Laura Rowley Money & Happiness

Last week, I reported on the results of a new survey by Yahoo! Finance and Decipher, which found many Americans struggling with anxiety in their financial lives. This week, I'll take a look at some people who have found financial peace -- and the habits they share.

1. They know exactly where their money goes.

Danny Kofke, 32, has been a special education teacher in suburban Atlanta for a decade. He wrote the book "How to Survive (and Perhaps Thrive) on a Teacher's Salary" based on his experience supporting a family of four on $37,000 a year.

"The number-one reason people are so far into debt is they don't know where the money is going," says Kofke, who is married with two daughters, ages four and one. "When we got married, we walked around with a pad for a month and wrote down everything we spent. After that we used a cash system -- we pulled $200 a week out of the ATM and left it in jar in our apartment. It's so much harder to spend the green stuff than swiping a piece of plastic through a machine."

When friends ask for advice, Kofke shows them how their money evaporates in drips and drops. "It's not the huge purchases, it's everyday occurrences they don't think twice about -- eating lunch out every day, going to the movies every week, or getting overdraft charges because they don't balance their checkbooks," he says.

Keep it simple: Write down every penny you spend for one or two months, examining those numbers and setting priorities. I use online software called Mvelopes to track my spending electronically; other people like Quicken or Microsoft Money. Find the method that works for you and stick with it.

2. They know what they want their money to do.

Financially peaceful people focus on two or three big goals they value, set a timeline, and then break the goal into smaller steps. They automate their savings through a weekly or monthly electronic transfer to a savings account, or by participating in a 401(k) plan. Meanwhile, focusing intensely on your own goals helps you avoid competing with the Joneses.

"I had a plan to retire," says Nicholas Fiduccia, a former computer hardware designer in Silicon Valley who recently left the workforce at age 50 and now lives in Oregon. "Sometime around 2000, I decided it was time to think about hanging up my career. I made plans by reading investment books, talking to money-wise friends and professionals, and attending retirement classes. Today, my philosophy is pretty simple: low-cost, diversified index funds, rebalanced every two years."

Similarly, several years before they had children, Kofke and his wife decided she would quit teaching and stay home with them full time. "We worked four years on one salary and put as much of her salary away as we could," he says. "We never got used to that second salary, so the loss of her income doesn't affect us as much."

3. They either don't carry revolving debt, or have a specific plan to pay it down.

"Plan your work and work your plan," says Mary Lena Anderegg, 65, a retired teacher who lives in Georgia with her spouse of 33 years. "Our first goal was to own a home outright in fifteen years, and in seven years we did. You have a lot more freedom to stamp your foot and say, 'This is how it shall be' if you own the land you're stamping your foot on."

Anderegg's husband was a homebuilder, and together they bought and flipped real estate back in the '80s, moving five times. That enabled her to get a Ph.D. with no debt. They lived on 30 to 40 percent of their income -- growing vegetables, hosting kids' clothing swaps, cutting utility bills, buying and maintaining used cars, and doing part-time or consulting work, putting the extra toward long-term goals.

In 1992, Anderegg's husband had a heart attack that left him unable to work -- and $40,000 in medical bills their health insurance didn't cover. "We wiped our savings clean because didn't want to incur debt," she recalls. Because they lived on less than half their earnings, they were able to make it on her salary -- and pay off the medical bills in just three years.

In 2000, they retired; they bought and fixed up a home near the ocean, and have traveled to Europe and Japan -- all with no debt. "Our rule is ‘If you want it badly enough to save for it, it's probably worth having,'" she says.

Small changes make a huge difference in banishing debt. If you put $1,000 on a credit card at 18 percent and make just minimum payments, it will take 12 years to pay off and cost $1,100 in interest. Put $20 more a month toward that card and it would be paid off in two years and a few months, with only $226 in interest. (Check out this calculator to see how an extra payment affects your payoff time.)

4. They invest in their job skills, and don't expand their lifestyles as fast as their salaries.

Rodger Oren was laid off in 2000 from an information technology position with a large manufacturing firm. "With my wife working, we had structured our expenses to live on the lesser of the two salaries," he says. "I could have bought a bigger house and better car, but I didn't. As a result, we didn't lose our house, auto, or incur debt from the ordeal."

Oren says he has always lived below his means thanks to the inspiration of his parents, who endured the Depression, and by watching manufacturing jobs disappear in his native Pennsylvania.

"I remember guys who were fifty-five years old coming out of McDonalds at shift changes" because it was the only job they could find after the steel mills closed, he recalls. "You can't live paycheck to paycheck -- you can't do that to yourself. I don't have as much as I would like, but I do sleep well at night regarding finances."

Oren banked his severance pay and jumped almost immediately into a college teaching job. By consulting on the side, he made 60 to 80 percent of his old salary, and kept hunting for IT positions. "I probably sent out thousands of resumes; I lost count," he says.

Ultimately, maintaining his career did require a temporary adjustment: He lives in Tennessee; his wife and two sons -- one starting medical school, the other in high school -- live in Georgia. "I'm ex-military, and sometimes you have to make sacrifices," says Oren, who served four years in the U.S. Air Force. "It's no different than if I was deployed somewhere." In the meantime, they visit back and forth on weekends and plan to reunite in two years, when his younger son graduates.

Oren shifted from manufacturing to the health-care sector and is working on his doctorate at night. When the IT security officer left last year, Oren volunteered to take on his duties for the learning opportunity.

"It increased my marketability; you always have to keep contemporary skills, look at the marketplace, and know where the trends are moving," he says. "With globalization, we have no idea what's going to happen -- you have to be fleet of foot, nimble, and adaptable."

For more habits of financially peaceful people, see my blog.