down where all your important papers and belongings can be found and who to contact. I've seen huge messes when someone died unexpectedly and no one knew what to do.

Force yourself to get past the "procrastination factor." And boy is there one when it comes to thinking about your own demise. But there is a feeling of peace that you'll find when you get this taken care of. Just push yourself to get it done.

Step Six: Choose Radiant Wealth

"Radiant wealth" is all about feeling confident and generous about how you are living your life. If you can take the steps above, you'll have a much better grasp on where you stand financially and where you need to make changes. When you know how your investments integrate with other financial aspects of your life, it can help you move forward.

As you grow in confidence about your finances, you may find that you are in a position to help others. This is true regardless of the amount of wealth you have accumulated. Anyone can give their time or a portion of their money to help someone else. And that so often brings happiness to you as well as others.