Before you start reading this article, can I ask that you read the title again please?
Now that you’ve done that, I’d like you to think about what it means. Even at a glance it seems to inspire further reflection. Is it a financial question, or something different?
If we assume it is a financial question, then this just leads us to more questions. Happiness is something we want, of course, but do we tend to think of it as something we can or can’t afford? Isn’t this for cars, holidays or that new pair of shoes we’ve got our eye on?
Let’s look at it less literally and think about it in terms of wellbeing. Is it asking us if we’re allowing ourselves to be happy? Are we finding the time and flexibility in our busy lives of multiple demands to make a positive choice over our happiness?
I think for me it’s a combination of both. Maybe it means more or something different again to you depending on your perspective (let me know in the comments below, I’d be interested). The point is, it inspires reflection on the relationship between two important topics: your finances and your happiness.
Success and Happiness
Many fall into the trap of thinking that success will automatically result in happiness, or that they’re the same thing. But it won’t, and they’re not.
I came across this conundrum in Tim Ferriss’s book ‘Tools of Titans’ in which he discusses the tactics and routines that make a range of inspiring individuals successful. A lot of us fall into the trap of thinking that success will automatically result in happiness, or that they’re the same thing. But it won’t, and they’re not.
Chasing success can be exhausting, frustrating and even detrimental to your health. I sometimes think that a success-at-all-costs attitude is like you’re in a never-ending competition with yourself; driving on regardless, and the more you do the less clear you are about the destination or endgame. So many ambitious people who end up burnt out forget to keep in mind what success looks like, or even define it properly in the first place.
Setting your own definition and parameters of success, revisiting them regularly to make sure they still apply, and celebrating your achievements along the way all seem like common sense principles, but it can be easy to forget them. If we’re not careful we end up with a very narrow definition of success that’s supposed to fit all of us, and we tell ourselves that to achieve it and to be happy we have to suffer for it. It doesn’t need to be that way.
Defining for Ourselves
Ferriss uses two questions to help us create our own personal definitions of happiness and success, along with the financial considerations that will come with them. The questions are:
- What would I do/have/be if I had $10 million?
- What’s my real target monthly income (TMI)?
The first question aims to help you work out what financial freedom would inspire you to do or who you could be. The second is asking how much your dream life – the lifestyle you may be deferring for retirement – would really cost on a monthly basis.
Ferriss has shared the story of how his own personal circumstances led him to ask these questions. He was the entrepreneur behind the highly successful BrainQUICKEN sports nutritional supplements company, earning more money than ever and expanding his business internationally. The flip-side was that he was regularly putting in 80-hour weeks and his personal life was falling apart. He knew he needed to make a change. He says:
“After running the numbers, most of my fantasies were far more affordable than I’d expected. Perhaps I didn’t need to keep grinding and building? Perhaps I needed more time and mobility, not more income? This made me think that maybe, just maybe, I could afford to be happy and not just ‘successful’. I decided to take a long overseas trip.”
Working out What Matters Most
The reason this struck a chord with me is because this is the same thing we do with our clients. When we take them through the lifestyle financial planning process, we encourage them to think about what matters most to them and help them define their life goals (which would be the same as the answers to the $10 million question above).
Money itself doesn’t necessarily make us happy, but the freedom and lifestyle it provides access to can.
Often, their ideal lives are based around the simple things like enjoying the company of friends and family or finding the free time to pursue a hobby. As Ferriss recognised, this lifestyle is dependent on more time and mobility, not more money. When we work with clients to achieve their financial independence, we are aiming to give them this time, mobility and freedom to live the lifestyle they want without fear of running out of funds. The money itself doesn’t necessarily make us happy, but the freedom and lifestyle it provides access to can.
When making financial plans for your future lifestyle, it’s easy to make the mistake of scaling up the expenses of your current life. But, as fans of our series on behavioural finance will recognise, this is an example of projection bias, where we think that our needs in the future will be identical to the ones we have in the present.
To do it properly, we need to consider carefully what our actual ideal future life would consist of, work out what it would cost (your Target Monthly Income), and then work back from there. The numbers may be very different, and you may be pleasantly surprised. For example, scaling up my current circumstances with all the expenses of home, family and working life would result in a far higher TMI than my ideal life of living by the coast spending my time surfing and cycling!
We think we’re familiar with what success and happiness are, but they’re just empty concepts until we take the time to define them properly and work out how we can make them a reality.