Laura Rowley Money & Happiness

The job outlook appears to be brighter this year for new college graduates, at least according to one survey: Employers plan to hire nearly 20 percent more new college graduates in 2006-'07 than they did in 2005-'06, according to the National Association of Colleges and Employers.

Here are a few thoughts on money and happiness for new graduates, who are set to begin collecting their first real paychecks and dive into their working lives:

1. Write down what you value most and how you can achieve it.

Do this today, tomorrow, and beyond.

Research shows that setting and striving for goals that are consistent with one's values creates happiness -- even if the effort requires some short-term pain. A 1993 study by German psychology researcher Joachim Brunstein discovered that a strong commitment to goals, and measurable progress, resulted in a higher sense of well-being.

Be specific about your financial goals, but don't let money serve as the only yardstick for success. Create measurable targets related to other values that create long-term happiness -- time with family and friends; education; health and exercise; memorable experiences such as travel; charitable giving and volunteer service; and spiritual growth.

2. When you list your life goals, don't put money at the top.

Researchers have found that people who make the pursuit of money a top goal score lower for mental health. According to several studies by Dr. Tim Kasser of Knox College in Illinois and Dr. Richard Ryan of the University of Rochester, money-chasers suffer a greater risk of depression; have more anxiety and lower self-esteem; experience more physical, behavioral, and relationship problems; and score lower on indicators testing for self-actualization and vitality. The findings were consistent across different countries, incomes, and age groups.

But there's an important caveat to these studies: The problems weren't caused by being wealthy, but by making money a high priority. A job that you're passionate about inevitably leads to high performance, which often results in financial rewards. But money is the byproduct -- not the primary goal.

So do what you love. Sometimes the money follows, sometimes it doesn't. But at least you're not squandering your precious time and talent pursuing a life of luxury that makes you nuts.

3. Start saving from day one.

Get in the habit of saving at least 10 percent of your salary every year for retirement right out of the starting gate. Otherwise you may never do it.

A recent study by HSBC Bank found that even people with more than $250,000 in household income -- the top 1.5 percent of U.S. households -- report facing many obstacles when it comes to saving. More than one-third said the need to pay everyday bills prevented them from saving more.

This is the dopiest thing I've ever heard. I started saving at 23, when my salary was in the mid-$20,000 range. I still had a blast devouring everything New York City had to offer (it helped to have friends who could score free concert tickets and club passes). In his book "Stumbling on Happiness," Harvard psychology professor Daniel Gilbert says that the brain is wired to recall infrequent and unusual experiences most vividly. And unusual experiences require creativity, not necessarily cash.

4. Recognize the downside of letting your lifestyle keep up with your income.

The phrase "hedonic treadmill" was coined by psychologists in the late 1960s. It describes how we adapt to improvements in our circumstances, and then seek more. The more money we make, the more we demand from life, and the more dissatisfied we become when we don't get what we want.

For 15 years, I lived in apartments (with up to three other people) that were no larger than 700 square feet. Then my husband and I bought a 1924 fixer-upper that was three times that size. When I find myself browsing local real estate ads, coveting more, I pull out my well-thumbed copy of "Your Money or Your Life" by Joe Dominguez and Vicki Robin.

That classic book reminds me of an important truth: The more crap I buy, the more I find myself in front of a computer working instead of frolicking with my kids at the beach. More stuff, less frolicking. Got it?

5. Procrastinate, procrastinate, procrastinate.

Put off until tomorrow what you could spend today, and the savings will be eye-popping over time. In my 20s, I had friends who dropped their laundry off with a service and had a biweekly cleaning lady. I held out until I was 40 and had a house and three kids before hiring someone to help out.

I figure that two decades of procrastination saved me somewhere in the neighborhood of $40,000. I'm currently applying the same technique to home improvements, and the purchase of a second car.

6. Never buy a new car.

Transportation devours one-fifth of average household spending. I have friends who have carried monthly car payments of $700. This is absurd. Once again, a bigger loan obligation and a bigger insurance bill mean less frolicking.

In my household, we pay cash for dependable used cars that cost $5,000 or less, take good care of them, and drive them into the ground. To borrow a phrase from Theodor Geisel (Dr. Seuss), "Be who you are and drive what you will, because those who mind don't matter and those who matter don't mind."

7. Choose your friends wisely.

According to a study by credit counseling group Myvesta, men overspend to impress other people, while women get in financial trouble because they want to socialize with a particular peer group. Either behavior can get you in a heap of trouble if you identify with a group that has deeper pockets than you.

"Whether it's your neighbors, people at work, or friends, you'll typically buy similar clothes, drive similar cars, and have similar activities," says Steve Rhode, Myvesta president and cofounder. "You can be very drawn to a group of friends, and before you know it you're in way over your head."

Bottom line: If you're a struggling novelist, avoid hanging out with investment bankers. If your college roommates are all investment bankers, enjoy your experience at the fancy bistro, excuse yourself before dessert by saying you have an early appointment, and fling them a $20 as you rush out the door. When it's you're turn to entertain, invite them over for poker night at your apartment (BYOB, naturally).

8. Define "enough."

A study by the Centers for Disease Control and Prevention found that people who earned $50,000 or more had fewer depressed or blue days than those who earned less. But to put a dollar figure on what everyone needs to be happy is utter silliness.

That's because the most basic needs can have radically different price tags. For instance, I have friends whose spouses and children have faced cancer, multiple sclerosis, diabetes, and a host of other health challenges (some since their 20s) that required excellent health insurance as well as significant financial wherewithal.

That said, think seriously about what you want to earn, but more important, about what "enough" looks like. How do you ultimately want to spend your time? Where and how do you want to live? What people do you want in your life?

Keep your answers to these questions in your head, because if you don't, you can blow through the next 50 years chasing a finishing line that keeps sneaking further away.