What makes you happy? As we wish you and yours a Happy Thanksgiving, we’d like to take a moment to reflect on this timeless question.
You probably already realize that piles of possessions by themselves aren’t enough. But it may be less clear what does generate enduring happiness and how we, as your trusted advisor, might be one of your core alliances for discovering it.
First, let’s define what we’re talking about. We are fond of this description by “The Happiness Advantage” author, popular TED Talk presenter, and Harvard researcher Shawn Achor:
“Happiness … isn’t just about feeling good,
it’s about the joy we feel while striving after our potential.”
Such a simple statement, but it’s packed with profound insights. To take this even further, I believe that we get closer to our potential when we focus more on others rather than our own well being. That is, being generous towards others plays a big part in achieving sustained contentment and joy. It is quite the paradox (that we get the most when we give the most), but it has been believed through the ages and proven more recently in the research.
Happiness isn’t about indulging in fleeting pleasures.
In fact, it’s closer to the opposite of that. If you can only be happy once you’ve “scored,” you are limiting your joy to isolated incidents instead of weaving it into the fabric of your life.
You can still be happy, even when life isn’t all puppies and rainbows.
Distinguishing enduring happiness from occasional pleasures frees us to enjoy even our most challenging experiences, and to savor them as among our fondest memories. It’s why we may willingly burn the midnight oil on a project of deep interest. Pay a personal trainer to push us harder than we’ve ever gone before. Volunteer our hearts and minds to others in need. Give birth.
Everyone has different sources of happiness, but the joy it can spread is universal.
In a world that sometimes seems increasingly polarized, a greater appreciation for happiness might just bring us closer together. As Achor comments: “Joy makes us want to invest more deeply in the people around us. … It makes us want to learn more about our communities. It makes us want to be able to find ways of being able to make this a better external world for all of us.”
By coming together to focus on what sustains us – an optimistic outlook, value-driven action, meaningful relationships – therein we can find greater happiness. That’s what the evidence suggests, anyway.
If you’ve taken our past advice about ignoring the onslaught of breaking market news, you probably didn’t read Russell Investments’ recent “2017 Global Market Outlook Q4 Update.”
I’m not prone to pore over these relatively unremarkable analyses ourselves, but I do read a lot of ‘industry speak’ as part of our due diligence. More times than not, it for purely entertainment purposes to see what the tea leaves say on that particular day. This is how I came across this intriguing statement in Russell Investments’ wrap-up:
“Our main message for the close of 2017 isn’t much different from our opening one: we maintain our ‘buy the dips and sell the rallies’ mantra.”
Great idea, but a little weak on practical application. It’s akin to suggesting that lottery players can score big … as long as they consistently pick the winning numbers!
Immediately following Russell Investments’ mantra, you’ll find this disclosure:
“These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page.”
In all seriousness, I feel these sorts of reports speak inadvertent volumes about the evidence-based mantra to which we adhere. If you are not familiar with this term evidence-based investing, be on the lookout as I will be writing more about this soon. It is a main tenant to the way we view and implement investment strategies. By depending on practical evidence instead of fanciful forecasts, our views are rarely subject to change – especially not in hurried reaction to current market conditions.
Instead, we continue to believe the best way to manage your personal wealth is to:
Stay laser focused on your bigger picture…are you on track to achieve your goals. Buy, sell and rebalance your portfolio according to your own carefully crafted plans.
Focus on an efficient, evidence-based approach to capturing the market’s durable returns while managing its related risks.
Ignore the market’s daily distractions, especially its fleeting dips and rallies; they’re far more likely to block the view toward your higher goals than to yield big wins through the chase.
This is our mantra, and so it shall remain – regardless of the date at the top of the page.
In life, it’s important not to miss the forest for the trees.
Money is a great servant but a bad master. Francis Bacon
Joshua E. Self, CLU, ChFC, CFP®
June 9th, 2017
How many of us plan, save, and invest for the future, anticipating that one day we’ll get to a point of enjoying our wealth? And all along the way, we find our personal lives, family lives, and financial lives becoming increasingly complicated, taking more of our time, not less?
How often have we heard of or been directly affected ourselves, by the unexpected and untimely illness, disability, or death of those we know and love? It is a fact of life: No one makes it out alive. On the other hand, if both a husband and wife live to be sixty-five years old, 50% of the time, one individual from that couple will live 30 more years! Without knowing the future, how do we live our lives to the fullest today, while still being good to our future selves?
We’ll tackle these challenges in three parts. First, be good to today’s you and to future you. Second, give serious consideration to lowering your financial goals – or at least pause to ponder the motivation for the money goals you have set for yourself. Third, get help to manage your growing wealth and your shrinking time.
Part one: Make sure it’s good for both of us – today’s you and future you
We often sense tension between preparing for an uncertain future and enjoying today. On the one hand, when you get right down to it, today is really the only time we have. On the other hand, we know that we desire to care for those we love and for ourselves in the future. How do we resolve this tension?
The answer to that question is a good-news-bad-news story. First the bad news: We can’t resolve this tension. Now the good news: There are some really important things we can do to live well with this tension.
The one and only you
First of all, as you consider where to spend your time and money, consider those things that only you can do. Only you can call your mom. Only you can be a husband or wife to your spouse. Only you can be a father or mother to your children, or a good friend, or a good neighbor to the people in your life. Only you can run your business or do your job just the way you do it. Never trade away the things that only you can do.
There are things that other people can do for you, and if you can afford it, you should consider trading dollars for time so you can invest back in the opportunities that are unique to you. The perennial favorite outsourced task for dusty husbands everywhere (or at least in the southeast) is lawn care, but you can expand your thinking from here. Your assistant (virtual or otherwise) can help you with your e-mail and calendar. Amazon can help you with your shopping. A Roomba can help keep your floors clean while you sleep.
Stay healthy!
Next, care for your health. It costs very little money (in some cases it saves money) to exercise and eat the right amount of healthy food. Caring for your personal health is one of the highest return-on-investment activities you can do. And it’s one of the best things you can do for your future quality of life.
Shred your excuses in this area. Can’t work out because you don’t want to join a club or gym? Running, cycling, pushups, sit-ups, and stretching are free in America. Can’t get exercise during the workday because you don’t want to sweat at work? Walk or do the stairs – just get up and move. Track your steps and challenge yourself to hit the 10,000 mark Monday through Friday. Can’t eat “healthy food” at a restaurant? Order the side salad and a cup of soup; substitute water for sweet tea; eat only half of the cheeseburger and box the rest for tomorrow! There’s always a way to hit your goal if you want it enough.
Flip the script in your mind from “I can’t” to “How can I?” And here’s more great news – none of these things we’ve just discussed costs very much money at all. It’s a triple-win strategy: Better life now, better life later, and more wealth for future you.
A strategy for spending
But what about things that do cost money in the present, and so will, by arithmetic, reduce your future wealth? Many times we’re not as clueless on this topic as we pretend we are. We have lived our lives up to this point and can reflect on our past expenditures and ask ourselves whether they delivered the enjoyment we expected for the money we spent. And, if we’ll meter our consumption over time, we can probably afford everything we want anyway.
For example, if you have a family goal to take a particular trip with your children or grandchildren while they’re school-aged, there are only certain years when you can get this done. By contrast, your kitchen remodel, unless you are no longer able to prepare food in your kitchen due to a fire or flood, can be deferred until the kids are older. Under this scenario, you can enjoy the trip now, look forward to your kitchen remodel later, and get both done over time.
Try this thought experiment: For any expenditure at a particular time, project yourself into the future and look back on what you spent. Are you delighted, indifferent, or disappointed with the decision? If you’re delighted, and if you have the money, go for it. If you’re indifferent, wait until your thoughts become clear. If you’re annoyed with yourself that you parted with your dollars, just say No.
Part two: Ask why
Toddlers are famous for asking “Why?” As a parent, I’ll agree they take this question to extremes, but as adults we can become complacent and ask this question too seldom. For example, if you’ve set a net worth goal of $5M (or $2M or $10M), take a moment and ask, “Why?” Is it because it sounds good to you? Is it because you’ve used some analysis and determined this is the amount you need to replace your current income? Have you considered that it is actually your spending (plus inflation), not your income that you need to replace in retirement? Does this fact suggest anything to you?
Remember, for everything you get, you give up something else. Every hour you work in your job or business is an hour not spent on something else. Every dollar you invest for tomorrow is not spent on something today.
Enough is enough
Imagine a couple celebrating their wedding anniversary at a special spot. The tab for two is almost $500. However, they are prepared for this, and the dining experience was a deliberate decision (in fact, a family member had given them a gift certificate!). Here’s more about that fabulous meal: The couple was at the restaurant for four hours and consumed enough calories to last at least one full day, along with an entire bottle of wine. The children stayed home with a sitter (more money!). It was a lovely and truly memorable evening.
But would you want to spend four hours at a restaurant even once a month, let alone several times each week? If you ate like that very often, you’d soon be overweight. A glass of wine is nice, and more is nice on a special occasion, but that level of alcohol consumption on a regular basis doesn’t help your future self. And, as crazy as they are, you probably enjoy sharing supper with your children.
In this lengthy podcast, Joshua Sheats does a terrific job telling the story of why lowering your financial goals can be a big help for your life, both now and in the future. Whether you accept all the assumptions or not, listen carefully as he reads about the different budgets based on different levels of wealth, and ask yourself whether a higher level of consumption in the future is actually what you want.
How much you need depends on how much you spend
Next, as I alluded above, it is not actually your current income that you need to replace in the future. It is your inflation-adjusted spending that must be replaced by your investments.
Two insights leap from this fact: First, you must know what your spending is in order to know what you need to replace. This implies some form of budgeting or tracking of your expenditures. Second, you’re in the driver’s seat on how much you spend in every category of your budget. If you want to be financially independent sooner, reducing your expenses is the way to go. Henry David Thoreau told us “that man is richest whose pleasures are cheapest.”
How much will ‘future you’ be able to utilize from the assets that you have accumulated? This can only be prudently answered in the context of your total financial plan. There are a number of ‘rules of thumb’ you could use, but these are not able to consider all of the nuances and variants of your financial plan, so talk to your financial planner about this. Some food for thought to help you prepare for the conversation can be found here and here.
Part Three: Get help
You may not consider yourself wealthy, but the fact that you are reading this article means that you are probably in the top quartile of income earners or asset gatherers…you have wealth or the ability to create it. Just because you don’t live ostentatiously doesn’t mean that you are not wealthy.
The wealthy, and those who will become wealthy, have a team of advisers. Roughly speaking these advisers can be broken into two groups. The first group contains those with unique knowledge of you and of life in general – your spouse, adult children, parents, closest friends, and perhaps a mastermind or industry group of which you’re a part. The second group of advisers has specialized domain expertise and includes estate and corporate attorneys, CPAs, and CFP’s.
According to Tom Stanley, whose research on millionaires is unsurpassed, the truly wealthy have a low propensity to spend on high-status items like cars, clothes, and watches, but are willing to part with their carefully husbanded dollars to get the right advice on their taxes, contracts, and financial plan. The number one ranked activity shared by decamillionaires, engaged in by 85% of survey respondents within the past year? Consulting with tax experts! (The Millionaire Mind, page 374).
As you accumulate wealth and your financial life becomes more complex, keeping good relationships with both your informal and formal team of advisers will help you make wise decisions and maintain and grow what you’ve worked so hard to build. “In an abundance of counselors there is safety.” Proverbs 11:14.
Conclusion
As you grow in your life and your wealth, there is a genuine risk of missing the forest for the trees. You are accumulating wealth at least in part in the hope of enjoying it in the future. It is critically important that you take the steps today not only to grow your wealth for the future, but to celebrate and enjoy the journey from here to financial independence.
Along the way, embrace the tension of caring for both today’s you and the future you. Ask why you’re aiming for your particular financial goals (and take a good look at expenses – are they delivering for you the way you want?). Finally, get the help you need in every area of your life, including your financial life, to make the best decisions you can. Death and taxes are the only guarantees. But there are many, many things we can do to stack the odds of a joyful life now, and financial independence in the future, in our favor.
You are standing on the edge of a cliff and the only thing that separates you from a 1000 foot fall are the rocks you are standing on and a small branch sticking out of rocks, hanging perilously over the abyss. However, you have been told that if you could just get out to the end of that branch, the view becomes amazing and it would change your life. At your core, you know a ‘view’ can’t change your life. But what if they are right? What should do? There is not a mentally sound person alive that would not agree that the right thing to do would be to back away from the cliff’s edge. We are a species that values survival, so this makes sense. But when it comes to money and money decisions, we do this over and over and over again.
I am not referring to just investment decisions, although these are well documented. Karl Richards wrote a fantastic book called The Behavior Gap where he discusses, among other things, how it is that the average mutual fund performance is between 2-4% per year higher than the average performance of the investors…in that same fund. In short, it is investors behaving badly by buying high and selling low. I will guarantee that every one of those investors got in the game with the goal of buying low and selling high, so why did the majority of them do just the opposite? This is the behavior gap, and Karl will explain it much better than I will, so read his book.
I am also referring to our decisions around other areas of finance such as cash flow, debt and generosity. I think most people know what they should be doing with these areas of finance, but very few actually execute this well.
Cash flow is pretty straight forward. The #1 principal when it comes to money is ‘Spend less than you make.’ Absolutely no other part of your finances will work as well as they should if you do not have this under control. You cannot plan and save for the future if you are not staying solvent today. Heck, you won’t be able to plan for tomorrow. This is critical and is a lesson I have had to learn the hard way.
Debt flows right out of cash flow. Show me a person that is spending more than they make, eventually, we will be discussing their debt problem. The problem with debt is that you are writing checks off of your future with no assurances that the money will be there to pay for it. It may work out ok for you, but then again, it may not, and do you really want to live with that uncertainty? Make no mistake, there are better and worse uses of debt, but the principal of debt is to be careful. The old Proverb states that, “The debtor becomes slave to the lender.” If you have ever been in an extreme amount of debt, you understand what it means to be indentured to that debt.
Generosity is something we should all practice on a daily basis to as many people that intersect our life. This is life at its fullest. Of course there are many more ways to be generous and kind to someone other than using your money. However, there is also no question that the thoughtful and strategic engagement of money with need can changes lives and impact people for generations to come. I think we are all wired to want to help. It is an incredible feeling to know that your efforts, thoughtfulness, and yes, money, have made an impact on someone. It will change their day, but I am certain it will change your day. But you can’t even get here if you have misbehaved so badly in other areas of your financial life. We all know this at our core, and yet we knowingly sabotage our desire to
I don’t think anyone does this on purpose, but this is what happens when the behavior gap is compounded exponentially. It is never just about what we did to miss out on returns this year or what bad decision we made today to live beyond our means. These decisions are never made in a vacuum and they always compound into a much bigger problem if a course correction is not made.
Shred your excuses in this area. Can’t work out because you don’t want to join a club or gym? Running, cycling, pushups, sit-ups, and stretching are free in America. Can’t get exercise during the workday because you don’t want to sweat at work? Walk or do the stairs – just get up and move. Track your steps and challenge yourself to hit the 10,000 mark Monday through Friday. Can’t eat “healthy food” at a restaurant? Order the side salad and a cup of soup; substitute water for sweet tea; eat only half of the cheeseburger and box the rest for tomorrow! There’s always a way to hit your goal if you want it enough.