Jan. 25, 2023

Upgrading Your Lifestyle: Realistic, Targeted Financial Goal-Setting

Upgrading Your Lifestyle: Realistic, Targeted Financial Goal-Setting

When money can buy happiness.

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This 20-minute rundown is about an (accidental) three-year study I ran on myself. 

Back in 2020, I was subjected to hours of content encouraging me to use the “great pause” of a global panini to reassess my entire life. Challenge accepted.

At the time, I wrote one of my very first blog posts for a fledgling Money with Katie site, describing all the ways I’d like to level up my lifestyle—the little ways money could buy happiness.

I revisited this exercise from my 2023 vantage point and had two major realizations: For starters, most of it came true. Some of it felt the way I thought it would…but a lot of it didn’t. 

So how can we set financial goals in a way that’ll actually produce the desired feelings we’re striving for? Tune in to find out.

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Transcripts can be found atpodcast.moneywithkatie.com.

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Katie:Can money buy happiness? Well, I basically did a three-year study on this unintentionally, and here's what I found. Welcome back toThe Money with Katie Show, Rich People. I'm your host, Katie Gatti Tassin. Today we're talking about some of the small lifestyle level-ups moneycanbuy that often do lead to greater happiness—or what I like to call lifestyle upgrades—in the long run, and how to identify them in your own life. We'll also cover where this approach falls short, and where you may be trying to buy a feeling that you can just get for free.

Every so often when I'm working on new material, I go back to read stuff that I wrote years ago to see if my perspective has shifted at all, and it's always a trip. In doing some poking around recently, I found this post from 2020 that seemed, well, oddly prescient, and you'll see why. At the time, I was trying to get clear on what I actually wanted for my life. This was the very romanticized phase of the panorama. People online were referring to it as like the “great pause,” and my Type A ass was like, “Well, that means I need to take advantage of this time to make some meaningful change.”

Enter the financial “Mundane Wednesday” exercise. The Mundane Wednesday is a philosophy that I have shamelessly coopted from Tim Urban of Wait But Why fame. I originally discovered it in his 2013 blog post called “Life is a Picture, But You Live in a Pixel.” Here's an excerpt about a man named Jack who experiences each “Today” of his life always looking forward to some big exciting event in the future. 

“So while thousands of Jack's Todays will, to an outsider from far away, begin to look like a complete picture, Jack spends each moment of his actual reality in one unremarkable Today pixel or another. Jack's error is brushing off his mundane Wednesday and focusing entirely on the big picture, when in fact the mundane Wednesdayis the experience of his actual life.” End quote. 

The takeaway is that we think the big and often expensive events like our wedding, our vacations, our nights out, are going to define our experience of life. But the reality is that our day-to-day happiness is far more tied to our Mundane Wednesday. The way we spend the majority of our time is, in fact, our experience of our lives. For example, you spend about 30% of your life sleeping, if you are sleeping around eight hours per night. You probably go on two weeks’ worth of vacations per year, so call it 4% of your life, when extrapolated, and you hopefully only have one wedding, which consumes such a small amount of time that it doesn't even register. If you work five days per week, that means you spend 46% of your working life in the midst of a workday. 46% of your life each year is spent inside the metaphoric Wednesday. 

So with this truth in mind, I set out in 2020 to define my own Mundane Wednesday and visualize upgrades that would make it better. Again, a quote “lifestyle upgrade” is usually just a slightly enhanced version of your life now, because money can probably help provide a lot of these upgrades. The more clearly that we can envision that reality, the easier it becomes to make choices accordingly. So that was my thesis in 2020, and as I read back my hopes and goals, I realized a lot of this stuff kind of came true. So I'll share my reflections on that at the end of the episode. 

Money and lifestyle are inextricably linked, and that's why I find personal finance so fascinating and alluring, in why your grander, broader fantasies and beliefs about your happiness shape your attitudes and your behavior with money. We'll be right back after a message from the sponsors of today's episode. 

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Katie:When we spend our day-to-day lives at our desks in the office or working from home, it begs the question: How can I upgrade my lifestyle a little bit to make me happier or more comfortable? So what was the lifestyle upgrade I dreamt of in 2020? Well, I'll let “2020 me” explain it. Here's what I wrote. 

When I imagine the dream life that money can buy, it's characterized by a few major things. Nothing makes you realize your quirks like verbalizing an ideal “day in the life.”Number one, convenience. I hate carrying shit from my car to the office building. You know that awkward bag lady dance we all do? Teetering on heels from the 9:15am arrival parking spot with the heavy laptop bag slung over one shoulder, dainty purse of #belongings cutting off your forearm circulation, lunch box precariously positioned to avoid sloshing shrimp juice down the front of your dress with a 50% success rate, coffee cup in one hand and water bottle in the other. It’s a little thing, but it’s that part of my morning I dread every day—and in my dream life, I’m not slogging through this inconvenient (and messy) dance day after day. 

All right, so Current Day Katie interlude here. You see what I mean? It doesn't have to be this crazy,“I want a corkboard floor in my home gym and a three-car garage!”At the time, I just home in on this repeatedly unpleasant part of my daily routine and figured, if I could eliminate or alleviate that, it'll create this like 2% improvement in the cadence of my day that I think will be meaningful over time. 

Here's what else I wrote.I envision a life where my work computer can stay at work because my personal computer is hooked up to my efficient and beautiful home office.No need to bring it home when I have an equal (if not better!) setup under my own roof. In this life, I don’t need to bring all my meals for the day to the office ahead of time. Coffee, breakfast and lunch can be purchased comfortably from the café upstairs, depending on what I fancy that day. Evidently I use “fancy” as a verb in my rich bitch fantasy. Or hell, let's take it a step further. Maybe it's to the point where the working from home/working from an office balance is split! 

So back to present-day me. I work from my house in my home office. I haven't done a bag lady dance in years, and sure, in the grand scheme of things, it was a little thing. Some of you probably would've just been like, “Dude, just buy the coffee and breakfast and lunch at the office and like invest in a home office or something. It's not that big of a deal.” But that's the rub. At the time, that was money that I needed to save. I would not have been able to guiltlessly buy those things back then because I was not making enough money to justify it, and I was still bound to the whims of my employer at the time, who insisted that I work most days in an office, which made my fantasy about working from home feel a little unrealistic. The whole point of the upgrade fantasy is that it is attainably aspirational. It's realistic, but it's still a marked improvement from your current situation, and usually addresses specific grievances you have with your current lifestyle—things that routinely and predictably frustrate you, fluster you, or stick out as negatives in your day.

Now, maybe I could have just saved and invested less at the time and had those things right away. After all, if the goal is a life where these things are possible, why not just give them to yourself now, right? But we're going for longevity, not immediacy. Someone with my income at the time did not get a home office and three meals out daily without sacrificing her future comfort. 

So let's get back to my hyper-specific realistic fantasy. I wrote Freedom. I want freedom. Specifically, freedom from thinking about the price of things, within reason. I envision a lifestyle where I’m not sweating the small stuff. In my fantasy lifestyle upgrade, I’m not sweating decisions about things that cost less than $100. Ideally, I’m not having intense 10-minute mental debates about a $20 dry shampoo anymore. Freedom from a budget is really my end game — imagine how it would feel to have millions in the bank and tens of thousands coming into your checking account on a weekly or monthly basis. Are you ever going to debate the validity of a $25 purchase? No. You’re just going to buy what you need and move on. That’s the mental freedom that I want my money to buy me. 

All right, back to present day. Reading this back three years later, I am proud of the work that Past Katie did to get me where I am today, and I attribute a lot of the focus to clarifying up front what life would feel like once those changes were possible. For the most part, I don't sweat a $20 purchase anymore, which does feel like the mental freedom that I was looking for. Maybe money can't buy happiness in the literal sense, but it can buy freedom and convenience, which, well, can get you pretty close. Both of those things make your day-to-day life a lot better. So rather than focusing all of your energy on saving and investing for these bananas big-ticket items that you assume will meaningfully impact your happiness in the future, it makes sense to strive for the improved Mundane Wednesday where you're gonna spend nearly half your life anyway. It's possible that your Mundane Wednesday improvement purchase does end up being a semi-big-ticket item.

Let's use an automobile example. So imagine that you commute to your workplace every day in an old beater of a car. The AC doesn't work; the sound is spotty; it's overall just not a very comfortable experience. The power steering often goes out, the dashboard resembles a Christmas tree, smells a little funky, it always needs to be taken into the shop, and it causes you significant stress. In the realistic fantasy version of the scenario, you would have a conservatively priced luxury car, something not too flashy, but still a serious upgrade from your 15-year-old rattle trap. Now you've got cushy leather seats, a working AC, cup holders abound. Your sound system is Bluetooth and responds to your voice when you tell Google to read you the news. The blind spot monitoring alerts you to the Camry about to swerve into the side of you. Now, this commute suddenly looks and feels very different. While this example is just a small part of your overall experience of your day, imagine that 30-minute twice a day experience over many days, months, and years. Those things compound. 30 minutes spent stressing over the check engine light, fiddling with the radio, versus leisurely sipping your coffee and enjoying an NPR podcast is NBD once or twice. But what about all 240 mornings per year that you're commuting? 240 mornings, 30 minutes each? That's 120 hours of either enjoyment or frustration, and that's just the mornings. 

Or you might take it a step further and decide you'd rather focus on getting a remote job or moving closer to work so you can eliminate the need for a commute entirely, and you can just invest that money and time elsewhere. Even the things that on the surface might scan as a little bit silly, because of the sheer frequency and repeatability of the Mundane Wednesday, these effects really add up. The point is, on your trek toward achieving those larger goals like buying a house or saving this ginormous nest egg, all the years that pass in between are not a trial run or dress rehearsal. And if money can enhance the 46% of time you spend living in your Mundane Wednesday, it's worth reconsidering how you deploy your capital and what kind of goals you set. We make the mistake of assuming that we need to save and invest for the big stuff that happens in the infrequent 5% of our life. But what if that means we are focused on the wrong predictors of happiness? 

So let's connect the lifestyle upgrade fantasy to realistic financial goal-setting. After you've taken the time to imagine your attainably aspirational life upgrade, you can start assigning dollar values to each element. So in my example, I estimated $25 per day for coffee and food at work. If I assume $25 per day times five days per week times four weeks per month, that is an additional $500 per month that I would've needed to earn to pay for that habit. Not only that, but $500 in this scenario would've had to represent a relatively small portion of my monthly income in order for me to be able to justify those types of purchases without very obviously setting myself back. Maybe call it 5%. I don't wanna spend more than 5% of my monthly income on this luxury and I know it costs $500 per month. Well, that means I need to earn $10,000 per month to make that happen.

Great. So now I have a clear income picture that I'm working with, right? We have a better understanding of what this would actually take. $10,000 per month is around $120,000 per year after taxes. If I am working in a role where I know my salary potential will top out at $75,000, that might be a signal to me that I need to get creative, either adjusting my course professionally or adjusting my expectations. 

Here's another example. Couple months ago I was reflecting on this type of exercise with respect to traveling in particular, which is something I do relatively frequently, and I decided it would make a big difference if I could take an Uber to the airport every time, rather than driving and like dealing with parking or taking the shuttle. We live pretty far from the airport, so it's expensive kind of regardless of what you do. It seems like a relatively easy upgrade. We're not talking about, oh, I'm always gonna fly business class, or I'm always gonna stay in five-star hotels. It's not crazy. I just estimated that at the rate I travel, this would still probably set me back about $300 per month. So now we have our dollar amount. And since the shuttle and airport parking also cost money, to the tune of around $120, I can see it's an incremental $180 per month that would make this miniature dream come true. So if I can reallocate $180 per month from other things that might mean less to me, I've effectively upgraded a meaningful part of my life at little additional cost.

So I've mostly stopped getting facials, which added about $120 per month back to my bottom line. That's an easy swap for me. Ubers to and from the airport it is. 

That is the point of the exercise, identifying the attainably aspirational, high-leverage lifestyle changes that remove friction or headaches from your day-to-day experience of your life, figuring out what they would realistically cost, and then building a financial goal around it. It might mean earning more, and in this case, it'll show you how much more, or maybe it means figuring out where existing spending can be rerouted. We'll be right back after a message from the sponsors of today's episode.

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Katie:So from my 2023 viewpoint, having achieved some of these upgrades that I wished for, how does it feel now? My Mundane Wednesday is undoubtedly better for a few reasons, not the least of which is because I can now spend most of the day in close proximity to my favorite coworker, Sam Cat. I didn't originally intend to fully work remotely, but that's how life played out, and I do enjoy the ability to walk down the street for coffee every once in a while or feel the freedom to order lunch delivery if my husband takes all of our leftovers to work. So the convenience and the freedom and hey, home office, that money was able to buy has been invaluable in a lot of ways, and I'm really, really thankful that Past Me clarified that vision and then put in the work to get us here. But part of the reason that it was so fascinating to read my 2020 financial journal, full of hope and wonder, was because at the time I assumed that those upgrades would kind of get me over the happiness finish line, so to speak. That I would never have another bad day, or that my experience of life would be this picturesque snapshot, which highlights why these conversations about lifestyle upgrades always have to be viewed through the grounding lens of the “hedonic treadmill.” No matter what changes you make, eventually they will become your normal, and if you're not careful, the goalpost will just keep moving. Also known as lifestyle creep. 

And this inadvertent three-year experiment taught me something very interesting about human nature. It's something that I consciously knew, but had not experienced in such a literal way before. There are somewhat diminishing returns to trying to make your own life better. After a certain point, incremental material improvements are not really going to measurably impact your experience of your life, if for no other reason than “hedonic adaptation:” the tendency for our moods and temperaments to revert to a baseline after good or bad things happen. Attainably aspirational upgrades are an attempt to elevate that baseline, sure, but the truth remains that once you have stripped the most stressful or unpleasant stuff away, you may find you get less bang for each incremental buck spent on turning up the dial. And when you reach that point, it makes sense to shift gears from trying to find novel and unique ways to level up, and instead focus on cultivating feelings of…da, da da da…contentment and gratitude. 

Now, I wanna make it clear, I don't think it's as simple as “Always strive for gratitude no matter your situation, rather than ever working to change things sometimes.” I would never tell a single mom working three jobs that the solution to her less-than-ideal experience of her life is to just “feel more gratitude.” Sometimes things really do need to change or really can improve: a toxic job, an apartment that makes you feel cramped and anxious because it's unsafe or too small. There are certain elements of our lives that impact our day-to-day happiness that moneycanfix. But feeling contentment is one of the most crucial elements of well-being. Fighting for incremental 1% improvements after a certain point is not really going to move the needle of your happiness. It's also one of the most powerful financial habits you can master. That is my thesis in 2023. 

So if you listened to this episode and you had a really hard time thinking of lifestyle upgrades of your own, you may already be at that 95% mark, and it might not be the best use of your time and energy to try to work harder or budget more aggressively or find a new side hustle. The best ROI on your time might be nurturing more gratitude and contentment for a life that doesn't really need much improvement. Part of the big lie that consumerism sells us is that there's no such thing as diminishing returns. And as I've talked about before on this podcast, in 2023, I am prioritizing time and experiences with friends and family, because regardless of when I'm able to retire, those experiences are what make gratitude and contentment incredibly easy for me, and they make the Mundane Wednesday less mundane, and even more valuable.

All right, y'all, that is all for this week. I will see you next week, same time, same place, onThe Money with Katie Show. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from the lovely Kate Brandt.