We have all heard that old adage that “money can’t buy happiness”! And although I am a financial professional whose job is to inspire people to make sound financial decisions, I think there is a lot of truth to this saying. The pursuit of financial well-being at the expense of other important life goals seems inadvisable and quite unappealing!
But recently, I came across research from a number of academic disciplines that made me briefly wonder whether my thinking was off target. One such study, undertaken by two University of Michigan professors and published in April of this year, (Note 1) concluded that money can indeed buy happiness, contradicting years of economic dogma.
For decades, economists have actually believed happiness and income were not related, in part due to the influence of a landmark study on the subject published in 1974. (Note 2) However, the Michigan researchers could not find a point of financial attainment where the level of happiness leveled off.
As I considered these vastly different conclusions, I came to realize that we should not spend too much time considering this academic debate! Instead, I think it’s probably more important for each person to decide about this question for their own life – without resorting to the use of statistics and econometric models!
Each of us could consider, for example, establishing our own personal objective about what we would need in order to remove finances as a source of stress or anxiety. This approach might include developing a realistic plan that will help you attain that financial objective(s), or it could involve getting assistance from a professional if the effort seems too difficult.
Even if you currently feel confident about your financial circumstances, you might want to re-focus on activities that provide you with intrinsic happiness and then reconsider your financial plans so that you can do more of those things in the future.
Having worked with many professionals experiencing mid-life change, I think these are particularly important questions to consider – a time of change presents a great opportunity to re-assess what is truly important in your life and to then try to organize your finances with the goal of trying to do more of those activities.
The results from such an exercise will not win you a Nobel Prize, but may likely provide important “psychic” benefits regardless of your situation. It also seems a lot more practical than solving a debate between some pretty smart economists and other social scientists!
And as you consider your own circumstances, I am providing guidance in this month’s newsletter about a number of financial topics that may help you move toward your personal definition of financial happiness. Remember, you don’t need to earn a PhD to feel “happy” about your finances:
Should You Pay Off Your Mortgage?
A common question I hear from professionals transitioning to second careers or into retirement is whether they should pay off their mortgage. Unfortunately, there is not a standard answer — the decision is based on one’s individual circumstances. Learn about the factors you should consider to make an informed choice! Read more…
Asset Class Review – REITs
Since the 2008-2009 Great Recession, Real Estate Investment Trusts (or “REITs” as they are often called) have been a popular investment, especially in light of today’s low interest rates. However, these investments have been somewhat volatile recently and you would be well advised to learn about this asset class before investing. Read more…
Social Security – Questions and Answers
If you are on the path toward electing Social Security benefits, or are developing a retirement plan, learn about the intricacies of this important program. Will the program remain solvent? How are your benefits taxed? Read more…
Making the Most of Your 401(k) Plan
With another school year right around the corner, it might be a good idea to go back to “401(k) school” and brush up on how to make the best use of the employer-sponsored retirement plans in which you are hopefully participating. Whether you are transitioning back into the workforce or simply want to review your current account, learn about how to best take advantage of this important staple of your retirement savings. Read more…
I hope you benefit from these articles and other financial education blogs I publish on my website, facebook and twitter pages. As always, please do not hesitate to contact me at (925) 301-4086 or send me an email if you have any questions about these or other financial topics!
Note (1): “Subjective Well Being and Income: Is There Any Evidence of Satiation?” April 16, 2013 Stevenson, Betsey & Wolfers, Justin. School of Public Policy and Department of Economics, University of Michigan
Note (2): “Does Economic Growth Improve the Human Lot?” Easterlin, Richard, University of Pennsylvania 1974
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.