Money & Happiness

“Money can’t buy me love” the Beatles once sang, but can money buy happiness? Yes, psychologists say, but many people don’t know how to spend to attain happiness. In a bid to find answers to this particular question, I will share one of the possibilities with you.

In a bid to find answers to this particular question, I will share one of the possibilities with you.

As a young academic, Professor Jones had a personal stake in figuring out how to best spend one’s money. She went from being a graduate student, making around $1,000,000.00 a year, to being a faculty member which increased her earnings exponentially. While most people don’t think of professors as being wealthy, she suddenly found herself like ‘the nouveau riche,’ with a lot more money than she previously had.

She took an unconventional approach and sought scientifically based advice on how to spend her money — not in terms of making financial investments, but to boost life satisfaction. “I was surprised to find out there was actually very little research on that topic,” she says.

As she delved into research, she discovered that people often miscalculate purchases on three counts: “People mispredict what will make them happy, how happy it will make them, and how long that happiness will last.”

Droplets of Pleasure

I tend to agree with this view. Purchases, such as a remodeled Kitchen or a big screen TV, may give delight, but the pleasure often vanishes faster than people expect — like a droplet of water evaporates under a stifling summer sun.

Take that remodeled kitchen, for example. At first, it’s a joy, but those positive feelings dwindle until the kitchen becomes ordinary and “completely fades into the background of one’s conscious experience.

Furthermore, all those sparkling, new fixtures may heighten expectations and desires that drive people to become dissatisfied and strive for more and more. After one finishes remodeling one’s kitchen, the living room and bedroom now seem drab by comparison. People’s rising aspirations render rooms eyesores that were previously normal.

Now, no one is saying that money and spending play a negligible role in happiness. In fact, wealthy people have better medical care, more meaningful work, and extra free time.

And yet we see it play out everyday, they aren’t that much happier than those who have less. So how can you spend your money to maximize happiness?

10 Useful tips for financial happiness

Here are some timeless tips that I’ve learned over 8 years as a professional financial adviser, which should help you to achieve financial happiness:

1. Always hold a least six months’ expenditure in an accessible account

– so you are never forced to liquidate “risky” investments when they are experiencing a temporary fall in value.

2. Save at least 20 per cent of your income each year and start early

– a little over a long time is easier than a lot over a short time. Stash your bonus or other allowances if possible.

3. Liquidate debt as quickly as possible

– interest costs are at historic lows but they still, in effect, represent negative returns. Use current low rates to enable you to repay your debts as quickly as possible.

4. Spend less than you (or your portfolio) earn

– no matter how much you make, if you spend all of it (or more) you’ll definitely be unhappy.

5. Risk and reward are related

– there are no low-risk, high-return investments.

6. Price volatility is not the same as risk

– liquid investments fluctuate in value, based on supply and demand. In general terms stock markets are falling one third of the time, recovering one third of the time and breaking new heights for the remainder. Don’t turn a transitory fall in value into a permanent loss of capital by bailing out when the market looks bleakly.

7. Filter the News

– next time you hear huge sums wiped off share values remember that eventually there will be huge sums added to share values.

8. Put your faith in business

– owning a part share in world class companies like Apple or local companies like Grace and NCB is likely to provide the highest inflation adjusted returns over twenty years or more, compared with low or negative real returns from fixed income or cash deposits.

9. Keep it simple

– if you don’t understand something and you are not comfortable with what is explained then don’t do it. If something needs a 20-page explanation booklet then it’s probably far too complex for most people to understand.

10. Remember all the tips

– The last tip is to remember all the tips and make them a part of your daily life. Then and only then will you be able to find financial happiness.