By Joni Lindquist
Remember what it felt like to get that first-ever paycheck? What about the first time you made a tidy profit on a well-chosen stock? Chances are you don’t get the same kick today. Psychologists and economists say that when you’ve gotten accustomed to success and having money becomes old hat, it may hinder your happiness and satisfaction. A well-thought-out financial plan can help.
“The key to being happy isn’t how much you earn,” said George Lowenstein, an economist at Carnegie Mellon University. “Happiness comes from gaining control over your finances and figuring out what to do with your money.”
We find that clients get a sense of security and control from having a financial plan. They know what they can spend and still meet their key goals. When your goals are aligned with your values, wealth can increase your happiness. Economists at Harvard University have found that income accounts for only 1% of happiness; health, family, and community rank far higher in helping make us happy. Yet when you combine income with those other values, income rises on the scale. That’s where a financial plan comes in. Ideally, it will help integrate money with what you find important.
To succeed in providing a road map to happiness, however, a financial plan must do far more than specify asset allocations, explains George Kinder in his book, The Seven Stages of Money Maturity. An effective plan should help shape your success according to your short- and long-term goals and personal beliefs. In addition, because it’s tailored to your individual needs, a plan can mitigate the extent to which you feel you must measure yourself against your peers.
For example, if you want to travel during retirement and provide your kids with a good education, you can develop a plan structured to maximize college and retirement savings opportunities. Similarly, if you feel strongly about certain causes or institutions in your community, you can put together a carefully structured charitable giving plan.
Of course, you have worked extraordinarily hard to achieve success and deserve to treat yourself to a spontaneous shopping spree or luxurious vacation every now and then. But when everything happens in the context of a well-considered financial plan, you’ll feel better about those special “occasions of consumption” as economists call them – and that can elevate overall contentment and satisfaction.
*The University studies cited in this article used a similar equation to measure happiness: Happiness = reality – expectation. Generally, respondents were asked to rate satisfaction and success in certain aspects of their lives on a numerical scale.
For help balancing your quality of life now and in the future, schedule a meeting by clicking below, contact Joni Lindquist –jlindquist@makinglifecount.com, or call (913) 345-1881.