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When Americans measure success, they don’t think much about their net worth or account balances.
About 59% of Americans polled say happiness, especially being able to spend money on things that make you happy, is the most important indicator of success, according to a new report from financial services firm Empower. I am doing it. Respondents were asked to select the top three types of success they value most.
Meanwhile, 35% of respondents noted that they have free time to pursue their interests. The same percentage cited physical health.
Rebecca Rickert, head of communications at Empower, says few people consider “wealth itself” to be the best metric.
According to the report, only 27% of people believe wealth is the best measure of success.
Empower surveyed 2,203 U.S. adults in September.
“There has to be a balance.”
“Americans equate success and happiness with what money can buy,” Rickert said.
This is not surprising considering that many people live paycheck to paycheck. This means regular expenses take up most of your income, leaving little room for savings.
A recent report from Bank of America found that in the third quarter of this year, nearly half of survey respondents agreed with the statement, “I live beyond my paycheck.”
An analysis of internal bank data found that 26% of households were living paycheck to paycheck. This includes 35% of households with annual incomes of less than $50,000 and 20% of households with annual incomes of more than $150,000.
Other factors such as inflation and rising interest rates are making it more difficult for people to make ends meet. According to the Empower report, about 35% of Americans surveyed believe the economy is the biggest barrier to success, followed by income instability at 30%.
These challenges are essentially “forces beyond our control,” Rickert said.
But in a sense, she says, “the secret to success is different for everyone.”
Creating a financial plan can help you save for long-term goals and free up space in your budget for short-term needs.
“There has to be a balance,” says Clifford Cornell, a certified financial planner and associate financial advisor at Born Fied Wealth in New York City.
“It’s great to save money for retirement,” he said, making it a financial planning priority. “But at the same time, we have to live today. Tomorrow cannot be taken for granted.”
Cornell says fun shopping can be as small as going to a coffee shop every now and then instead of making coffee at home.
“For some people, it can almost be a drug,” he says. “They really enjoy the whole experience.”
How to find a fun space within your budget
Experts say you often need to maximize your cash flow to buy items and experiences that make you happy.
Some recommend the 50-30-20 rule. This is a budgeting framework that allocates 50% of your income to necessities like housing, food, and utilities, 30% to “wants” or discretionary spending, and the remaining 20% to savings and investments.
While this structure is a good starting point, it can be difficult to sustain, especially given the high costs of housing and child care. For example, half of U.S. renters will be “cost burdened” in 2022, meaning they will spend more than 30% of their income on rent and utilities, according to Harvard University’s Center for Joint Housing Research.
For young people just graduating from college and starting their careers, Cornell said saving 20% of their income may not be realistic.
“Maybe we’re actually spending too many dollars just to save 5% or 10%,” he said.
Sean Williams, a private wealth advisor and partner at Paragon Capital Management in Denver, who was ranked 38th on CNBC’s 2024 100 Financial Advisors list, added, “I follow the 50-30-20 rule.” “I don’t really like it, and very few people follow it.” that. “
Instead, find the ratio that works best for you and your current financial situation..
Another way to find room in your budget for fun spending is to take inspiration from “cash stuffing,” where you allocate money into different envelopes for expenses. Williams said deciding how much you intend to spend on a specific activity over a specific period of time, whether it’s a few months or years, and opening a savings account toward that goal.
When it comes to long-term planning, think about the kind of lifestyle you want to live and try to figure out how much your needs, wants, and dreams will cost, Williams says.
