This note is an abstract of a presentation which my father, Kapil Jain, had made in a financial planning seminar …. Hope it is helpful for you to understand relationship of money and happiness…… (Source : enrichwise)
Martin Seligman author of ‘Authentic Happiness’ and research psychologist has said that there are three parts to happiness : Pleasures, Engagement and Meaning.
Pleasure is the feel good part, the short term happiness of material possessions in life.
Engagement refers to good life involving work, friends, family and hobbies.
Meaning is using our time and strengths towards a larger purpose.
He reckons, that Although all the three are important , it is the last two which make a significant difference.
Now a lot of time we spend goes into increasing or earning money. Hence it is worth figuring out where money and hence financial freedom comes into play in our overall happiness.
Does Higher Income really lead to Happiness though? Is the million dollar question.
When researched , the results are surprising. ? A study from Princeton University found that a larger paycheck does lead to a happier life—but only to a certain point. ($75,000 per annum to be precise)
What really affects our happiness more than how much we make is our attitude toward money and the way that we handle it. When we hold fast to the belief that money directly determines happiness, life becomes a constant pursuit of accumulating ”more”.
Would winning a lottery make us the happiest people on earth? Harvard Psychologist Dan Gilbert says NO.
He goes on to prove that we human beings are very good at adapting but extremely poor in predicting when it comes to our emotions and feelings. We tend to overestimate the duration and intensity of our future emotions.
For eg: A dream home with all modern amenities couple of extra bedrooms, with a beautiful view gives pleasure for a few months. Before the purchase, we tend to think that the possession will provide everlasting happiness and also experience that the happiness will be the ultimate satisfaction. But the same disappears later. At times it can also possibly have a negative effect on happiness at times.
Even when you change jobs or progress in career he has found out across subjects that in approximately 3 months they are back in the same place in terms of happiness. You can extend the examples to Car , let’s say you buy a porche or a BMW , the impact is the same.
This is one of the most important research subject in behavorial finance. Known as Hedonic treadmill. We work hard, earn more, and are indeed able to afford better and nicer things and yet it dosen’t make us any happier. The deeds and things you worked so hard for no longer make you happy; you need to get something even better to boost your level of happiness.”
Wouldn’t it be better if we knew exactly how happy a new car, career, house or relationship would make us? It is quite possible if we do the following :
Avoid negative things that you cannot get accustomed to such as commuting , noise, chronic stress
Expect only short term happiness from material things such as cars, houses, lottery tickets, prizes, bonuses.
Accept your present
Aim for as much free time and autonomy as possible since long lasting happiness comes from what you actively do
Follow your passions even if you have to forfeit a portion of your income for them
Invest in friendships
Have clear financial goals, focus on purchasing assets (rather than accumulating liabilities) and make your assets work along with you in order to achieve those goals. Remember, assets is something which puts money in your pockets, where as liabilities is something which takes money out of your pockets.
Finally, Understand your relationship with Money. Don’t let money control your life . Rather Get a control over Money.