How to Want What You Have

In our quest to banish our debt and reach financial freedom we often get caught up with keeping up with the "Jones". We often end up making poorly thought out purchases that bring us temporary joy, that lacks long term fulfillment. How to Want What You Have by Timothy Miller is a great book that teaches a fundamental philosophy to live by. In it Miller describes the basic human instinct that drives us to perpetually desiring More.

We are never quite satisfied with what we have because a basic survival instinct is to strive to become the "leader of the pack". Whether we do this by obtaining status symbols or accumulating wealth there is a deep desire to continually consume. The problem is that once we reach the bar we set, it ends up just rising again. Miller explains where this instinct originates and some ingenious methods in overcoming this instinct.

The three principles in which he presents in the book are Compassion, Attention, and Gratitude.

Compassion: is the ability to understand that all others around us are pretty much striving for the same things in different ways. Also we must understand that no one is more entitled to getting what they want more than you are. When we have compassion for the people around us we become less critical and judgmental which frees us from hate filled feelings towards others.

Attention: is focusing on the present. Sometimes we get so caught up in reaching our goals we forget to stop and smell the roses. Attention means not dwelling on the mistakes of the past and not wishing for a better tomorrow. Attention means belonging to the now and enjoying the present for all that it is.

Gratitude: is being grateful for what you have. We live in one of the most wealthy countries in the world. An individual in Canada may not think of themselves as wealthy compared to friends, neighbours or family, but in reality we are in the top 5% of the wealthiest in the world. A majority of the world's population is more worried about how they will feed there family tomorrow rather than how they will get there plasma screen and surround sound set up.

This book should be read before any other personal finance books because it helps set the foundation for a meaningful life. Having this insight will help us set meaningful goals that will bring us lasting joy and purpose. As the saying goes true happiness comes from not having what you want, but wanting what you have.

Don't take my word for it. Here is a video of the Dalai Lama's thoughts about inner peace, happiness and money:

Spending vs. Fulfillment

We all know how great it is to go out and purchase something we've always wanted. It makes us feel great to finally bring home something that we've been eying in the mall display for months. But how many times have you ended up bringing something home only to find that your purchase wasn't as great as you though or that once you owned this object you ended up not using it at all. In many cases you may have been ecstatic at first, but psychological studies have shown that our happiness quickly fades after most discretionary purchases. Eventually the widgets we purchased may not be used and end up in storage where it collects dusts until next year's garage sale.

Not all purchases are created equal and this article is about how we must separate our wants from our needs in order to live a more fulfilling life. Knowing the difference will also help us reach our financial goals faster. Here is an excerpt from the book “Your Money: The Missing Manual” by J.D. Roth.

Two writers are at a party thrown by a billionaire when one jokes “How does it feel to know that our host makes more in a day than your best known work has made in its entire history?” The other writer responds, “I’ve got something he can never have. I’ve got Enough.”

Tthe relationship between spending and happiness is non-linear, meaning that every dollar you spend brings you a little less happiness than the one before it.

More spending does lead to more fulfillment – to a point. But spending too much can actually have a negative impact on your quality of life. The authors suggest that personal fulfillment, that is being content with your life can be expressed graphically like this:

Survival: A little money brings a large gain in happiness. If you have nothing, buying things really does contribute to your well-being. You’re much happier when your basic needs-food, clothing, and shelter – are provided for than when they’re not.

Comforts: After the basics, you begin to spend on comforts: a nice chair or extra pair of pants. These purchases also bring increased fulfillment, but not as happy as the items that satisfied your survival needs. This part is still positive but not as steep.

Luxuries: Eventually your spending extends from comforts to outright luxuries. You move from a small apartment to a home in the suburbs, and have an entire wardrobe. You drink hot chocolate in the winter and sit on a new sofa with a library of DVD’s. These things are more than comforts they’re luxuries, and they make you happy pushing you to the peak.

Overconsumption: Beyond the peak, Stuff starts to take control of your life. Buying a sofa made you happy, so you buy recliners to match. Your DVD collection grows from 20 titles to 200, and you drink expensive hot chocolate made from Peruvian cocoa beans. Soon your house is so full of Stuff that you need to buy a bigger home and rent a storage unit. But none of this makes you happier. In fact, all of your Stuff becomes a burden. Rather than adding to your fulfillment new Stuff actually detracts from it.

The sweet spot on the Fulfillment Curve is in the Luxuries section, where money gives you the most happiness: You’ve provided for your survival needs, you have some creature comforts, and you even have a few luxuries. Life is grand. Your spending and your happiness are perfectly balance. You have enough.

Here is a video from MSNBC about how spending on experiences is more valuable than most widgets you could be wasting your hard earned money on:

Visit msnbc.com for breaking news, world news, and news about the economy

Gas Price Crystal Ball

As gas prices hit all time highs we're finding our transportation budgets stretched like gumby. One way to save is to time the purchases of gas when you know that the rates are going to fall.

Check out Tomorrow's Gas Price Today http://tomorrowsgaspricetoday.com/

When you're down to about a quarter of a tank and can get gas within a 3 day period it's best to check this site and purchase gas on the down days or just before the price is about to rise.

Check out this excellent video with more gas saving tips:

Dollar Cost Averaging

In my last article I talked a bit about the concept of dollar cost averaging. Here is a video with a better explanation of how this works.

DRIP: Compound Interest On Steroids

Here's a great book by Derek Foster for anyone who's starting there investment journey. This book teaches you some of the basics about investment. The best concepts covered in this book are:

1) Dollar Cost Averaging
2) Dividend Re-investment Programs (DRIP)

Dollar cost averaging is a concept where you consistently invest a set amount of money regardless of how the individual security or market is performing.

Using this method allows you to purchase more shares when the price is down and less shares when the price is up. Over time you'll end up owning more shares at a lower average price. This method takes advantage of price fluctuations and market volatility. Here's an example I found of dollar cost averaging at the www.theshapeofmoney.co.nz:

Introduction to dollar cost averaging

You're able to regularly save $100 per month.

In May, the units cost $1 each, so you're able to buy 100 units.
In June, the cost of the units falls to 95c, so you're able to buy 105 units.
In July, the cost of the units again falls, this time to 85c, so you're able to buy 118 units.
In August, the cost of the units rises to $1.05, so you're able to buy 95 units.

At the end of August, you own 418 units. The cost of the units is now $1.05, so your total investment is worth $439.

The cost of your 418 units over the four months was $400, so the average cost of each unit was 96c.

Your investment has increased from $400 to $439.

The second concept covered in this book is dividend re-investment plans or DRIP's. A DRIP is where a company offers its shareholders the option of re-investing their dividends into the company by purchasing more shares. Some companies even offer a discount which is a super attractive deal (sometimes up to 5% off the share price with the dividends re-invested).

Even if there is no discount on the share price, you can avoid hefty commission charges by signing up for this plan. Also you are using dollar cost averaging to your advantage.

Only some companies offer a DRIP so it's important to check before purchasing shares. Here is an excellent site introduced by The Lazy Investor which lists all the companies on the TSX with DRIP's http://cdndrips.blogspot.com/ .

DRIP's are an incredible way to compound your growth. If you've picked a great company and the share price increases over time and you are enrolled in the DRIP program your investment will grow astronomically. Not only will you be owning more shares over time, but as you own more shares you'll receive more dividends as a result. Which means you'll be purchasing more shares each time dividends are paid. It's a vicious cycle of wealth creation!

Check out this great video from money.com about DRIPS