What makes us happy
If we imagined what would be the greatest form of wealth, it would be the chance to wake up every morning and say — I can do whatever I want today. All of us aim to become wealthier expecting it will make us happier. But does it actually?
This is a very diverse topic, because the definition of happiness is different for everyone.
Several studies show we can't co-relate happiness with money, material possessions, fame or career. But studies show one thing in common — people that control their lives tend to live happier.
"The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.", Morgan Housel.
This is a very interesting topic and my first Finance article. I recently read a book called The Psychology of Money, which I will bring some ideas to discuss here.
Money and freedom
In the book The Sense of Wellbeing, the psychologist Angus Campbell, describes his research which focused on disorders that bring people down — depression, anxiety, schizophrenia. He wanted to know what made people happy.
His research showed that you couldn’t group them by income, geography or education. The most powerful common denominator of happiness was very simple — having a strong sense of life control. This was the best predictor for future positive feelings and wellbeing.
Not your salary. Not the size of your house. Not the prestige of your job. Not your apparent success.
Money’s greatest inherent value — and this can’t be stated enough — is its ability to give you control over your time. To give you freedom to decide. To give you freedom to wait. To give you freedom to act.
Saving money — will gradually build a level of independence and autonomy, that will give you greater control over what you can do, and when you can do it.
Richer but not happier
Take a quick look at the Global GDP chart below. The global wealth output has skyrocketed, but if we compare today's happiness levels to 1950, are we actually happier?
Even though wealth and income are much higher, there is no evidence that people are, on average, happier today than they were in the 1950s. But one thing is clear — people have a lot more stuff.
If we take the American median family for example, its income adjusted for inflation was $29,000 in 1955 and over $62,000 in 2019. Furthermore, the median American home increased from 90 square meters to 225 square meters.
The average American home has more bathrooms than occupants. Our cars are faster and more efficient, our TVs are cheaper and sharper. So why are we not happier?
Part of the reason is that, even if we used our wealth to buy bigger and better stuff, at the same time we have given up on something else — more control over our time.
Never ending work
Because of technology we have a sense of global progress. What about our time? Does it resemble progress? Not really. It seems everything comes down to the jobs we now have.
According to the economist Robert Gordo, in 1870, 46% of jobs were in agriculture, 35% were in manufacturing. Majority of jobs required doing things with our hands, not with our brains. Few workers relied on their thinking process. The work was tangible, but that has changed.
Today, 38% of jobs are labeled as managers, professionals, and 41% are service jobs — in a sum, decision making jobs. They rely on our thoughts as much as our actions.
What does it mean? Work never ends. Work no longer stops when we leave the workplace. We are thinking about work during our commute, when making dinner, when with our friends and family. It feels like we are working 24/7, and it is hard to get away from this.
If the work tools of modern times are portable devices, it means the modern factory is not a place. It is the entire day itself. Technology decoupled the tools of productivity from the office environment.
What really matters
Compared to our grandparents, control over our time has greatly decreased. Since control over our time is the most important happiness influencer, it is not a surprise that newer generations are not happier, even if richer.
So what can we do about this? We need to shift our focus towards what matters.
In the book 30 Lessons for Living, an interview was conducted with 1000 elderlies, to find out the most important life lessons they had learned:
- Not a single elderly mentioned that to be happy, we should work our asses off to have money to buy the things we want.
- Not a single elderly mentioned that to be successful, we should aim to be wealthier than those around us.
- Not a single elderly mentioned that we should choose a career, based only on its future earning power.
What they really valued was quality friendships, spending time with their children, spending time doing things they liked, and feeling as being part of something bigger than themselves.
Save money to control your time
Money is not the reason for happiness and money itself will not bring us happiness. What money can buy is freedom and control over our time, and time is everything. Money is what gives us the tools so we can control our lives as we want.
Being wealthier does not necessarily make us happier. If we use money only for material purchases, we will not use it for what could really make a difference.
Take the example from those that lived longer than us. Controlling our time to do the things we love, with the people we love, is the highest dividend money will ever pay. Money is the means, not the end goal.
So how do we actually achieve this level of freedom? By saving money and developing our capacity to delay short term gratification.
In another article I addressed the takeaway here. Why should we save money? Check it out here.
