One of the biggest concepts in behavioral economics these days is the role that "choice" plays in our financial lives.
Sounds obvious, but it's the simple idea that we have a finite amount of money, so we need to choose wisely how we spend it if we want to live a life that we consider good.
But what, really, is the "good life"?
In August's Journal of Socio-Economics (yes, I confess that I read it for fun!) there was an intriguing book review of How Much Is Enough? Money and the Good Life by R. Skidelsky and E. Skidelsky, a father-son team -- the dad: an economist; the son: a philosopher.
In the review, researchers Benjamin Nienass of Yeshiva University (New York) and Stefan Trautmann of Tilburg University (the Netherlands) outline those factors that the Skidelsky team believe to make up the good life: "Health; security (low uncertainty in life); respect; personality (autonomy); harmony with nature; friendship (community, social capital); leisure (goal-less activity)..."
I thought this was a compelling list. Certainly more thoughtful than beef tacos and beer on a Sunday afternoon while watching football -- many of my friends' notion of living the good life.
But the reviewers then go on to say that this one-size-fits-all definition may not really be right. They argue that everyone's view of the good life can be varied, and you can't really account for the trade-offs that people are willing to make in such a list.
"A doctor," the reviewers write, "who feels called to help people may be willing to work 60 hours, sacrificing leisure and family life. Will he subscribe to this definition of the good life?"
This got me thinking about my own upbringing and the choices that my parents made in order to give us their version of the good life.
As I mentioned in my last column, my parents were frugal in a good way. They made smart decisions about spending money that allowed them to live the life that they wanted to live.
We certainly did not have everything we desired, but we definitely had what we needed.
Though they were careful with cash, they didn't scrimp on those areas that really mattered to them. Health care was number one -- damn the cost.
We saw the very best doctors even if we had to go outside the network of my dad's health care plan. (Of course, 20 or 30 years ago, health care wasn't nearly as expensive, but it was still a big cash outlay for my dad, an educator, and my stay-at-home mom.)
Weighing Priorities
Another priority: living in a comfortable home. That's not to say that they didn't hunt around for the best sale price on furniture or appliances. They sure did. (I recall many a Saturday evening trudging through a mall or department store as we compared prices on big-ticket items.)
But they believed that buying a quality refrigerator or a well-designed central AC system was incredibly worthwhile -- even though buying such higher priced items was not routine in most families in the '70s.
Their logic -- and mantra: We spend 365 days a year -- minus a small, local family car trip here or there -- in our modest home, which should be our family's comfortable refuge.
Buying good quality items for the home, they taught us, was a good short-term and long-term investment since we'd end up living with these items each and every day for many years.
One example: I vividly remember my folks replacing the wall-to-wall carpet that ran from our small living room to the dining room and down the hallway, off of which were our bedrooms.
The choice came down to a "real wool" green carpet, which was $10 a square foo, (I have an uncanny memory for that type of thing), versus a synthetic green carpet that was closer to $5.
We had a little contest in our family (this was before the Internet and DVDs, so we had to make our fun in some way!) in which we each closed our eyes and then felt both carpets to determine which felt more comfortable.
We all chose the wool, which was incredibly plush (a big plus in those days!) and luxurious, and despite its significantly higher cost my folks announced that they were going to go with it.
The carpet was a purchase that we'd no doubt live with for the next 20 years or so, and it made sense to choose the higher quality, more comfortable one. That was what my mother and father valued: It was worth it to pay extra for our home when it mattered.
Now, we did know families who used their money in other ways.
Some invested in snazzier cars. (One of our neighbors had a silver Cadillac convertible, which was the "it" car of the day.) Others went on major vacations -- from Disneyland to even more exotic locales like England or France.
There was one family who had a particularly strong interest in art and they brought their kids all over Europe to see the paintings of the masters.
My folks felt that on a limited budget they wanted to spend their money on their home.
It wasn't that they didn't want to travel. But they explained to us that when they weighed all the choices, they felt that a vacation is more of a fleeting experience whereas a dream carpet or state-of-the-art central air conditioner (not all that common at the time) to keep us cool in the 95-degree muggy city summers was something that would last for many years to come in a very concrete way.
That's not to say that we didn't take any family trips. Our vacations were to places within driving distance. We went to Amish Country, Philadelphia, and Boston.
Once there was a bigger family excursion to Washington, D.C., but I was left home with my beloved Nana since I was just 4 years old and considered too young to get much out of the trip. (I didn't mind because we ate ice cream out of the container until midnight.)
Because our family always stayed local on vacations, I didn't take an airplane until I was 16 years old, and that was for a trip to Pittsburgh to go to my brother's dental school graduation! (Not exactly the Louvre.) My parents didn't just apply these rules to us. They themselves did not get to Europe until their 25th wedding anniversary.
As I think back to those days, I do remember a twinge of envy over other kids' Mickey Mouse sightings (I remember my cousins told me about the frozen bananas covered with chocolate at Disneyworld and how I longed to try such a unique treat) or funny tales of trying to speak a foreign language to locate the nearest bathroom.
But I didn't really mind. I think I got great comfort from the fact that these were highly considered and thoughtful choices that my parents were making. And when they shared their thought process -- and the results of their choices -- with us kids, we felt quite lucky.
On some sweltering hot summer days when we'd stay indoors and watch a movie, I remember my dad sitting in his chair, commenting on the wonderful AC system and swooning, "Now this is the good life."
And now that I'm a parent, I know that these choices are, in the end, the stuff that life is made of.
What financial choices did your parents make that influenced your view of the "good life?"
And now as a grown up, how is it the same or different from that of your parents?
Please let me know!
It's Autumn: Do You Know Where Your Kids are...Financially?
Back-to-school time triggers annual checkups for kids, but it's a great time to check on your kids' financial well-being, too.
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This national initiative provides families with the 20 age-appropriate lessons--with corresponding, behavior-changing activities--that children need to know to live financially smart lives.
Nearly 800,000 families have visited MoneyAsYouGrow.org, and the Consumer Financial Protection Bureau touts it as the go-to source for parents!
Now that school is back in session, share MoneyAsYouGrow.org with your kids, their teachers, other parents, and anyone else who may find this vital tool useful.
© 2013 Beth Kobliner, All Rights Reserved
Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller Get a Financial Life: Personal Finance in Your Twenties and Thirties, and a member of the President's Advisory Council on Financial Capability. She is co-author of the forthcoming children's book Jacob's Eye Patch (Simon and Schuster, September 2013), which she wrote with her nine-year-old son. Visit her at bethkobliner.com, follow her on Twitter, and like her on Facebook.
This post was originally published on Mint.com.