Listen to this article
I was having dinner with a very good friend of mine recently, and we got talking about money and happiness. My friend explained that collecting and drinking fine wine made him very happy indeed; so much so that he estimated that his wine collection was worth more than his home.
Money is, for most people, an emotive, complicated subject. We all have different beliefs, motivations, emotions and preferences, which can make our relationship with it difficult. Money also influences how we view ourselves and can affect our feelings of self-esteem, control and security.
Over the 25 years that I was a financial adviser I interviewed hundreds of successful people. They each told me their life story and how they had achieved their success. But what I found most interesting was their relationship with money and how it influenced their approach to life.
For some people, other than funding the basics, money was merely one measurement of their personal or business success. Others saw it as a means of obtaining social status, often comparing their material wealth (house, car, clothes) to that of their peers. Their personal motivation was very much about the outward appearance of success, even if they were not completely fulfilled and satisfied as a result.
Sometimes, people feel “trapped” by money, particularly when lifestyle costs have crept up over time and they are forced to do a job they don’t enjoy purely for the financial rewards.
A few years ago, City & Guilds did a jobs survey and found that the highest level of job satisfaction was experienced by florists and gardeners (87 per cent) and the lowest satisfaction was experienced by technology workers (48 per cent) and bankers (44 per cent). It seems that having a high degree of control over one’s working activity and seeing the results of those efforts have a big impact on happiness.
Another friend of mine is a business consultant. He and his wife decided to make a radical change to their life, after several years of making excuses. They sold most of their possessions, put the rest in storage and rented out their London home.
They now travel the world, including skiing for at least two months a year, and return to the UK every few months to see clients and run their business courses. They are happier than they have ever been and they now make more money, while working less.
I was able to “fire” my own job when, a few years ago, the opportunity arose for me to sell my stake in the wealth advice firm which I had founded. I was apprehensive about such a radical change, after 17 years at the helm, but I was determined to change my lifestyle.
I no longer have a tiring commute and I enjoy a lot of variety between my speaking, writing, consulting and angel investing activities. I see my family more, I do more exercise and have lots of holidays and trips. I’m even planning to project manage the building of our new family home later this year.
Research suggests that having a higher income does affect happiness, but only up to a point. Whatever that point is for you (one study put this at $75,000 a year) will depend on your own situation, but beyond it you won’t be significantly happier. Maximum happiness comes from continual and meaningful rises in income throughout one’s life.
Comparing your financial situation to your peers is also not a good idea, because research shows people care about relative income. If you earn less than your peers you are more likely to feel aggrieved. There will always be someone with more money than you, so try to stop worrying about it.
There is also plenty of evidence that spending your money on life experiences, rather than material possessions, will make you happier. This is because we remember the experience much longer than the initial excitement of acquiring something. We are also less likely to compare ourselves to other people when we have experiences, compared to when we acquire possessions.
Your happiness is also likely to be higher if you spend your money on other people in a way that strengthens personal relationships, or you give money to causes which are aligned with your values.
Your self worth is not determined by your net worth, but by the quality of your personal relationships, your life experiences and the meaning you derive from your existence.
I think that true happiness comes from having a strong sense of purpose, being clear on your ideal lifestyle, and making work and spending decisions aligned with that vision. Life is far too short to waste time doing things you don’t enjoy.
Back to my friend and his wine collection. The last time we met for dinner he produced a bottle which he advised was worth about £350. I protested that I couldn’t possibly drink such an expensive wine at his expense, but he insisted.
“None of us is getting any younger and I need to start drinking my fine wines before it’s too late. I’d rather share the experience with a good friend, than letting the bottles continue to gather dust in my cellar. What’s the point in having it if I can’t enjoy it?”
So my friend has cleverly done two of the things that research says maximises happiness. He has turned a possession into a life experience and he has spent some of his wealth on me, his friend, in a way which strengthens our personal relationship.
I’ve made it clear to my friend that I am more than happy to help him enjoy his wine collection over the coming years. After all, a friend in need is a friend indeed.
Jason Butler is a personal finance expert and a former financial adviser. Twitter: @jbthewealthman