I just had the chance to read two interesting articles in a recent edition of the Wall Street Journal. The first article was an opinion piece written by Ashleigh Brooker. Ms. Brooker made the argument that it’s always smart to live below your means, or essentially to only spend up to 80% of your income and save the remaining 20% no matter what your income level is. This way, you provide a cushion for times when you may lose your job and have to live on one income or no income, or for times when an emergency arises such as an illness, or disability. She provided a couple of examples of situations where individuals either had to move and needed extra time to find a new job (thus living off one income for a short while) or when a grandparent moved to be closer to his grandkids, but had to accept a lower paying long-term position. By living below your means, you provide yourself with greater flexibility.
The second article I read was a summary of recent research conducted by Joe Gladstone, a research associate at the University of Cambridge. He had the chance to look at how happiness levels change in correlation with levels of wealth. His interesting finding was that there was a significant correlation between a person having more money in his/her checking account and the person’s happiness level. This correlation existed regardless of the overall wealth level of the individual. Thus, in reading these two articles, I immediately thought—if you live below your means and save 20% of your income, you can put that 20% of your income (or some portion of it) into your checking account and that may boost your happiness level. Not a bad plan!
-Allison G.
Sage Personal Finance 