Why happiness should be the main focus of our finances

The previous newsletters focus on helping you think about and articulate your Happy Place. This is the sort of retirement nirvana where we want to put ourselves in the future, by making active decisions around our finances today. Many people, and particularly high achievers, who are able to define this clearly in their minds, have a clearer framework which they work towards and encourages them to make the right decisions because they have that long-term goal in mind.

But let us remember the title of this newsletter, Plan For Happy. We’re not necessarily planning to have the most money in the world, we’re not even planning to be “rich” (however you want to define that). We’re planning to be happy. And you want me to tell you the secret to this, that I’ve discovered through years of working with clients to help achieve this goal? Everyone’s level of happiness is relative and can change over time.

Simply by understanding that happiness - which in this context we can also reframe as contentment with your financial situation - is a relative state and can be changed over time, giving you an enormous advantage over the majority of people out their slaving away and simply hoping for some sort of successful retirement.

The idea that happiness is just in our minds is a rather Stoic attitude that Ryan Holiday brings to life best in his great book Discipline is Destiny[1] . Using just money, or an amount of assets, to define your happiness is dangerous. Ryan says:

“No amount of money is ever going to truly free you. But being less dependent, caring less about money? That will free you right now.”

I love that idea.

That also helps us focus more on the day-to-day part of life. The important part of what actually is in front of us right now. You ask anyone who has just been diagnosed with a significant illness and they will tell you the days before that they had “nothing” to worry about. They long for those days to return. Yet, those “nothing” days for the majority of us are now – right here, today – and yet we still worry, stress, think “in the future, when I’ve made it, I’ll be happy”.?

Naval Ravikant has expressed similar thoughts.

"We all are chasing Wealth, Happiness and Health. We just do it in the wrong order". [2]

Naval has an interesting idea which even includes health being the priority and thinking about that, it makes sense. Without your health, it is much harder to be happier and content with your life. The key point we all know about looking after your health is that it is one area that certainly cannot be postponed into the future. Living healthily starts today and has very similar compounding affects to your finances. Continuous bad decisions, or no decisions around your health – like smoking, drinking too much, eating junk - and that ends up being a very slippery slope you fall down. The flipside is also true and the same goes for when we think about wealth. We will see in a future chapter that this act of making positive decisions today around your finances can put you on the path towards your Happy Place.

When I talk to my clients, we often discuss their financial journey or the path that they’re on. What I try to emphasise with them is that the journey is not about the destination. It’s not just about waking up one day to find you have ￡1 million in the bank and thinking “Ah, I’ve made it”. It’s about crafting the life you want to live before this, using all the resources you have and making them work for you instead of the other way around.

Ryan Holiday, again, in his book deals with this.

“The problem is that many of us tell ourselves that someday we will be beyond this, that if we can just earn enough, we won’t have to consider any of it…. Because we’ll be “good”, we’ll have “arrived”. Here’s the thing. This never happens.”

There is nothing wrong with thinking about the long-term and planning to be financially content at that time. That’s what this book is all about. My point really is that that should not be pined for at all costs. We shouldn’t wish away our current life for some sunset-filled vision of the future where we think we’ll have “made it”.

Because the other thing to remember is that “it” changes. What we plan for at age 40 and what we actually want when we get to 65 can be two very different scenarios. Life changes, priorities change, there is illness, success, grief and everything in between that we all contend with and we cannot deny that this will have at least some sort of significant impact on what drives our future determinant of happiness. This is not an excuse though. It certainly doesn’t mean we shouldn’t plan for our future. Again, it’s just understanding the nature and context of making plans for 20,30 and 40+ years time. These plans will rarely come to fruition EXACTLY as we imagine them. But that is just life and that shouldn’t stop us imagining, because it’s the act of imagining and imprinting that Happy Place in our mind that drives the active and positive decision-making today.

How does this help you? It helps because potentially that big figure, dream scenario you initially imagined may not actually be what really would make you happy. There are many people who would say spending their hours sitting by a pool doing nothing is their dream retirement. Is it really though? Whilst great to start with, I know I would get bored stiff after about 3 days. And when I get bored, I annoy my wife, and then nobody is happy.?

I’m not sure when it happened but the generally accepted Anglo-Saxon idea of “retirement” is playing golf regularly and taking long walks. Why? Perhaps, like most things in the Anglo-Saxon world, it stems from the British Victorian times where working life was hard labour and upon retirement that just stopped. In that time what normally followed was a swift death. By those times are over. My guess is that most of you spend more time on a keyboard than anywhere else for almost every day of your life. Think about that for a second. This is where a significant number of people spend the majority of their peak years. There are many mental challenges of working in the 21st century, but hard labour has diminished significantly. So why is there still the stereotype of a “perfect” retirement is one where we totally stop and our mind and bodies turn to mush?

So, bringing this back to you again. Why not consider some part-time work later into life in thinking about your Happy Place? Why not plan to work until 70, 75 even 80 on a part-time role, doing something you love, helping people, being involved in the community. This may be voluntary, which is fantastic, or it may involve getting paid. With the state pension paying around ￡10,000 per year in 2023 and doing basic work earning around ￡10,000 per year, you are starting your retirement with an income of ￡20,000 before you even need to draw anything else. That amount could cover food and bills. Even better if you’re married, then you both will receive the state pension, adding another ￡10,000 to bring the total to ￡30,000 for a couple. I know many couples who are perfectly happy living off that amount. You may not think that will be you, but at least you know it is possible. This brings us to an important point, our individual view on what it costs us to be happy and what drives this.

Happiness is relative

We have talked previously about the emotional context of money. How our upbringing influences our attitude towards money and finance. The same rule applies to planning for happy. Our view on happiness is also driven as much by our upbringing as our view on money. Think of this as an example. What is the difference between a Rolex watch and a Swatch. Both fulfil their main functional purpose almost identically. They are both very good at telling the time. For some people, that is where it stops. “Why would I ever buy a Rolex?” some ask themselves, “a normal watch tells the same time.” However, for others, a Rolex is so much more. It is a status symbol, a message to the outside world, a sign that you’ve made “it”. Your upbringing will have a significant impact on which side of the coin you believe. The exercise you did around your spending habits offers a clue as to how you would think about this. Please remember, there is no right answer. There is nothing wrong with wanting a Rolex, they are beautiful watches and can be considered jewellery. Humans have been wearing jewellery since the ancient Egyptians which indicates there is potentially some biological or evolutionary need to wear shiny, precious things. There is nothing wrong with wanting to show off a status symbol of your wealth and this, for you, may drive significant happiness. For others, it may not, and that is ok as well. The status symbol part of this discussion brings in the next point I want to make – happiness is relative.

There was a famous meme that went across social media around 2 or 3 years ago. It showed footage of a beautiful boat moored in some tropical paradise. Suddenly, a much larger boat looms past and the attention of the camera is moved away to that boat. The camera lingers on the larger boat for another few seconds, before an even larger boat, more than twice the size of the second boat, comes in to view and goes past it. The caption of the video uses the somewhat pithy line of “how an investment banker feels about his bonus” implying the initial joy an investment banker may feel about his/her bonus is soon dwarfed by the realisation there is always someone who is earning more than him/her. The meme may be focused on a very small number of individuals – being investment bankers and their bonuses. But it can be applied at every different level. We constantly compare ourselves to our peers, even if we try and not do it.

This doesn’t just relate to finance. The Psychology Today website published an article by Dr John G. Cottone entitled “Happiness: Is it all relative?”[3]. In the article Dr Cotonne describes two different clients of his – Omar and Lena – who come from very different backgrounds and, you guessed it, have very different happiness levels with their situations. His conclusion is that we don’t tend to think about or compare our situation versus THE world, that is simply too abstract and too big for us to take in. What we do is compare to OUR world. Our world is the small number of connections that we have. The closer the connection, the higher the influence upon us.

Let us bring this back to you again. Think about your closest contacts. How do you feel you try to match up with them? Even if you have never thought about it before are you trying to keep up with the Joneses? Does that impact your decision-making and even potentially your overall happiness?

Nasim Nicholas Taleb sums up the concept of relative wealth with this rather blunt quote.

"To feel rich, socialise with poor people. To feel poor, socialise with rich people"[4].

We’ve talked a lot in this article about how being happy is a relative state and is not just related to your financial situation.? We’ve also discussed that our own version or goal of happiness can change over time, based on our own internal shifts in thinking but also external influences around us. Whilst sounding more complicated this is good news. It means it’s not just the numbers in the bank or investments, but it is actually what is going on in our own minds.

?

[1] Holiday, Ryan. Discipline is Destiny. Profile Books. 2022

[2] Jorgensen, Eric. The Almanac of Naval Ravikant.

[3] https://www.psychologytoday.com/us/blog/the-cube/202201/happiness-is-it-all-relative

[4] Taleb, Nassim Nicholas. The Bed of Procrustes.