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Archive for the ‘work life balance’ Category

And We Could All Use a Little Change…

Wednesday, June 17th, 2009

…to borrow a line from “All Star” by Smashmouth. It seems appropo given the magnitude of change the economy is demanding of people. Just this morning I did an interview on the Today Show about the growth of stay-at-home dads, and how couples can cope with the transition from a financial perspective.

One of the dads in the story talked about the loss of identity, which is a huge part of change (happened to me when I was laid off with 500 other people at my job back in 2001). There’s this weird black void you step into when you leave the old thing but don’t know what’s next.

My advice for these dads? Embrace the void, take time to hang with your kids, wallow in the mess, the frenzy, the tedium, the delight. You will look back on that downtime with a pleasure that most dads don’t get the opportunity to experience. At least that’s what my husband says, who stayed home for a bit with the kids while I worked full-time.

And though it sounds like a cliche, getting laid off really was the best thing that ever happened to my career.  Here’s the Today Show clip.

Location, career, kids and compromise

Thursday, June 11th, 2009

Today’s Yahoo!Finance column looks at the financial challenges that face prospective parents. I interviewed a couple from Seattle, Patrick and Suzy, who are doing all the right things with their money but still feel overwhelmed by the financial issues related to having a child.

One of the biggest challenges is that they bought a home near a city they love, but one that’s thousands of miles from their famillies. Because of the expense, they both have to work full time, and yet they lack the support network extended family can provide when the kids come along.

Their story resonated with me, because I faced similar questions about compromise when we started our family. Like them, I am originally from the Midwest and fell in love with the vitality and creativity of the best city in the world (New York). It presented wonderful career and cultural opportunities and still does. We are an hour from the mountains and an hour from the ocean, 35 minutes from Broadway shows and the best museums in the world.

But back when I started having kids, I thought seriously about moving to Chicago, even asked my boss about a possible transfer. Our cost of living is significantly higher here than in the Midwest, which requires us to work harder to afford those museums and Broadway shows (and property taxes) — which ultimately gives us less time with our kids. (Although I work mainly from a home office, which helps.) I would love my girls to have the same relationship with my mother that their cousins in Chicago do, but that’s impossible when you only see each other a few times a year. They do, thankfully, have my husband’s family nearby.

But that’s life — it demands compromises. Would Patrick and Suzy be happier if they moved back to the Midwest, where they could afford a better lifestyle and be close to family when they have their kids — and give up the city and friends that make them happy? Should someone make career satisfaction a higher priority — even if it means moving far away from extended family? Or should you settle for a less satisfying career to sustain closer family ties? I’d love to hear your thoughts and experiences. You can comment here or email me at laura at laurarowley.com.

The Risks and Rewards of Living on One Income

Wednesday, May 7th, 2008

Is it possible for families to shift from two incomes to one?

It’s something most households with two working parents and young children at home have contemplated at some point. More than 60 percent of families with children under age 18 had both parents employed outside the home in 2005-2006, according to the Bureau of Labor Statistics. That compares to less than a third of mothers in 1975.

You see lots of articles discussing ways to eliminate the second income — things like clipping coupons, buying second-hand clothes, and cutting out vacations and cable television.

But ultimately, paring those expenses isn’t going to cover the gap for most middle-class families, because those aren’t the costs that drive them to the economic edge. The real problems are what Harvard Law professor Elizabeth Warren calls “the big five” — housing, health insurance, child care, a second automobile, and taxes.

Warren, co-author of “The Two-Income Trap,” is an expert on family bankruptcy. She has found that married couples with children are more than twice as likely to file for bankruptcy as childless couples. (More children live in homes that will file for bankruptcy this year than live in homes that will file for divorce.)

Moreover, income volatility has increased sharply among families with children. According to Jacob Hacker, author of “The Great Risk Shift,” the volatility in family incomes doubled between 1969 and 2004. Moreover, Americans with at least four years of college experienced a larger increase in family income instability than those with only a high school education over the past generation, with most of the rise occurring in the last 15 years.

The single-income family with two children in the early 1970s earned about $32,000 in inflation-adjusted dollars, compared to $73,000 for the dual-income family in the early 2000s. Despite the higher income, today’s families save less and carry more debt: In 1970, the one-income family saved 11 percent of its take-home pay and allocated 1.4 percent of its annual income to pay revolving debt, such as credit cards. In 2005, the two-income family saved nothing, and allocated 15 percent of its annual income to revolving debt, according to Warren.

In other words, the two-income family spends everything — the second income, all of its annual savings — and has piled on debt. Where does the money go? Despite the sticker-shock that goes with buying a gallon of milk these days, they didn’t spend it on food, clothing, appliances, electronics, or automobiles — on an inflation-adjusted basis, those costs actually went down.
 
Warren found two-earner families today spend three-quarters of their household incomes on five categories (which consumed only half the income of single-earner families a generation ago):
Housing: The cost for families with children has risen 100 percent in inflation-adjusted dollars since 1970.

Health Insurance: For a healthy family that has an employer-sponsored insurance plan, costs have risen 74 percent in inflation-adjusted dollars since 1970. In that year, the demographic group most likely to lack health insurance was a 23-year-old unmarried man with no children; today it’s a person age 35 who is married with children.

Cars: Families today spend 52 percent more on automobiles than in 1970, on an inflation-adjusted basis, Warren found. While the inflation-adjusted price of automobiles has dropped since 1970, families are still spending more on this category because they typically need two cars to get to work.

Taxes: The first dollar that the second earner earns is taxed after the last dollar of the first earner, Warren notes. This means that the tax rate for the family unit has risen by about 25 percent between 1970 and today.

Child Care: In 2007, fees in licensed centers ranged from $10,920 a year for 4-year-old children to $14,647 a year for infants, according to a study by the National Association of Child Care Resources and Referral Agencies (NACCRRA). In every region of the United States, annual costs of child care surpass the cost of food.

A sixth major expense is education — both preschool and college — which most families in 1970 didn’t view as necessary to launch their child into the middle class.

The number of children who attend preschool has risen to 45 percent of all 3- and 4-year-olds from about 20 percent in 1970, according to the Census Bureau. On average, parents pay $7,000 a year, according to NACCRRA.

Finally, there’s the challenge of saving for retirement. In the late 1970s, 62 percent of workers were covered solely by defined benefit plans, paid for by their employers; in 2005, the number was 10 percent, according to data from the Employee Benefits Research Institute.

Making It on One Income

So is it possible to downscale to one income? It may be, for couples who are willing to make bold changes with their money and in their attitudes, says Judy Lawrence, a financial coach and author of “The Budget Kit.”

“You have to be willing to do some soul-searching about the things you’re going to change and let go of,” Lawrence says, adding that the stay-at-home parent takes on the additional job of planning ahead and investing the time to get the best deal. It’sgoing back to your true priorities, values and goals and saying ‘it’s the best choice for me, my family, and our future’ — not ‘we’ll be locked into a life of drudgery and we can’t do what we want to do.’”

Jonni McCoy, a Colorado writer and founder of Miserly Moms, agrees. When she left her job as a buyer for Apple Computer in 1992 to stay home with her two children, she was earning more than half the family income. “Make sure you’re really clear why you are doing it, because there will be days when this is the last thing on the planet you want to do,” she says, drawing an analogy to nutrition: “The average diet lasts 72 hours, but if you have a medical reason, it will stick.”

Find a community of like-minded savers, says McCoy. “You have to have people who share your values, who say ‘no, I can’t afford that,’ ” she says. “The beginning is so tough, because when you’re leaving the working world you may not have that community established.”

Bankrate.com offers a calculator to help figure out what a second income is really worth on an after-tax basis, without all the work-related expenses. You need to track your monthly expenses for child care, commuting, work clothes, lunches and coffee breaks, dry cleaning, cash for coworkers’ birthdays and other celebrations, and money spent on take-out meals and restaurants because you don’t have time to shop and cook. Also consider savings on cleaning and other services the stay-at-home partner could take on, and the possibility of eliminating or downsizing a second car.

Start to tackle grocery expenses before you quit. “Food is the largest unfixed expense in most household budgets, so there’s a tremendous amount of money in there,” says McCoy. “We tweaked our budget in every way, but the majority of extra money came out of groceries.” Basing weekly menus specifically on sale items can cut 30 percent off a grocery bill, McCoy says.

Lawrence, whose budgeting guide was first published in the 1980s, says it’s harder to live on one income today because a number of innovations — such as Internet access and certain prescription drugs — have become necessities. But just as important, there’s so much more choice in luxuries than there used to be — that is, so much more stuff to say “no” to.

“Children and adults are bombarded unconsciously with media showing them how life is supposed to be; you’re unconsciously saying ‘no, no, no’ all the time — and that takes energy,” Lawrence says. “It’s much more of an emotional challenge than it used to be.”

(Adapted from my Yahoo!Finance Column)

Sophisticates and Myopes: Who Is Better Off?

Friday, February 1st, 2008

In my recent Yahoo!Finance column, I interviewed Bob Sullivan, author of “Gotcha Capitalism.” Sullivan references some academic research that divides consumers into two groups: sophisticates and myopes. Sophisticates are the savvy consumers who clip coupons and call customer service when they’re overcharged, while myopes lack the time or interest to get the best deal. 

A reader emailed and suggested that myopes may actually be better off from a happiness perspective. Unlike sophisticates, they are not kept awake at night thinking about how the cable company is gypping them with extra service fees. Here’s a portion of the email, and my response:

Laura: First of all, I completely agree that many companies are finding many ways to squeeze in extra fees that most people don’t catch. As a very analytical and cost cautious consumer, this bugs me night and day. It bugs me night and day… you see, it takes away from my happiness. 

I remember a few years back when I actually spent over four hours on the phone with Adobe because they charged me $300 for some software and didn’t send it to me for over four months. It turned out that I ordered it right as they switched over systems and they lost my order but still charged me.  My point is, and I’m sure you agree, customer service is stressful and takes away from our happiness. 

Back to those pesky costs. As an industrial (business and finance operations) engineer, I remember studying the effect of bundling. It’s the concept that a company makes more money by bundling things together than by offering each one separately. It works because we all value items at different levels, but if you add a lot of things together we often value the sum of the objects the same.

Thus, a company can sell 30 items for say $125 because we all value the package sum at (or above) that amount – maybe it’s a bundle of channels and I value NFL network at $124 and Disney at $1 and you value Disney at $125 and NFL at $1, but we’re still getting a product/bundle for a price less than or equal to it’s value to us. 

And those pesky fees. I agree completely that companies go after the myopes.  But does it really matter? For starters, if we all adhered to the principles of our capitalistic forefathers, we’d only pay for things that cost less than there value to us.  If a cell phone bill got to high, we just wouldn’t use one (but obviously cell phones are worth those fees). If a rental car cost too much this time, we wouldn’t rent one next time.  In “theory,” it’s that simple. 

It seems to me that it’s not all about things costing too much – in which case we would just stop buying them – but things cost more than we think they should.  In this case, in comes down to deciding whether or not our time is worth the savings from calling customer service.  As a former “sophisticate”, I didn’t realize how valuable my time was and I called too often.  Myopes value their peace and time too much to call.  And as a hybrid, I now try and call only when it’s truly necessary. 

Finally, the real benefit of our capitalistic society is when companies evolve further.  My favorite example is Apple with its simplicity in design and pricing. They’ve discovered the economical benefit of appealing to the emotions of people. They can appeal to sophisticates and myopes by offering a range of simple products and services at clear prices. 

I think a great follow-up for your article would be another about whether or not it’s really worth our time or not to be a sophisticate. Because in the end, time wasted on customer service and stress for a pesky refund may have been better off being used towards the creation of life’s greatest gift – happiness. 

Dear Reader: Thanks for the insightful feedback. I agree with you that it might be more peaceful to be a myope, and not nit-pick every $5 overcharge. It might be better to spend that time doing something more productive, or more pleasurable. On the other hand, those little nickels and dimes add up, especially when compounded over time. 

For instance, I graduated from college debt-free – a combination of scholarships, part-time jobs, help with room and board from my parents and lots of penny pinching. That meant I could open an individual retirement account a year or two out of college. I did so despite struggling on a meager salary in New York.  

Where did I find the money to invest? Nickels and dimes. Looking for deals on every purchase, clipping coupons, thinking carefully about what stuff costs; never taking on credit card debt. (Going to bars during the happy hour, where you could nurse one beer and eat the free buffet for dinner.) 

Those habits were ultimately life-changing. In my late 30s, I was working long days for a media company, and wanted to go on my own, to get more flexibility and spend more time with my kids. I could take that risk because I had no debt and a healthy retirement fund that had been growing for more than 15 years. I had managed to max out my contributions every year by being a sophisticate. 

That doesn’t mean I led a monk’s existence over those 15 years. I enjoyed life in New York and traveled across the U.S., to Europe a half dozen times, and Africa. Again, I managed that by thinking like a sophisticate – sharing a small apartment with a roommate and cutting my rent in half so I could put my money into things I valued, like travel. 

Sophisticates have a sense of what things cost, so they can make better judgments about when it’s worthwhile to spend money and when it’s not. At its most fundamental, money management is about making value-driven choices; when you know what stuff costs, you can make better choices. That’s important in a culture that tells you that you can have everything you want (just get enslaved by a credit card company at 15 to 30 percent interest!) 

Here’s a recent example: I’ve been stalking a new sofa and love seat for my living room for over a year. The beat-up furniture I had was over a dozen years old, but I didn’t want to replace it until all my kids were potty trained, and old enough to know you don’t stab a leather surface repeatedly with a pen because it makes a fun popping sound. (That happened to a friend of a friend.) 

I gained a good grasp of what a leather couch and sofa should cost (including shipping). So when I found it at half that price this week, I jumped on it. As I was waiting to arrange for delivery, I met a man who said he had just bought the same set. I asked if he liked it, and he said, “Yes, and I’m a furniture dealer. I can’t even get leather at that price.” 

Frankly, this part of being a sophisticate is fun; I love the hunt, I love beating the industry at its own game (furniture has among the highest mark-ups of any consumer product).  

Bottom line? The more you know, the better your choices, and the more money you have left over for other fun stuff. (We’re traveling to Florida this month during the kids’ school break; four of five airline tickets were free — frequent flyer miles.)  

I think company tactics that force people to spend time avoiding hidden rip-offs is appalling. The playing field is not level, and being a sophisticate can be a hassle. On the other hand, companies aren’t likely to change their appalling strategies, so it’s important for myopes to get in the game. (Sullivan’s book is great for identifying which battles pay off best.) 

Being a sophisticate rather than a myope has allowed me to completely avoid revolving debt; systematically save for my goals; and change my work life so I can balance work, family, friends, exercise and volunteering (all of which researchers find contribute to happiness.)

Sorry for the long post! I think the hassles of being a sophisticate pay off big long-term. At least it worked out that way for me. Any other readers out there want to weigh in on myopes, sophisticates and the pursuit of happiness?  

Identifying Your Values

Monday, August 6th, 2007

Can you imagine having $10 million in net worth and still not feeling wealthy? That’s the story of a group of folks from Silicon Valley who were interviewed in a New York Times article from August 5. They have a net worth that puts them in the top half of the top one percent of Americans, but are surrounded by people who earn tens or hundreds of millions. As Gary Kremen, the founder of Match.com said, “You’re nobody here with $10 million.”So these so-called working-class millionaires continue to toil at their high-tech companies, working 60 to 80 hours a week, caught up in chasing the players whose net worth is in the top one-tenth of the top one percent.

An extensive body of research has found people cannot seem to help comparing themselves to their peers. This is true whether it’s millionaires in Silicon Valley or the poorest of the poor in countries like Peru and Russia. It’s one thing if you’re passionate about your work, and your work is located in Silicon Valley. Work is the primary value, and you manage your other priorities, and the negatives like a high cost of living, around that primary motivation. But sometimes we just get caught up in a culture, a mind-set and a routine, and we think other alternatives don’t exist.

 

The path to financial well-being begins with identifying what you value most in life. You want your work and your money to serve your values. That’s not easy, with the siren call of advertising bombarding us from every angle, and our tendency to compare and compete with peers.

 

So how do you figure out what you value? Start with your passion. Recall the last time you felt excited by work, fulfilled, competent, so deeply engaged in activity that time melted away.

 

-What were you doing?

-Think about the environment: Were you in an office? In the field? Working alone with ideas or things? Working with other people on a team? -Did you do this activity with the structure of a 9-to-5 day, or did you organize your own schedule?

-What skills and qualities did you call upon to accomplish the job? Creativity? Specific knowledge? Leadership?

-What part of the process did you enjoy most?

-What outcomes did you feel most excited about?

-What rewards motivated you? Money? Beating a competitor? Serving others? Learning something new? Creating something new?

 

Another way to identify your values is to look at how you actually spend your time, and ask why you spend it that way. For more on this exercise, see this story.

Lifestyle Creep

Monday, July 2nd, 2007

 

I bought a new chair for my office. It’s a modern-looking thing, olive green fabric with a curving pattern and walnut legs. I looked around for more than a year before settling on a piece from homedecorators.com, which has decent quality for the price. The new seating replaced an Adirondack stick chair that my cousin gave me a long time ago — a rugged, outdoorsy thing suffering from a bad case of claustrophobia. It now lives on the patio, and I can tell it’s happier there.

I know this is true because I spend more time on the patio than I used to, thanks to a gift I bought for my husband on Father’s Day. The gift was objectionable on two counts: It was completely unromantic, and was actually for me, not him. I got a Mosquito Magnet Defender at Home Depot for about $300.

It’s a contraption that looks a little like a gigantic plastic decapitated mosquito head on a stick – Freudian perhaps, as the thing is awesome at extinguishing the little blood-suckers. You insert a little octenol, attach a propane tank and plug it in. The mosquitos think it’s a human, fly inside and die of dehydration. The woman at Home Depot told me I should have installed it in May, because it takes four to six weeks to disrupt the breeding cycle. But a week after installation, the trap was sucking ‘em in by the dozens and my patio was a new oasis of bite-free calm…and style, thanks to the new green outdoor pillows from Home Depot I picked up on the same trip. (They’re identical to ones I admired from Pottery Barn — at about 1/3 the price.)

 

When I found myself dropping a few hundred more on sale items from Crate and Barrel and Red Envelope (justifying them as early Christmas presents, with a few for myself) I realize I was in deep in lifestyle creep.

 

Both my husband and I are having stronger years in our respective businesses than last year. But since we hadn’t set specific goals for the extra income, I was distributing it randomly in ways that may not have been optimal to my economic utility…or, to put it more frankly, pissing it away. That’s lifestyle creep – this unconscious thing that happens when you get a raise, or bonus, or a repeat client. The money just disappears on stuff that will probably provide little thrill in a few months.  

 

I would argue I am getting utility out of my new office chair, the Mosquito Magnet and even the outdoor pillows. I probably could have skipped the shopping spree at C&B and Red Envelope. But the smart approach would be to sit down and be thoughtful about the extra income. Here are a few things I should have asked myself before going shopping:

 

-Am I directing enough of my income to real necessities – retirement, college savings, debt pay-down? (We have no debt, other than our mortgage, but that would be the first place a windfall should go.)

 

-What maintenance necessities are around the corner? The entire house will have to be painted in the next few years, and a very old, very dead tree has to removed from the front yard. (I frankly can’t think of a less satisfying way to spend thousands of dollars. But this is the joy of homeownership. And will prevent it from possibly falling on the house, turning an annoying expense into a catastrophic one.)

 

-What experiences do I want to have, and with whom? Research shows you’re better off creating memories than purchasing stuff. For instance, we went canoeing with the kids on Sunday. I know they got a bigger bang out of that than my office chair.

 

-Can I use the money to create more time? One of my goals has been to work half-time in July and August and spend more of that time with my three kids. But I somehow forgot that I could use the extra cushion to cover ordinary expenses and work less in those months.

 

-Can I use the money to invest my career, and make the income boost self-sustaining?

 

A jump in income is a great opportunity to take some time and really think about what you value most in life; to create a picture of what you want to accomplish in a holistic way. What are your goals for close relationships and friendships? Continuing education? Career? Family pleasures, like travel? Housing? Public service and charity – what difference do you want to make in the world? And how can money facilitate that picture?

 

I’m in the process of revisiting five-year, one-year, six-month, and one-month goals based on what I value most in life. Then I’ll figure out what I need to do this week, and today, to make them happen. If I walk through this exercise and our family income continues to grow as I hope, the money will be a tool to serve our values, and create long-term happiness…rather than just fund a mindless shopping spree.

 

How do you avoid lifestyle creep? Comment here or email me at laura at laura rowley dot com.

Career Detours

Friday, May 11th, 2007

 

This week’s Yahoo column is about on-ramping and off-ramping in the workforce. Both men and women leave jobs at various times during their careers, but for different reasons. Forty-five percent of women report off-ramping for child care, another 24 percent to care for an elderly relative, and 32 percent because their partner’s income was sufficient, according to Sylvia Anne Hewlett’s new book, “Off-Ramps and On-Ramps: Keeping Talented Women on the Road to Success.”

 

Among men, 29 percent leave their jobs to change careers and 25 percent to earn advanced degrees; just 12 percent cited “time for children” as the reason they left their jobs. Hewlett also surveyed men about how they felt about their wife leaving the workforce. While 60 percent said they were enthusiastically supportive, another 55 percent said they were either envious or angry. Almost one-quarter of male respondents worried about the financial implications of their wife’s decision to quit.

 

Hewlett says work-life balance has become more difficult for both sexes. “It’s gotten harder to do everything at the same time, because the work model has gotten more onerous,” Hewlett told me. “The extreme job phenomenon, with the 73-hour workplace and 24/7 client demands, working in multiple time zones – that’s not going to go away any time soon, because it’s driven by globalization and technology and fiercer competition.”

 

Relying on anecdotal evidence, the media has focused on women choosing to off-ramp to care for children, when many would prefer flexible work to leaving altogether. Case in point: Three researchers at University of California, Hasting College of Law examined 119 media stories about the opt-out revolution. They found the media “focuses overwhelmingly on the lives of professional/managerial women, who comprise only about 8 percent of American women; they pinpoint the pull of family life as the main reason why women quit, whereas a recent study showed that 86 percent of women cite workplace pushes (such as inflexible jobs) as a key reason for their decision to leave; gives an unrealistic picture of how easy it will be for women to re-enter the workforce; and virtually always focuses on women in one situation: after they leave the workforce and before they are divorced, which is unrealistic in a country with a 50 percent divorce rate.”

The Hedonic Treadmill: The More We Have the More We Want

Thursday, March 8th, 2007

In 2002, after more than a dozen years in Manhattan, my husband and I finally bit the bullet and moved to the suburbs.

We traded our 900-square-foot, one-bedroom apartment in the city for a 2,000-square-foot, four-bedroom colonial in New Jersey. Just in time, too. Our third child was born shortly after we moved.

I thought I’d died and gone to real-estate heaven. But it didn’t last.
Just as I had once longed for the classic-six apartments and Hamptons retreats of our Manhattan friends, I now began eyeballing the mansions higher up the hill and envisioning the delights of a summer place on the Jersey Shore.

Scientists call this phenomenon “the hedonic treadmill.” It simply means we adapt to the improvement in our circumstances and then seek more. The more stuff we have, the more we demand from life –and the more disgruntled we become when we don’t get it.

So what’s wrong with improving our material circumstances? This is just the pursuit of the American Dream, right? Well, not if your ultimate goal is happiness, according to three decades of research in the field of “subjective well-being.”

Scientists have found that while a certain amount of money does indeed make us happy, once basic needs are met, happiness doesn’t continue to rise in direct proportion to income. For instance, surveys of lottery winners found they are not much happier than the average person — and actually took less pleasure in routine events, like a friend telling a joke. I suppose once you win Powerball, the neighbor’s knock-knock jokes kind of pale in comparison.

But that’s not all. Researchers Tim Kasser of Knox College and Dr. Richard Ryan of the University of Rochester have found that people who make money a top goal in life are at greater risk for depression, anxiety, behavioral and relationship problems, and score lower on indicators testing for self-actualization and vitality (or feeling alive and vigorous). The results were consistent across different countries, income levels, and age groups.

So if scientists say chasing more money and more stuff can actually be bad for you, why do we keep climbing on the hedonic treadmill?
Here’s one compelling theory: People are bad at predicting what will make them happy. Princeton psychologist Daniel Kahneman won the Nobel Prize in economics in 2002 for his work in this area.

Basic economic theory suggests that you and I are motivated by self-interest. We know what we want, we can predict the most desirable outcome, and we can make the best choice to maximize our welfare. Not true, say Kahneman and others. We don’t always act rationally.

Consider the irrational attachment to New York City that would prompt a family of four to live in a one-bedroom apartment, for example. We left reluctantly, viewed it as a sacrifice for the kids, and predicted living in the suburbs would make us unhappy. Strangely, it turned out to be quite the opposite.

Why can’t we predict what will make us happy? As Kahneman explains, there are two people involved in our decisions: The self that actually experiences events and the one who remembers them. It’s the remembering self who keeps score and controls our destiny.

When we recall events, we craft a narrative for ourselves, paying closest attention to the peak and the end of the experience. And that results in a limited picture of what actually happened.

Psychologists discovered this phenomenon by having subjects do both real-time, minute-by-minute assessments of an experience and then an after-the-fact evaluation. Kahneman, for instance, did a study of patients receiving colonoscopy exams.

In the study, Patient A went through a buildup to sharp pain and then the procedure was over. Patient B went through a longer procedure — a buildup to sharp pain, which then declined to slight discomfort before the exam ended.

Here’s the wacky part of the findings: The people whose experiences ended on a less-painful note rated the experience better, even though they suffered exactly the same pain as Patient A and the event lasted for a longer period of time. They only remembered the peak and the end.

So what’s my point? Like the colonoscopy patients, we focus on the peak of an experience and the end, ignoring the stuff in the middle. So we’ll remember the rush of closing a big deal at work, but we won’t remember what it cost in time away from our families. We’ll remember how spectacular it felt to trade up to larger digs, but we won’t remember how long and hard we had to work to get there.

The bottom line: The bigger the trade-up in lifestyle, the bigger the monthly nut — and the harder we have to work to achieve material goals. Since there are only 24 hours in a day, we end up sacrificing other aspects of life that actually do create lasting happiness (at least according to scientists): Spending time with family and friends, exercising, volunteering, or swinging on that hammock in the back yard with a copy of Sports Illustrated and a cold Heineken. (Okay, that last one came from husband, not from scientific research.)

So how do we resolve this dilemma? Make a list of 10 things you value most in life. Make a list of the people, the qualities and the experiences that are most essential to your happiness. Then set goals for yourself as to how you’ll build a life that consciously reflects those values, connecting them to both money and time.

Value a relaxed, secure retirement? Max out your 401k or IRA contribution. Value a relationship? Schedule lunch with that person a couple times a month. Value helping others? Mentor a colleague or volunteer for a charity you strongly believe in. Consciously choose what the happy life looks like for you, rather than allowing the irrational self to run you ragged on the hedonic treadmill so you can buy more stuff.

Meanwhile, if you come across a bargain surfer’s shack on the Jersey Shore, let me know. On second thought, don’t.

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