How Much Money Does it Take to Make You Happy?

Have you ever wondered if money brings you happiness? You are not alone in this thought. I find this topic fascinating and as such, I have written several blog posts on the relationship between money and happiness/success, including:

• Does Money Bring Happiness
• How We Look at Money
• Are Money and Success the Same Thing?

Last summer I was teamed up with a high-end money manager at a golf tournament. During the round my interest was piqued when he provided me with his thoughts and observations on wealth as it related to happiness and unhappiness.

His general observation was that “Money makes happy people happier and unhappy people even unhappier” (keep in mind, he deals with the wealthiest segment of the population).

It was his contention that people who are happy to start with, have the ability to receive pleasure through spending, sharing and giving. Happy people enjoy the material things they can purchase. They also can be generous to others and receive satisfaction seeing the benefits of their generosity. Overall, they receive pleasure observing the betterment of themselves, family, friends and the community.

Conversely, he opined that unhappy people, considered money to bring added stress and a burden that manifests itself into further unhappiness. He felt the cause of this unhappiness resulted from the worry that people judged them and there was often paranoia that people wanted access to their money. For the most part, he had observed that these people don’t get real pleasure from their money and don’t enjoy spending, giving and sharing.

While I appreciated his insights, I was concerned about the applicability of his findings given the wealth of the people in his sample and his limited sample size. This caused me to look for studies with more of a representation of the average population to determine if “happy people” were able to reach a certain level of happiness due to their financial success. This led me to a 2010 Princeton University Woodrow Wilson School study by Angus Deaton and Daniel Kahnemen.

Princeton Study

Deaton and Kahnemen analyzed the responses of more than 450,000 Americans to the Gallup-Healthways Well-Being Index. They found that “emotional well-being” (essentially your day to day contentment based on the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant) and “life evaluation” (the thoughts that people have when they think about their life) are not necessarily correlated.

The authors found emotional well-being increases with income, but does not progress past $75,000 (or $90,000 Cdn :). However, more money boosts how you assess your life. As Mr. Deaton told Randolph Schmid of the Associated Press "Giving people more income beyond 75K is not going to do much for their daily mood ... but it is going to make them feel they have a better life."

Personally I wonder how all this translates regionally. Am I as happy with $75k if I live in Flin Flon as I am with $75,000 in Toronto? How about if all my friends make $300,000,does my life evaluation become so negative it impacts my happiness?

Anyways, if you believe in the findings of the Princeton study, the money manager’s view is essentially corroborated and at $75k, you’re bopping around the house singing “Happy” just like Pharrell Williams.

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The Emotional Side of Retirement for Entrepreneurs

Last week, I featured a guest blog by Betty Hansen of Crossroads Planning Group Inc. on the emotional side of retirement. That post titled Retirement or Refirement can be found here as a complement to my six-part series titled How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does! 

Today, Betty returns with another great post on the emotional side of retirement for entrepreneurs. As someone who has dealt with owner-managers of companies for years, I know they are often wired a little different and thus, retirement can seem like they have put their life into slow motion. I thank Betty for her excellent blogs and without further ado, here is her post.

The Emotional Side of Retirement for Entrepreneurs

By Betty Hansen

We all know what has to be done when it comes to our finances for retirement…investing, saving and years of planning. But many entrepreneurs have not thought about how they will emotionally handle this new stage in their lives.

Many definitions of retirement are similar to “the act of ending your working or professional career”. Sounds exciting, doesn’t it?

In my experience one group that generally does not transition gracefully through the act of ending their working or professional careers are entrepreneurs. The following quote from “You Can’t Fire Me I’m Your Father” by Neil N. Koenig sums up the reason why very well!

“Work is fun; it is seductively engrossing and exhilarating when it provides challenge, risk and reward.” This is what entrepreneurs live for and it certainly has a lot more appeal than a traditional definition of retirement.

I would love to be able to create a word to replace “retirement”… for many people that’s one of the biggest hang-ups. There’s an implication that you no longer are as useful to your business as you have been in the past. The roles may change. However, the importance of the knowledge, skills and experience that the entrepreneur can continue to bring to the business can be invaluable. When and how does retirement occur? I think there is no definitive answer to that question (or should there be).

Entrepreneurs quite often are stubborn, independent, confident and resilient. These characteristics work well while building up the business but often work against the entrepreneur when the time comes to pass on, sell or retire from the business. These characteristics cannot be turned off like a switch.

Let’s explore a few emotionally driven areas related to retirement for entrepreneurs.

Control, Identity and Purpose

 

Understanding how and when to give up control depends a lot on why one wants to keep control in the first place.

Wanting to keep control may arise because the entrepreneur feels no one can replace the skills they bring to the table. It can also arise from the fear that the next owner will do better.

There is also control for control’s sake. That usually happens when recognizing mortality and keeping control of the business is often one of the ways of putting that recognition out of mind.

Then there is control that’s kept because there is nothing else to replace it.

For the entrepreneur, the business may have been the focus of their purpose for decades and that has become their identity. That purpose and resulting identity has been imbedded in structure. However once the entrepreneur retires they may be faced with a future with no structure, no purpose and no identity and that can be daunting.

During the first few months of retirement there are usually lots of activities to be undertaken…then reality sets in. That reality may take the form of disenchantment and/or depression. A feeling of “so this is it?”.

A recently retired entrepreneur expressed these feelings. “When you have a business and become depressed you still have to deal with the business so you get up and deal with the business and the depression…when you are retired and become depressed there may not be anything out there to motivate you to get out of the depression”. That’s a depressing thought in itself.

I feel that the entrepreneurs who have a healthy and happy transition into retirement (or into new careers) are those that have started the planning process early and have created a culture of communication with their families and employees in order to create a future for themselves. One of the questions to be asked is “When not thinking about the business what am I doing when I lose all track of time?”

The answer to the above question may be the foundation on which to build the future. The business which has been an outlet for the entrepreneur’s control, purpose and identity needs to be replaced by something that will provide a similar outlet and create a vital and vibrant future.

At some point in time the entrepreneur will dispose of their business. The disposition may be voluntary or involuntary and may be to a third party or to family, but it is going to go. Let’s redefine the future before, during and after the disposition. That future may or may not include continuing participation in the business.

When a young man asked his 80 year old grandfather what he would change about his entrepreneurial career if he had to do it over, the grandfather indicated that he would have developed interests outside the business early on in his career that would give him greater purpose now.

Because we are living longer and better than generations in the past, I like to look at retirement not as an event but as a process that evolves over a period of time and a process that is just as important as succession planning or preparing the business for sale.

And that period of time will be different for each entrepreneur, their families and their business.

Betty’s company, Crossroads Planning Group Inc., helps familes transition their business from one generation to the next while encouraging family harmony. Betty believes that communication is the foundation of effective retirement, succession and estate planning. Please feel free to contact her directly at 519.269.9634 or by email at bhansen@crossroadsplanning.com. More information is available on Betty’s company website, www.crossroadsplanning.com.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Retirement or Refirement?

In February, I wrote a six-part series titled "How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!" The series focused on how much money you really need to retire, and the various economic factors that can impact your retirement nest egg. The series concentrated mainly on the financial side of retirement, and neglected the emotional side of retirement. If you did not read this series and are interested, click here.

I thought it might be interesting to have someone who specializes in retirement and life transitions to provide their expertise on the emotional aspect of retirement, and I am pleased to introduce a guest post by Betty Hansen, whose company Crossroads Planning Group Inc. deals with retirement, succession and estate planning. Betty is going to provide two guest posts: today's post which will focus on the emotional side of retirement and a second post next week which will focus on why entrepreneurs become emotional wrecks once they retire :)

Retirement or Refirement? 

By Betty Hansen

There’s a new word out there and I like it. Refirement. The next stage of life has been referred to as Refirement not Retirement. Let’s rejuvenate ourselves with both external and internal enthusiasm for the world around us instead of having our world controlled by the concept of retirement.

There is a negative suggestion of being tired in retirement. Let’s retire the word retirement.

Refirement…. To teach, surprise and give. This is what refirement should be all about.

I have a friend who was looking forward to retirement for years and now that it is here - it’s a letdown. I hear no enthusiasm in her voice when I should be hearing all sorts of excitement about what she’s doing, what she’s going to do as well as what she’s going to learn. Nothing.

What happened? Did the anticipation of retirement overshadow the reality of retirement? I think so.

I’ve also heard “I’m not doing anything – I’m retired”. Great! There has to be something to get you up in the morning. There may be physical and/or mental conditions that will prevent many activities but we have brains and we can use those brains, in many cases, to create stimulating activities no matter what the state of our physical or mental health.

The bottom line is that we are responsible for our own happiness, our own enjoyment of life and for what we create as our legacy – and I’m not talking money here! Don’t misunderstand, money can certainly smooth the path to what we want to do, but we have to decide initially what it is that is going to create a vital and vibrant future for us.

If the notion of a formal stopping point called retirement is removed and consideration is given to how to mix work, play and family, the outlook can be changed from deciding that one is “past it” to “how can the next stage of life be refired?”

So what do we do now? I believe that we have to go back to our roots and decide what we want to do with the rest of our lives. This can be a very simple or a very complex process, but either way it will include evaluating the skills, knowledge and experience that you have and incorporating them into your dreams for the future.

You’re still the same person that you were before you retired and as a teenager full of dreams and ideas. The vital and vibrant future that can be created as an encore can surpass the success that was enjoyed prior to retirement. Realize that it is never too late to do the things you always thought you would like to do.

Everyone is unique and the biggest contribution to making this world a better place may very well come in the refirement phase of life. There are plenty of options for people who want to contribute to society in some way utilizing their enthusiasm for creativity and compassion as well as making every day an adventure.

When they reach retirement many people age rapidly; losing their drive, motivation and purpose. Conversations focus on the past, weather and aches and pains.

Consider the phrase “What about me?”. Depending on how it is said it can be “I’m feeling sorry for myself” or it can be articulating the intention to “refire”.

In the book “What makes Olga Run?” by Bruce Grierson, the author makes the following observation:

“To have a mission in life, something to get you up, some valuable role to play: that is a huge part of ageing gracefully. The Japanese have a word for it - ikigai (eekee-guy). Rough translation: the belief that ones’ life is worth living. Studies have found that those who have ikigai live longer”. This is an enlightening and entertaining book that everyone over the age of 40 should read!

Happy Refirement!

Betty’s company, Crossroads Planning Group Inc., helps familes transition their business from one generation to the next while encouraging family harmony. Betty believes that communication is the foundation of effective retirement, succession and estate planning. Please feel free to contact her directly at 519.269.9634 or by email at bhansen@crossroadsplanning.com. More information is available on Betty’s company website, www.crossroadsplanning.com.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Does Money bring Happiness?

I find the psychological aspects of money fascinating and in July, I wrote a blog called How we look at Money. Today, I want to discuss a post on the Psyblog (written by Jeremy Dean, a researcher at University College of London working towards his PhD) called The 3 Reasons Money Brings Satisfaction But Not Happiness.

Jeremy puts forth the following three reasons why money doesn't make us happy:

It's relative income that's important

Jeremy says money is relative. He says “we don't mind so much about our actual level of income, so long as we're earning more than other people around us. Unfortunately as we earn more money we're likely to be surrounded by richer people so we often end up failing to take advantage of the positive comparison.”

I would be interested in knowing if there is a correlation between increasing income and the importance of relative income; or is relative income as an important measure at lower income levels as it is at higher income levels? One would think meeting basic needs would be far more important the lower your income level, but maybe not. As for those with a higher income, I think we all know someone who needs to earn more than their friends and the people they grew up with, but as they earn more, they essentially social climb into another strata and, as Jeremy says, become surrounded by richer people, requiring them to climb another social strata in a never-ending loop.

Material goods don't make us happy

Jeremy says “acquiring things like houses and cars only have a transient effect on happiness.” Jeremy even states that materialism makes us less happy.

I think we can all somewhat relate to this comment. We often strive for a material item and sometimes, after achieving it, there is almost a letdown as the journey was more exciting than reaching the mountaintop. However, let’s say you love to jet-ski; the acquisition of the sea-doo would seem to have a lasting effect on happiness, so I am not sure I am 100% in agreement on this one.

People don't shift to enjoyable activities when they are rich

Jeremy says “people who earn more money don't spend their time enjoying themselves, they spend their time at work, in activities likely to cause them more stress and tension….In fact, to earn the money, they have to spend more time at work, and commuting to and from work.”

Although true in some cases, I certainly observe many people golfing 3-4 times a week or hanging out at their cottage in the summer enjoying themselves and their financial wealth.

Finally, Jeremy in his blog notes that Nobel-prize winning psychologist Daniel Kahneman says “the idea that the reason people continue to think money makes them happier is that chasing it leads to conventional achievements. Conventional achievements include things like getting that coveted promotion or being able to afford that big house - in other words things that say loud and clear: here I am and this is what I can do.”

Jeremy concludes that “in fact, people with more money and status are just more satisfied with their lives, not happier”.

Jeremy asks an interesting question in his blog posting and I will conclude this posting with the same question, “before you scoff at this think about whether you'd rather be satisfied or happy?”

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.