How do you maximize your happiness from your savings?

Money doesn't provide happiness. You maximize your happiness in lyfe through moments… Money can support these moments but your money needs a plan to do this.

Exercise: Take time now to envision your lyfe in the future. What are you enjoying? Where do you live? What major lyfe events are occuring?

• Within the next year?

• 1-5 years?

• 5-10 years?

• 10+ years?

Now, what money do you need to accomplish these?

*My suggestion is that you do this exercise at least once a year.

Figure: Time frames to categorize when you will use your money to support your lyfe

Great job! Now let’s talk about how we can handle our money reserved for each time frame.

Within the next year?: When you create a budget, you should create it for a full year. While you do this, take into consideration how you want to spend your money in this time frame to maximize your happiness.

• Where to put this money: Low risk, high liquidity options

  • Savings Account (Preferably high interest savings account)

• IMPORTANT NOTE: Emergency savings should be in this section since you need this money available immediately.

• From your budget, you will also have planned savings that will end up in the following time frames.

• What do I do? I create a yearly budget with monthly and yearly spending categories. The yearly categories are my bigger, less frequent spending items. I put money that will be used in this time frame into my high interest savings account until I need to use it.

1-5 years: This money is going to be needed fairly soon and depending on where you are in lyfe, it could be anything from a new car, new house, education, etc.

• Where to put this money: Low risk, medium to high liquidity options

  • Savings Account (Preferably high interest savings account)

  • Short term bonds or bond funds

  • CD’s

• What do I do? I mainly just use my high interest savings account for this category because it is easy to manage and I have this money available at any time I may need it.

5-10 years: This money now has a while before it is going to be used. You can start to take more risks in this time frame. Also, the use of this money could change by the time you need it, which is completely normal. When you make changes to the purpose of this money, it may end up in another time frame so keep this in mind.

• Where to put this money: Medium to High risk, low to high liquidity options

  • Index or Mutual Funds with mixed bonds and stocks (likely will want a more balanced bond to stock ratio: 40-60, 50-50, 60-40 are options)

  • Stock funds (if you want to take more risk)

• What do I do? I actually just put this money in stock index funds as I have a higher risk profile with anything 5+ years out.

10+ years: This money has plenty of time before you are going to need it so you have the most options with it. This money will likely not be pegged to as specific of goals or purpose, such as the general category of “retirement”, because your purpose will likely change.

• Where to put this money: Medium to High risk, low to high liquidity options

  • Index or Mutual Funds with mixed bonds and stocks (likely will want a higher balance of stocks than bonds: 60-40 or higher stocks)

  • 100% stock index or mutual funds (if you want to take more risk)

• What do I do? All of my money that will not be used for 10+ years is in stock index funds.

These are suggestions but your own risk profile will determine where you want your money saving and investing. The main takeaway is that you should have a purpose for your savings so that you can maximize your lifetime happiness. You should also consider the timeline of that purpose to determine where to put your money to help it grow with the right risk level.

Plan your money to maximize your happiness and what you want out of lyfe! Let me know if you need support with that plan and to get started budgeting today!

Please note that the information provided in this article is for general informational purposes only and should not be considered as financial advice. Before making any investment decisions or taking any financial actions, it is essential to consult with a qualified financial advisor who can assess your individual financial situation and provide personalized advice. The author and publisher of this article do not assume any liability for actions or decisions taken based on the information contained herein. All readers are encouraged to conduct their own research and due diligence before acting on any information presented in this article.