MONEY Spending

Why You Should Spend More Money in Retirement

illustration of senior couple taking money out of purse
Jason Schneider

Money worries can make you unnecessarily frugal. Here's how to overcome them.

You’ve saved up money your whole career. So in retirement, don’t deny yourself the pleasure of spending it.

Not a problem, you think? Actually, it can be. In 2014, 28% of people 65 and older with at least $100,000 in savings pulled less than 1% from their accounts, reports the research firm Hearts & Wallets. That’s well below the 4% that many financial planners say is safe.

Misgivings about spending play a big role, says Hearts & Wallets partner Laura Varas. In focus groups, retirees described big spenders their age as irresponsible and expressed shame about their own spending. And as people age, they tend to get more emotional about complex money decisions, says Christopher Browning, a financial planning professor at Texas Tech University: “No one gives you instructions on how to turn your savings into income. It can be a paralyzing process.”

First determine if a shortage of money is the problem rather than an inability to spend. The tool at troweprice.com/ric can help you figure out whether you indeed have enough funds for a good retirement. Then, if it’s worry that’s stifling your spending, try these steps to put yourself at ease.

Make Your Own Pension

Living off a steady income stream, not portfolio withdrawals, can boost your confidence about spending. A Towers Watson survey found that retirees relying on pension or rental income are less anxious than those who live off investments. Don’t have a pension and don’t want to be a landlord? You can create regular income by buying an immediate fixed annuity. A 65-year-old man who puts $100,000 into one today, for example, would collect about $500 a month for a lifetime.

Add up your monthly fixed costs, such as a mortgage and health insurance. If that amount exceeds your Social Security and any other guaranteed income, fill that gap with an annuity. (Get quotes at ImmediateAnnuities.com.) Granted, if you’re hesitant to spend money, you may be hesitant to lock up funds in an annuity. If so, annuitize a fraction of your money and add more once you’re more comfortable with the idea.

Bucket Your Money

Should you not want to tie up any money in an annuity, you can get comfortable about spending by dividing your portfolio into accounts for different needs. Browning suggests sorting your savings into three buckets. One provides income for everyday expenses over the next few years, the second is for fun pursuits, and the third is for future needs: day-to-day living, emergencies, and bequests.

Put the first two buckets in secure and liquid investments: money-market accounts, CDs, or high-quality bonds. The bucket for later years can have stock holdings for greater long-term growth.

Once that’s done, you can start collecting income—a paycheck for retirement. Set up a regular transfer from a money-market account that’s in your first bucket—enough to cover, with Social Security, monthly bills and usual expenses. Then relax and enjoy.

You Might Also Like:

These Are the Best Places to Retire in the U.S.

When $1.5 Million Isn’t Enough for Retirement

When Good Investments Are Bad for Your Retirement Strategy

MONEY Spending

When It’s Okay to Splurge on Yourself

543194985
Dave and Les Jacobs/Kolostock—Getty Images

"It's a shame to work so hard all the best years of your life, just so you can afford to survive in the worst years of your life."

When Stan Calow was growing up, frugality was a way of life: “You spend as little as you need to, and then save everything else.” So, the 58-year-old engineer and U.S. Army veteran from Kansas City, Missouri always hated spending money.

It took his financial planner, Cindy Richey, to drill the point into him that it was actually okay to enjoy his savings once in a while.

After much prodding, the message finally got through. Calow and his wife just returned from a trip to France, touring the chateaux of the Loire Valley, just like they had always dreamed.

Says Calow, who learned about the fragility of life by serving in Kosovo: “I wanted to live life while I’m still young enough to enjoy it.”

It’s a tricky dilemma for many of us. As much as pundits tell us to scrimp, and save, and sacrifice for the future, when is it actually okay to spend a little on yourself and enjoy this life that passes all too quickly?

Indeed, according to a new survey, many of us are not enjoying it enough.

When Wells Fargo asked affluent Americans about what they regretted most about their finances, 15% said “not having enjoyed their money more”.

It is an honest answer that you do not often encounter in financial surveys. After all, splurging on yourself is typically seen as selfish and gauche.

But as some planners point out, it’s your money, and you should not be made to feel bad about enjoying it occasionally.

“People are so nervous about outliving their money, and sometimes they shoot too far in their saving,” says Joe Nadreau, director of innovation and strategy for Wells Fargo Advisors. “You don’t want to come to the end with $3 million saved, but having sacrificed your whole life along the way.”

Of course, leaving an inheritance is still an important consideration, according to 57% of affluent Americans in the Wells Fargo survey.

But just remember that once the will is read, you are six feet under, and no longer around to witness your family enjoy that wealth.

A Bank of Memories

So try thinking of the concept of ‘inheritance’ a little differently: Instead of purely in terms of dollar bills, consider it as a set of memories, which you can create together as a family while you are still alive.

“We have recently noticed a sizable uptick in clients who are more interested in sharing their wealth in the form of experiential gifts,” says John Fowler, a planner in Keller, Texas.

“It might mean taking the entire family on a cruise, or paying the airfare to fly in to see grandma and grandpa in Arizona, Colorado, or Florida. At the end of the day our clients realize stuff is just stuff, but with a little effort, they can create a memory for their families that will last a lifetime.”

Keep in mind that splurging on yourself doesn’t mean you become miserly with others. It is not an either/or proposition; You can treat yourself once in a while, and also be generous with charitable causes that are meaningful to you.

“People call me all the time to get permission to enjoy their money, which I heartily give them,” says Dave Ramsey, a popular radio host and author of “The Legacy Journey.”

“Often the thing that breaks it loose for people is to increase their giving. Because the more generous you are, the more you get permission to spend on yourselves.”

As for Kansas City’s Stan Calow, he looks forward to traveling the world with his wife, and enjoying future grandchildren. It was hard to get him to enjoy those savings, but now he’s making up for lost time.

This thought, in particular, came to mind when he was walking the streets of Paris recently:

“It’s a shame to work so hard all the best years of your life, just so you can afford to survive in the worst years of your life.”

Read next: When It’s Okay to Splurge on Yourself

MONEY Spending

9 Times to Demand a Refund

108006192
Jeffrey Coolidge—Getty Images

Get ready to stand your ground.

When you spend your hard-earned money on a product or service, you expect a certain level of quality — and when that quality falls short of expectations, it’s not unreasonable to think you’re entitled to a refund. But not every situation qualifies. So when should you stand your ground for your money back, and when should cut your losses? Take a look at these nine times you should demand a refund — ever so politely, of course.

1. Departure Taxes on an Unused Flight

I once booked a European vacation around the holidays that was supposed to stop in London, Dublin, and Paris, but the last leg of the trip was cancelled due to “weather conditions” according to the evil discount airline that shall remain nameless. The airline offered to fly my friends and I to Rome as penance — which was a nice offer in theory, except we couldn’t fly on the dates they suggested — so my flight was essentially a loss since the airline wasn’t responsible for acts of God, which, in this case, was fog. I was young and dumb and just accepted the decision.

Maybe that wouldn’t have happened if I were friendly with Kyle Stewart, travel editor at UPGRD, at the time. He experienced a similar situation, but walked away a little less broke than I did.

“We had found a very cheap flight to and from London, but once we were abroad we had to make a change and book an alternative separate flight home,” he says about his one-time travel plans. “Our tickets were non-refundable, but it is unlawful for the carrier to keep revenue they collect for ‘taxes’ if you do not actually fly the route. The U.K. has a steep departure tax of nearly $250 each on flights leaving the United Kingdom. Because we did not fly those routes but had paid for the taxes, even on a non-refundable ticket we were able to get the departure tax refunded which nearly paid for our alternative transportation home.”

2. Anything Unsanitary or Unsavory in Your Food

There are a lot of gross things I can deal with — my friends would love to tell you the story about the time I ate an ancient corn chip off the carpet in high school for a dollar — but as I’ve evolved out of being an idiot, hair or other yuck in my food isn’t one of them. It’s hard enough to eat out these days just thinking about the various “things” in my food that I can’t see, so you better believe if there’s visible, physical evidence of my gag reflex, I’d like my money back, please. And another, fresh meal. I’m willing to give it another go since I understand that accidents happen and I’m usually too hungry to have to start the restaurant search all over again.

3. Items That Break Too Soon

If you’ve recently purchased an item and it breaks unreasonably soon under normal use — I’d say less than 90 days, for most things — take it back to the store for a replacement or a refund. I tend not to buy the same junk twice in a row, so typically I’d just like my money back so I can avoid this problem a second time. This is a situation where store associates and managers like to give you a hard time — “How do I know how it broke?” — but don’t let them beat you. Stay strong and stage a sit-in to get what you’re owed if you have to.

4. Groceries That Are Spoiled, Rotten, or Stale

I think this is a situation where Americans as a collective lose tons of money, but one that is considered perfectly valid refund territory. I would be willing to bet than more times than not when the average supermarket shopper realizes they have a spoiled, rotten, or stale item when they’re already home, they just throw it out. What’s a few bucks, they think. Plus, they’d have to get back in the car, go back to the store, speak to the manager, blahblahblah. All worth it in my book. Food isn’t cheap, and this is America; we shouldn’t expect anything less than the highest quality food for which we’re paying.

5. Goods That Aren’t as Advertised

False advertising is against the law for a reason: You can’t trick people into thinking they’re getting one thing and then sell them something else. This goes for anything: from kids’ toys to electronics to power tools. If the item said it was going to perform a certain way and it fell short of that promise, you deserve a refund.

6. Services That Aren’t Performed as Promised

It’s not just tangible goods that can fall short of expectations; services, like hair and nail salons, auto body shops, and dog grooming facilities can too. I take services that aren’t performed as promised seriously because it’s an active-engagement situation, and as an entrepreneur myself I recognize the importance of providing the very best service possible — and when that’s not possible, apologizing and doing whatever I can to make amends. Good costumer service is key, and I expect you to recognize that without putting up a fight if I’m being perfectly reasonable.

7. Erroneous Charges on Your Bill

Mark my words here: This happens ALL the time. From your cell phone bill to you Internet bill to your doctor’s bill, there are sometimes strange charges that shouldn’t be there. Most of the time they’re mistakes, but I’m also not naïve enough to think that the provider isn’t sometimes trying to get one over on you, thinking you won’t read the bill closely enough or that the fee they’re overcharging is so low you won’t waste your time fighting it. Read your bills closely and make sure every charge is accounted for.

8. One-Time Late Fees if You’re a Loyal Customer

Just hours before I started writing this post, I called J. Crew to dispute a late fee on my bill. I didn’t receive the bill in time as it arrived at my other home, so I missed the payment due date. Because I’m a very loyal customer to J. Crew, and I always pay my bill in full each cycle, I called to kindly request that the late fees be waived for this circumstance. The customer service agent was perfectly willing to do it, and it saved me $50.

9. Hotel Rooms That Aren’t Sufficiently Clean

I stayed in a Red Roof Inn once that had not one but two bugs in it (not the bed variety, thank God); a hair on the towel; and no cold water in the sink, only boiling hot. I sent a message through the customer service portal on the hotel’s website asking for a refund but my claim was dismissed. I stayed at the same hotel a week later and coincidentally they gave me the exact same room with the exact same issues, just no bugs this time. Again I requested a refund. I got a credit for a free night’s stay – which is sort of moot, because why would I go back there after they failed me twice? – but it’s better than nothing from a company that obviously doesn’t put much stock in customer service.

More From Wise Bread:

 

MONEY Spending

Here’s How Much You’ll Spend on School Supplies This Year

140355315
Willy de l'Horme—Getty Images

Back-to-school spending will be less this year, according to a survey released Wednesday.

Retailers betting on a back-to-school bonanza to lift 2015’s somewhat mediocre sales might be in for a disappointment.

U.S. consumers are expected to spend about $68 billion on back-to-school and back-to-college items this year, down 9.3% from $75 billion last year, according to a survey released on Wednesday by the National Retail Federation, an industry group. After loading up on expensive electronics in 2014, consumers are likely going to cut back on spending in that category, shelling out about $207.27 per person, down from $243.79.

A sluggish back-to-school season would deliver yet another setback for retailers, which have yet to benefit from lower unemployment rates and higher consumer confidence. In June, retail sales unexpectedly fell 0.3%, the weakest reading since February, after May’s downwardly revised, and modest, 1% increase.

The back-to-school and back-to-college season is key for several retailers. Kohl’s KOHL'S CORP. KSS -0.33% , a retailer that’s eager to prove that its recent spate of improving sales has staying power, collects 15% of its annual sales during the period. Other back-to-school-reliant retailers include teen fashion chains Abercrombie & Fitch ABERCROMBIE ANF 0.95% and American Eagle Outfitters AMERICAN EAGLE OUTFITTERS, INC. AEO 2.25% , as well as department stores like J.C. Penney J.C. PENNEY JCP -0.24% and Macy’s [fortune-stock symbol=”M”]. What’s more, the back-to-school and college period often gives retailers an early read on consumer mood heading into the key holiday season.

The NRF, which had Prosper Insights & Analytics survey 6,500 consumers between June 30 and July 8, said a significant part of the comedown was simply due to the fact that shoppers stocked up quite a bit in 2014.

“As seen over the last 13 years, spending on ‘back to school’ has consistently fluctuated based on children’s needs each year, and it’s unlikely most families would need to restock and replenish apparel, electronics and supplies every year,” said NRF President and CEO Matthew Shay.

Despite what has been a slow start to the year for many stores, from Macy’s to Walmart WAL-MART STORES INC. WMT -0.25% to Gap GAP GPS 1.19% , the NRF expects consumer spending trends to improve in the second half of the year.

This article originally appeared on Fortune.

TIME Money

Why Companies Should Pay Bonuses Twice a Year

dollar bill sliced vertically into sections
Getty Images

A semi-annual bonus can be a better motivator for employees than a single year-end payment

Whether you find personal satisfaction in your job or work purely for a paycheck, money is an important motivator. Intellectual stimulation or a sense of accomplishment are great to have but they don’t pay the bills. A common and popular mechanism used by companies to reward employees is the year-end bonus, which serves as a carrot for workers to aspire to as well as a stick for those who don’t perform.

But does it really work as it should and is a semi-annual bonus more effective in motivating employees?

Here is why a year-end bonus is problematic. Even though it ties employees down for a whole year with the company and theoretically makes them work hard for it all year round, twelve months is a long time and employees can lose their motivation during that period for a number of reasons. These include uncertainty and worry about whether they will be rewarded appropriately at the end of the year, lack of financial milestones along the way to indicate how they’re actually doing, and resentment at their bonus being withheld so long, especially if they’re struggling to meet financial obligations during the year.

Handing out bonuses twice a year, by contrast, can mitigate uncertainty, send a clear signal to employees about how well they’re performing, reduce their resentment at being forcibly tied to the company for an entire year, and enable them to lead a more comfortable life with money in their pocket. This in turn can engender more loyalty from employees and incentivize them to do their best work for a company that they feel cares about and values them.

In addition, since a bonus serves as the perfect report card, a semi-annual bonus can be used to encourage employees to adjust their performance during the course of the year instead of only at the end when they receive their annual performance review. That obviously benefits the company but can also help employees improve their work product and increase their chances of a receiving a higher bonus in the next cycle.

Finally, a side benefit for a company of a semi-annual bonus cycle is in budgeting. Since employee compensation is often a large portion of a business’s costs, handing out part of the bonus at mid-year can provide a more realistic assessment of the money left over to meet other operating costs and prompt the company to plan the rest of the year accordingly.

For all these reasons, businesses that hand out bonuses only once a year should consider changing their policy.

S. Kumar is a tech and business commentator. He has worked in technology, media, and telecom investment banking. Kumar does not own shares of the companies mentioned in this article.

MONEY consumer psychology

10 Reasons You’re Not Rich Yet

81774390
H. Armstrong Roberts—Getty Images

#5: You’d rather complain than commit.

As a financial advisor, I have spent many years helping other people overcome financial stumbling blocks so they can become rich. Ironically, the one person I have had the most trouble helping is myself.

Being “rich” can mean different things to different people, but I believe it means having the financial freedom to achieve your goals and live the life you want. I am great at giving advice; I am not always so great at taking my own advice (know anyone like that?). So, when it came to helping my clients understand why they weren’t rich yet, the easy part was explaining the culprits, because I was all too familiar with most of them.

Regardless of our upbringing, education, profession or lifestyle, most of us are not where we want to be financially and our reasons are probably more similar than different. The good news is that it is never too late to become rich if you, like me, are ready to own up to the reasons you’re not and do something about it.

Want to know why you aren’t rich yet? Keep reading.

#1: You spend money like you’re already rich.

Sure, it feels good to buy expensive things, whether it’s a luxury car, designer clothes, a big house in the burbs, or a tropical vacation. Even if you don’t necessarily buy pricey items, if you consistently buy stuff you really don’t need, it still adds up fast ($300 trip to Target for toothpaste? AHEM). But the shopping high only lasts until the guilt and regret set in or the credit card bill arrives. Most of us are guilty of living beyond our means and using credit cards more than we should. The problem is that as long as we continue to spend more than we have, we can’t start building wealth. Chronic overspending and high-interest, revolving credit card debt are your worst enemies when it comes to financial success. Spend like you’re poor and you are much more likely to become rich.

#2: You don’t have a plan.

Without clearly defined short, mid and long-term goals, becoming rich will just seem like an unattainable fantasy. And that turns into your go-to excuse for why you shouldn’t bother saving or stop overspending. As we say in the financial industry: those who fail to plan, plan to fail. Creating a financial plan may seem overwhelming or intimidating, but it doesn’t have to be. Whether you do-it-yourself or decide to work with a financial professional, the process simply starts with prioritizing your goals and writing them down. Put that list where you can see it on a regular basis. Visual reminders go a long way in helping us stay on track.

#3: You don’t have an emergency fund.

I know, you’ve heard it a hundred times: you need to have at least six months of income saved in an emergency fund. And yes, it’s much easier said than done. However, I’ve seen too many people (including myself) get hit with a major unplanned expense, whether it’s a car or home repair or a medical bill, or an unexpected job loss, accident or illness that’s led to a drastic reduction in income. When these things happen–and they do, more often than you might think–not having a financial safety cushion can make the situation much, much worse. If you’re forced to rely on credit cards, you’ll end up sinking deeper into debt instead of, yes, saving to become rich.

#4: You started late.

With every year or month that goes by without saving, your chances of becoming rich decrease. Time and compounding interest are your two best friends when it comes to growing money, so wasting them really hurts. Just like exercising, the hardest part of saving is starting. Even if you’re in debt, making little money or have a lot of expenses, you can still always save something — even if it is a small amount. The sooner you get yourself into the habit of saving — regardless of how much — the easier it will be for you to continue and eventually increase those savings. I like to think of saving as a muscle you have to work out and build with practice. Even if you start saving late, you can still become rich if you’re committed enough. But you need to start. Now.

#5: You’d rather complain than commit.

“Life is too expensive.” “I’ll never get out of debt.” “I don’t make enough money.” “Investing is too risky.” I’ve probably heard every excuse for why someone isn’t saving, investing or planning in general, and I’ll admit I’ve used a few of them myself from time to time. It’s easier to be lazy and let bad habits fester than to commit to –and follow through on — changing them. It’s no wonder obesity and debt are epidemics in our country, and that millions of Americans have had to push off retirement. As long as the complaining, excuses and finger-pointing persist, so too will not becoming rich. Instead, take responsibility for your bad habits and focus on what you can do to change them. Then do it.

#6: You live for today in spite of tomorrow.

I get it. It is really hard to think about retirement and other distant fantasies when we have needs and plenty of wants now. The bills have to get paid, the family must be fed, momma needs a vacation — and a new wardrobe to go along with it. The problem is that impulsive and overly-indulgent behavior commonly lead to credit card debt, spending money you might have otherwise saved and, yes, not becoming rich. Do yourself a favor: Ditch the “buy now, worry later” mindset and instead, adopt a “save now, get rich later” mindset.

#7: You’re a one-trick investor.

You might be lucky enough to become rich by betting all your money on one type of investment. Just like you might be lucky enough to win the lottery. But that’s not a strategy for getting rich (at least, not one I’d ever recommend).

One of the worst financial mistakes you can make is putting all your money eggs in one basket. Doing so puts you at too much risk, whether it is being too conservative or too aggressive. Sure, the stock market is on a run and real estate is on an upswing again, but are you prepared for when the tides turn? Because they will. And if you are invested in all fixed-income securities like CDs, bonds and annuities and think you’re safe, inflation should make you think again. Your investment portfolio needs to include a good mix of investments with varied levels of risk and return potential and liquidity (so you can get your money when you need it).

#8: You don’t automate.

Here’s the secret to saving: Automation. Saving is seamless when it’s automatic. Unfortunately, we are not born to be savers. We are impulsive and greedy by nature. Being responsible requires much more discipline. However, automation forces us to be responsible without too much effort. And all it requires is setting up regular transfers from a paycheck or bank account to a savings or investment account. Without it, we are much more likely to spend money we could be saving. Even if it is a seemingly small amount that you automate, those steady investments can make a big difference over time. Automate whatever you can whenever you can; just be careful to avoid overdrafting your account and try to increase your savings amount periodically.

#9: You have no sense of urgency.

You might think you don’t need to worry about getting out of debt or saving because someone, or something else will save you. Maybe it’s a pay raise, a new job, an inheritance, a rich spouse, or the lotteryyou’re counting on. Whatever “it” is, you use it as an excuse to put off taking steps on your own to become rich. The problem is that very little in life is certain. Who knows what will actually happen, or not happen, so why not focus on what you can control now? Save now and save yourself — just in case something, or someone, else won’t.

#10: You’re easily influenced.

Maybe you live with a chronic overspender or a typical day out with your girlfriends involves shopping. Or maybe it’s your inner “Real Housewife” that you sometimes can’t control. We all have negative influences in our lives that threaten our chances of becoming rich. The superficial, materialistic, sensational culture in which we live is probably the biggest one. The suffocating swirl of media that goes along with it makes it ten times worse. The trick is not giving in to temptation. How? Some of it is making conscious choices to avoid putting yourself in vulnerable positions. But most of it is having the willpower to keep the goal of becoming rich in the front of your mind, especially when you are tempted to sabotage yourself.

Read next: The 10 Richest People of All Time

More From Daily Worth:

TIME psychology

Why You Spend Too Much Money and How to Stop

money-bag-coins-falling
Getty Images

Eric Barker writes Barking Up the Wrong Tree.

  • The word sale makes us less likely to comparison shop and yellow tags fool us into thinking we’re getting a discount even when we’re not.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY consumer psychology

How Your Money Beliefs Are Hurting You

145565218
Barbara Taeger Photography—Getty Images

We make things up about money and believe them.

What you believe about money drives your financial behavior. Finding out your beliefs is a key step to solving various problems, such as money conflicts in relationships.

Money doesn’t actually exist in reality. It isn’t gold or bank account balance or the pieces of paper in our wallet — it’s this conceptual thing, a promise, an agreement, delivered in measurable units, which we later exchange for something we want.

To grapple with this concept, we make things up about money and believe them. These beliefs act like a kind of programming language, which I call Money Operating Systems.

Your Money OS is a very basic belief about money that influences all your financial behavior. This system you install, unwittingly, controls how much you save and spend, whether you invest, how you invest, how you negotiate for a salary and how you feel about all of that.

Your past experiences with money, starting with your early memories of it, created your Money OS. It also came from your parents or the environment you were raised in.

Recognizing your belief helps you tackle your money woes, or those with your partner. Here are five of the Money Operating Systems I see most frequently:

  1. “There will always be enough money.” People with this belief can be high earners, but sometimes they’re average earners who just live a simple lifestyle. If you have this belief about money, you need to be careful. Make sure you understand how much money you need for your financial future. Over-optimism causes under-saving.
  2. “If I am good, the universe will give me what I need.” A positive world outlook doesn’t lead to productive financial behavior. Saving and investing rarely happen, because these folks believe that their financial health is a function of virtuousness.
  3. “Money makes me valuable.” They are often the people who drive the big flashy cars, and they work to have other people perceive them as successful. Money intertwines with their self-worth. Their ego grows with their bank account. But if they are unsuccessful, their confidence suffers.
  4. “There will never be enough money.” This one is pretty self-explanatory, and very common. People with this money belief will be either over-spenders or under-earners, and they keep creating the circumstances to prove this outlook true. They may justify holding on to poorly paid positions or overspending their high income.
  5. “Money is bad, the root of all evil.” These people believe that business and capitalism are responsible for social ills. They often righteously live without a lot of material possessions. Their negative opinion of money usually leads to destructive financial behavior.

These are only some of the beliefs that determine what is possible in your financial life. It took me some time to be analytical about my own money. I recognized my own system and how it kept me locked in cycles of overspending and feelings of worthlessness, and I’ve since transformed my experiences with money.

So where do you begin to see yourself here? What about your honey?

Hilary Hendershott, MBA, CFP, is founder and Chief Executive of Silicon Valley-based Hilary Hendershott Financial.

More From AdviceIQ:

MONEY Shopping

The Latest Sign That The Economy Is Getting Back on Track

A family uses the self-checkout at the Wal-Mart owned Sam's Club in Bentonville
Rick Wilking—Reuters A family uses the self-checkout at the Wal-Mart owned Sam's Club in Bentonville, Arkansas June 4, 2015.

Consumer spending accounts for two-thirds of US economic activity.

U.S. consumer spending recorded its largest increase in nearly six years in May on strong demand for automobiles and other big-ticket items, further evidence that economic growth was gathering momentum in the second quarter.

The Commerce Department said on Thursday consumer spending increased 0.9% last month, the biggest gain since August 2009, after an upwardly revised 0.1% rise in April.

The sturdy increases suggested households were finally spending some of the windfall from lower gasoline prices, and capped a month of solid economic reports.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have been unchanged in April. Economists polled by Reuters had forecast a 0.7% rise in May.

It was the latest sign that growth was accelerating after gross domestic product shrank at a 0.2 percent annual rate in the first quarter as the economy battled bad weather, port disruptions, a strong dollar and spending cuts in the energy sector.

From employment to the housing market, the economic data in May has been bullish. Even manufacturing, which is struggling with the lingering effects of dollar strength and lower energy prices, also is starting to stabilize.

The firming economy suggests the Federal Reserve could raise interest rates this year even as inflation remains well below the U.S. central bank’s 2 percent target.

Spending on long-lasting goods such as automobiles jumped 2.2 percent last month, while outlays on services like utilities rose 0.3 percent.

When adjusted for inflation, consumer spending increased 0.6 percent, the largest jump since last August, after being unchanged in April.

Personal income increased 0.5 percent last month after a similar gain in April. Income is being boosted by a tightening

labor market, which is starting to push up wage growth. With households stepping up spending, the saving rate fell to 5.1 percent from 5.4 percent in April. Still, savings remain at lofty levels.

Inflation pressures remained tame last month despite the acceleration in consumer spending. A price index for consumer spending increased 0.3 percent after being flat in April. In the 12 months through May, the personal consumption expenditures (PCE) price index rose only 0.2 percent.

Excluding food and energy, prices edged up 0.1 percent after a similar gain in April. The so-called core PCE price index rose 1.2 percent in the 12 months through May, the smallest gain since February 2014.

MONEY consumer psychology

When Money Can Bring You Happiness

536992331
Matt Dutile—Getty Images

Here are 3 reasons to spend yours wisely.

You’ve heard the refrain countless times: Money can’t buy happiness.

Or love. Or class, for that matter.

But a wave of new research suggests that cash can indeed increase your pleasure—if you manage it the right way.

In fact, the influence of money on well-being is such a hot topic that experts around the country have devoted their studies to it.

Want a peek at what some of them have discovered?

We asked three researchers who spend their days delving into the ties between money and satisfaction to divulge their most intriguing revelations—and explain how you can leverage their insights to get happier.

Professor Michael Norton Says … Spend on Others to Be Happy

A professor of business administration at Harvard Business School, Norton has an interest in the intersection between finance and personal satisfaction that stems from his diverse academic experience.

After earning a Ph.D. in psychology, Norton received a fellowship to study business at the MIT Media Lab and the Sloan School of Management.

“Considering how much time people spend thinking about how to increase money and happiness, [I wanted] to figure out the relationship between the two,” the co-author of “Happy Money” explains. “[I wanted to know], when it comes to how we spend, are we getting it right?”

His Key Findings Initially, Norton, 40, uncovered that people spend most of their money on themselves.

“But my fellow researchers and I thought maybe this wasn’t the best way—that an outsized focus on the self might be part of the reason why having more money doesn’t necessarily make us happier,” Norton says.

To test his hypothesis, Norton designed a study in 2008 in which participants rated their happiness before being handed an envelope containing cash. Half were instructed to spend the money on a personal expense or gift for themselves; the rest were told to donate it or buy a gift for someone else.

The results? Those who gave the money away reported higher levels of satisfaction, whereas those who spent on themselves weren’t any happier.

Curious to understand the implications, Norton conducted a few more experiments.

In one, Belgian salespeople received 15 euros to spend either on themselves or on a co-worker. In another, recreational dodgeball players were asked to use $20 for their own purposes or for a teammate’s.

Time and again, people who gave money away reported increased happiness compared with the control group.

Not only that, but their performance improved. For every $10 a salesperson spent on herself, the employer reaped $3 in sales—but every $10 employees spent on co-workers translated to $52 in sales.

Likewise, charitable dodgeball teams scored more goals. Every $10 spent selfishly led to a 2% decrease in wins, but $10 spent on teammates increased them by 11%.

How to Boost Your Own Bliss While any degree of generosity will up your joy, some kinds of giving are more powerful than others. “The closer you are to the recipient, the happier you’ll be,” Norton says.

So buying flowers for your mom has a greater effect than, say, contributing to a stranger’s Kickstarter campaign.

And while the amount you spend doesn’t influence your happiness, Norton says, theimpact of your contribution does.

For example, when it comes to charitable giving, you’ll get the most bliss for your buck if you donate to organizations that create a personal link between the giver and the recipient, such as Kiva or Adopt A Child.

But regardless of who you give to, try to make it a habit. “The happiness surge you feel from a one-time gift eventually wears off, but people who chronically give are happier overall,” Norton says.

Professor Cassie Mogilner Says … Shell Out for Experiences to Be Happy

In 2004, when Mogilner was working her tail off as a marketing Ph.D. candidate at Stanford, she perpetually found herself strapped for cash and time.

“In business school, there’s so much attention focused on the bottom line,” says Mogilner, an associate professor of marketing at the University of Pennsylvania’s Wharton School. “But I realized that, for me, time felt like a much more precious resource than money.”

Intrigued, she began to channel her research efforts toward investigating the association between time, money and happiness.

Her Key Findings Over the past 10 years, Mogilner, 35, has found that time is a significant happiness predictor because, more so than your possessions, how you spend your spare hours reveals your interests and unique “you-ness.”

Just look at social media: People share photos of weddings, vacations and delicious dinners—but you don’t see many posts about trips to the mall.

To that point, Mogilner has also investigated how long we enjoy the mental boost that comes from temporal experiences versus material goods. “We get used to a new pair of shoes very quickly—it’s a phenomenon known as hedonic adaptation,” she says.

So while you might be psyched about your new boots at first, before long, they’re relegated to the back of the closet. Instead of being a source of joy, they now serve a purely functional purpose.

“In contrast, we adapt more slowly to experiences,” Mogilner says. “The way we spend time becomes a part of our memories—our personal narrative.”

People also tend to feel less regret after shelling out for a good time, adds Mogilner.

“After you spend $100 on a dress, you can see the other dresses you didn’t buy right there in the store,” she explains. “But if you spend $100 at a restaurant, you’re less likely to second-guess your decision because you can’t see the alternative meals you passed up.”

How to Boost Your Own Bliss Mogilner’s latest research focuses on the concept of buying more positive time—such as renting an apartment closer to work as opposed to buying a luxury car in which to commute.

“Our lives are the sum of our experiences, so we should be supremely deliberate in spending our time in the best and happiest ways possible,” she says.

Her preliminary findings? People are more satisfied when they outsource a chore anyone can do, like cleaning the house or picking up dry-cleaning.

And when it comes to deciding how to use the time you’ve just freed up, Mogilner says you can maximize your happiness by keeping a few points in mind.

“Activities with a social aspect have the strongest effect,” she says, pointing to things like a family picnic, a concert with friends or a date night with your spouse. “Social activities increase happiness because they cultivate relationships with others—and having strong, stable connections with others is the most important ingredient for well-being.”

Another satisfaction inducer, she says, is experiencing out-of-the-ordinary events—such as taking a vacation somewhere new and exciting—which will have a greater impact on happiness than everyday pleasures.

Speaking of vacations, you can get even more happiness bang for your buck if you book your trip well in advance.

Research published in the journal Applied Research in Quality of Life found that just anticipating a getaway is as enjoyable as the trip itself. So start planning your winter break—now!

Professor Jeffrey Dew Says … Get on the Same Financial Page With Your Partner to Be Happy

Fifteen years ago, Dew and his wife were colleagues in the mental health field, but partway into his career, Dew had a change of heart and decided to enroll at Penn State for a dual Ph.D. in human development and family studies.

His transition back to student life had major consequences: He and his wife lost their benefits and half their income.

“I wondered how the change in our financial situation might impact us as a couple,” says the 38-year-old Dew, who’s now an associate professor in the department of family, consumer and human development at Utah State University. “I looked at the scientific literature, and found that not many researchers had asked this question.”

So he decided to explore it himself—ultimately uncovering a major connection between money and marital happiness.

His Key Findings In 2012, Dew and his colleagues analyzed data after following married couples over the course of five years. In an initial survey, the spouses were asked how often they fought about various topics, including money, chores, intimacy and time spent together.

Dew was particularly curious to see if any of those arguments correlated to divorce rates, and found a striking trend: For men, money fights were the only conflict that predicted a split. For women, money and intimacy were equally loaded—but financial disputes were a much stronger divorce determinant.

In fact, couples who argued about money several times per week were 37% more likely to divorce than those who only had financial spats once a month.

Why are finances such a fraught subject? Dew has a few guesses.

“Money fights are frequently a stand-in for bigger relationship issues,” he explains. “On the surface, an argument might appear to be about overspending, but underneath, it’s a struggle over trust or power.”

Plus, if you’re under financial duress, there’s likely an added layer of stress to a relationship—and that can take a serious toll.

So Dew and his team did a follow-up study in 2013 with 450 married and cohabiting couples, with the goal of determining how happy couples combat financial pressures.

“We looked at the frequency of their financial management behaviors, such as creating a joint budget and putting money aside for retirement,” he says. “[And what we found is that] the more often couples engaged in sound financial practices together, the more likely they were to be happy.”

How to Boost Your Own Bliss The secret to happiness, according to Dew, is to get on the same financial page with your partner by opening the lines of communication as soon as possible.

That’s not to say you have to agree on everything. “Most issues can be worked through, although it will take compromise from both sides,” Dew says.

Dew’s suggestion: Commit to regular money dates—be it monthly or quarterly.

“And try sandwiching these financial discussions between two enjoyable activities, so that they’re less stressful,” Dew says. Consider opening a bottle of wine while you go over the numbers, and then head to dinner or a movie afterward.

One thing to focus on during your money date nights? A financial goal that’s meaningful to both of you, such as saving for a dream trip to Hawaii two years from now or paying off your house by 2020.

“It’s so easy for money to drive people apart,” Dew says. “But by having a shared objective, you can instead use it to bring you closer together.”

More From LearnVest:

 

Your browser is out of date. Please update your browser at http://update.microsoft.com