Money and Happiness: Far From a Simple Equation

Money can’t buy happiness, but it can avoid a lot of unhappiness. Keeping a sense of proportion is what’s important in assuring long-term happiness.

Money isn’t everything. Everyone knows that compared to your family, your friends and your health, money is nothing.

But here’s the problem: If you want to give your kids the education they need to compete in today’s world, supervising their homework is not enough. It also costs a lot of money.

And if you’re ill, and you want to jump the queue and go to a private hospital and the doctor of your choice, health costs money too.

And if you want to enrich your life by exploring fascinating foreign cultures, travel isn’t cheap either.

And what about the fact we all have to face sooner or later: In this age of self-funded retirement, you need enough to pay for two decades or more of non-working life to have a comfortable and worry-free old age.

So although it may be true that money can’t buy happiness, it can make happiness easier to come by or prevent unhappiness, and it certainly can relieve the stress of desperately wondering how to find the money to pay those education, mortgage, household and health bills.

We even have some proof that this is so. An American survey conducted by the Pew Research Center last year shows that just 34 percent of people considered themselves very happy. However, when you analyse the happiest replies by income group, you find that 49% of people with an income above $100,000 are happy, compared to only 24% of those with incomes below $30,000.

So how important should money be in our lives? The key factor is to keep a sense of proportion. If money is all that matters to you, you run the risk of ending up an unhappy person who has sacrificed much of the quality of your life to accumulating money, denying yourself pleasure or surrounding yourself with material status symbols that may arouse the envy of your acquaintances, without increasing your happiness quotient.

The objective should be to have enough money to do, buy or plan what is important to you. Knowing yourself, and what you value, is the first step towards escaping the vicious cycle of working, spending and worrying about money.

Famous American investment guru Warren Buffet tells the story of a large corporation that offered all its senior executives a free haircut from the barber in the lobby once a week. Eventually, tough times called for cost-cutting and they axed the free haircut. Guess what? Most of these well-paid executives found they could get along with a hair cut every 3-4 weeks rather than cough up a few dollars a week out of their own pockets. What is your personal bottom line?

Do you have to have a new car every two to three years? Do the kids have to have a new computer? Is it essential to have 10 business suits hanging in your wardrobe? Do you really need to replace your wide screen TV with a home theatre? Every single thing we buy puts more pressure on our credit cards, stretches our budget even thinner, and leaves less money available for the really big things in life.

For example, if you could save just $250 a month at 8.5% compound return from the day your child was born, you would have an education fund of $123,332 when your child turns 18 – if that were important to you.

That’s why a financial adviser acting as your personal coach could help you turn your life around. A financial adviser has the two things every successful personal trainer needs: expertise and impartiality. So the first thing your planner will do is sit down with you and help you work out what’s important to you and what your personal financial goals could be.

This is the key to everything. Because once you have a goal, you can work out a plan to get there. And once you have a plan, it’s a lot easier to avoid meaningless spending and concentrate on things that really make a difference to your life.

The other thing is that although it’s never too late to talk to a financial adviser about finding real financial happiness, the earlier you do so the better.

Most of us only get the wakeup call in our 40s and 50s, when we realise that the compulsory super levy is not enough to buy us the comfortable old age we?d like. And by then it’s too late to have second thoughts about home entertainment units, lavish 40th birthday parties, off-road motorcycles and other discretionary spending that might have been discretely directed to a higher priority objective.

But it doesn’t matter how old you are, or how much you earn, or what you’re worth. An initial consultation with a financial adviser is usually free and could make a big difference to your life. So although money can’t buy happiness, half an hour with a financial adviser could make you very happy in the long run.