Funny as it seems, personal finance is not just about the money. Having a healthy relationship with your finances depends on balancing your various priorities, while doing your best to ensure that your long-term outlook aligns with your actions. The Japanese concept of Ikigai–a word that roughly translates to “the happiness of always being busy”–can serve as a useful guide to create sound personal finance habits.
In their bestselling book Ikigai: The Japanese Secret to a Long and Happy Life, authors Héctor García and Franscesc Miralles detail the importance of finding your life’s purpose. Though the book is first and foremost about how everyone can find happiness, there are a number of personal finance-related lessons that can be gleaned from these pages as well.
Identifying Your Priorities
In their book, García and Miralles write about how finding a career that gives you purpose will provide constant motivation. Beyond the salary that you will earn, doing something that motivates you will keep you inspired to continue learning, improving, and making a contribution in your chosen field.
Finding your Ikigai relies upon aligning a number of concentric circles: your passion, your mission, your vocation, and your profession (see the image below). The combination of these different factors can help drive you towards your ideal career path.
Aligning your various priorities will help your personal finances as well. Ikigai will ensure that your financial decisions support your personal desires. Making sure that your day-to-day behavior meshes with your long-term objectives is key to finding this balance.
Creating a financial roadmap by building a budget will help to keep you on track. Periodically reviewing your spending choices will allow you to make course corrections as well, spotting areas where your spending is not supporting your true desires.
Not Relying on Consumption
There are a number of additional aspects of Ikigai that can be applied to your personal finances. Not relying on consumption for your happiness is an important one.
The authors have spent a good chunk of time in Japan (García lives there), and clearly have a deep appreciation for many of the local customs. They have a particular admiration for the inhabitants of the island of Okinawa, which is one of the world’s so-called Blue Zones where there are a high concentration of individuals who live longer lives.
The community structures in the town of Ogimi, where the authors visited, were strong and vibrant. The elderly members of the community spent plenty of time together engaged in various social activities. For many, their sense of satisfaction revolved around modest activities, such as tending their vegetable gardens, conversing with friends, and being in nature.
In our modern-day, connected lives, it is exceptionally easy to get in the habits of spending on unnecessary items. The ease of purchasing on credit or falling into the trap of revenge spending can lead us into spending well beyond our means.
Finding other means of enjoyment can help us lead healthy, fulfilling lives, without relying on consumption for short-term satisfaction.
Being Consistent
Being consistent is another lesson of Ikigai that can serve your finances.
Not surprisingly, those individuals who tend to live longer eat healthy and exercise regularly. The importance of being consistent with your (healthy) habits tends to be a common theme among those who live happy, fulfilling lives.
The same certainly holds true when it comes to personal finance as well. The idea behind dollar-cost averaging is that by plugging money into the market at regular intervals you will gradually accumulate a nice sum, without needing to worry about perfectly timing your investments.
The magic of compound interest only truly works when money is left invested over longer periods of time, when your interest begins to bring in its own revenues. Consistency is a key aspect of solid investment practices.
The 80% Rule
Additionally, knowing how to self-regulate will help our bodies, and our finances. Having the discipline to put money away for the future is an important aspect of personal finance.
Most everyone would agree that eating a wide variety of fruits and vegetables–and avoiding processed foods–are healthy eating habits. García and Miralles write about another one: eat only until you are 80% full. According to the authors, eating until we are completely stuffed will wear our bodies down with long digestive processes.
One can also apply this idea to our personal finances. Just because we have the capacity to spend 100% of our funds is not an invitation to do so. We can and should aim to set aside a good chunk of our monthly income for savings or investments. In fact, the 50-30-20 budgeting rule is based on the idea that we will put 20% of our after-tax income aside for savings and investments.
Just because you have the means to purchase something does not mean that you should. The 80% rule applies to our wallets just as much as it applies to our stomachs.
Conclusion: Finding Balance
Creating healthy personal finance habits extends way beyond simply understanding how to balance a check book. It relies upon finding balance with our lives, and as Ikigai promotes, understanding what truly makes us happy.
Chances are, true happiness is not acquiring that latest gizmo or gadget. Instead, it is based on the satisfaction of knowing that our financial decisions are supporting the lives that we want to live.
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