There is a belief that it is a linear equation between money and happiness. The more you have, the happier you are. However, in a 2013 book titled ‘Happy Money’, American authors Elizabeth Dunn and Michael Norton argue that happiness is not related to the amount of money you have. They quote a study conducted in the United States to show that happiness barely increases even if the income doubles in an American household.
The study finds that your happiness is related to the way you spend your money.
From your personal finance standpoint, it assumes significance. You may not be aware, but it is ‘World Savings Day’ on October 30. If you are looking to be happy by planning an early retirement to focus on things you love, it may be a good time to step back and take note.
Tell yourself not to spend
A change in habit is not possible if you are not mentally prepared for it. A lot of the effort has to go to trick you into saving money. If you belong to a middle-class family in urban India, there are a lot of households where frugality is a norm. It comes to you naturally as your parents strive to give you a good living. For most of you reading this, they have perhaps already worked hard, saved and invested their hard-earned money to provide you with the right education. Most parents will not buy fancy toys but would not hesitate to spend money on the child’s education. It is an ingrained goal in frugal middle-class values. You may have often heard your parents highlight “simple living, high thinking” as a living philosophy.
If you belong to a household like that, your job is easy. You will be a natural in frugality. However, if you belong to a family where there is an emphasis on spending money to buy happiness, you may want to change it.
One way to tell yourself to stay thrifty is to break down the size of your happiness. Very often, we believe that a significant event in our life is the only way to be happy. For example, you may think that the only way you could be satisfied is by living in a big house near your workplace or driving a big luxury car. An idea of a world tour could be another source of happiness for some people.
Yes, it is essential to dream big. However, achieving or not achieving those dreams cannot be linked to how happy you could get from them.
Here are some ideas for you to do something about your spending habits:
You may love to explore new places and have a habit of going out of town whenever you an opportunity arises. But there may be several lanes in your own city that you may not be aware of today. There could be a lot of history that you would have missed over the years in your backyard. You could join or create a group online that discusses the heritage of your city. If this works, you can meet occasionally or arrange walks around such sites and explore them.
If you enjoy food, you may want to learn to cook. That is another way of curbing the urge to eat at fancy restaurants whenever a new one opens. You would spend quality time at home and enjoy a sumptuous meal with your loved ones.
If music makes you happy, you may want to pursue learning it in any form. You can reduce the number of live concerts you attend with friends. You may argue that you like hanging out with friends and so you attend them. But then, do you want to go to a concert that costs over Rs 5,000 for a ticket to hang out with friends? You can do that in a natural setting near a beach or a hill around your city.
The way you spend will determine the distance to your personal goals. Previously, this column has argued for financial independence, retire early. It is impossible to be financially independent if you do not curb your spending. Even if it means, tricking yourself into it.