What’s Your Happiness Index?

We have all heard the adage “Keeping up with the Joneses.” For many, this adage reflects a perception of happiness – seeing what others have and believing it creates an abundance of happiness in their lives. In reality, the desire to have more often results in less satisfaction.

When asked, most people would say if they had $_______ more (you can fill in the blank), they would be better off, financially speaking. It’s hard for most Americans to believe someone earning a handsome six figure income, say $400,000, can feel broke. But it happens.

This “getting ahead” mentality occurs at all income levels and generally has the same effect. As our income increases, even slightly, we think: “How can I spend this additional money?” More often than not, the answer is a purchase. Maybe it’s upsizing your home, moving to a better neighborhood, getting a new car, or buying a recreational toy. There is no limit to the human desire to have more.

We’d like to introduce a new idea. Perhaps getting ahead doesn’t mean buying more stuff. After all, what exactly are we getting ahead of? Contentment and happiness come when we are comfortable living within our means.

happiness

Financial Freedom
Debt does not create freedom. The treadmill of borrowing more money to buy more stuff gets tiresome and stressful. We become so focused on finding a way to pay for our lifestyle we seldom really live in and enjoy the present. Freedom comes from having enough discretionary income to cover the unexpected curve balls life can throw your way. Discretionary income provides the flexibility to slow down and enjoy the life we are living and the lifestyle we are striving to create.
Contentment Creates Happiness
This in no way implies that we shouldn’t strive to improve our lives and better our circumstances. The point we are trying to make is that using someone else’s lifestyle as a measuring stick for our personal happiness generally has the opposite effect. If we never feel we measure up financially, we’re going to be hard pressed to feel happy or content. Setting realistic expectations and balancing wants and needs is a starting point.

From there we must break down our income to first cover non-discretionary needs. This would be a roof over head, food on the table, electricity, etc. Then we prioritize wants and determine how to use current resources to cover these items. At the end, there should be discretionary money that is not appointed to any specific goal, other than creating excess cash – savings.

The Happiness Index
Balancing our wants with the ability to pay for them is a challenge. There have to be trade-offs. Buying the newest high-end luxury car may result in a high level of debt. On the other hand, a beat up jalopy with high miles may not last long. The idea is to purchase a vehicle that meets your needs and that you can reasonably afford. That way you feel good about the purchase and still have some cash flow flexibility. This decision making process is your happiness index.

Each time you spend a large amount of money or commit monthly cash flow to an ongoing expense, ask yourself, “How will this financial transaction impact my happiness?” Applying this technique will help set you on a positive financial course. In the words of author Mitch Anthony: “Be content with what you have right now. If you can’t enjoy it now, you won’t enjoy something
better later.”

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