I believe I mentioned last year I would be talking about the qualitative side of financial planning this year. Maybe you would describe it as life-balance, but I call it real financial planning. Regardless of the terminology, here is where we start things off. Specifically, we are talking about a different approach to money and happiness.
You probably do not remember, but I wrote a long time ago about money and happiness. Specifically, it was how studies show that increasing your income does not necessarily equate to a higher feeling of emotional wellbeing.
There was a famous study done in 2010 by Daniel Kahneman and Angus Deaton on this specific topic. The most cited section was that emotional wellbeing only increased as your income reached $75,000. Above this level the rankings of emotional wellbeing plateaued for most people.
With inflation adjustments, let’s now say that income above $100,000 does not necessarily mean you will see an increase in your emotional wellbeing. Sorry, had to put that in there in case anyone wondered.
Where am I going with this? Great question.
I am thinking that maybe, just maybe, there may be a different way to look at chasing more money with the hope it will increase your happiness.
What if instead of trying to get more money, we shifted our approach and thought about ways to use the money we have to get more happiness?
I know, radical concept and all😉
Going forward, I will regularly be sharing thoughts and ideas on around the whole concept of money and happiness, which is all a part of what I call Real Financial Planning.
Your first one is this. The next time you are about to spend $5 the normal way you do, stop to ask yourself whether this is happy money. Specifically, “Am I spending this money in the way that will give me the biggest happiness bang for my buck?” There’s no right or wrong and this isn’t a trick question. Just something to try.
I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.