Be More With Less
THE STORY OF THE MEXICAN FISHERMAN
A businessman was sitting at the pier of a tiny coastal Mexican village when a fisherman docks a small boat. The businessman compliments the fisherman on the size of his fish and asks him how much time it took to catch them.
“Not very long,” replies the fisherman.
The businessman then asks why the fisherman did not stay out longer and catch more fish?
The fisherman says he has enough to support his family and does not need more fish.
“What do you do with the rest of your time if you’re not catching more fish?” the banker asks.
“I sleep late, fish a little, play with my children, take siestas with my wife, and, in the evenings, I go into the village where I drink wine and play guitar with my friends. I have a fulfilling life.”
The businessman is not impressed.
“I have an MBA from the top business school in the world and can help you,” he says.
“You should catch more fish, and with the profits, buy a bigger boat. With the profits from the bigger boat catching more fish, you could buy more boats and eventually have an entire fleet of boats other fishermen can use to fish for you. Instead of being the middleman, you could sell directly to the fish processor, eventually opening your own processor. You could own and control the entire supply chain, everything from owning the product to the processing and distribution of the fish. Complete vertical integration,” he says. “You could then move from this little village to New York City where you would run your growing business.”
The fisherman, intrigued, asks, “Seems like a lot of work. How long would that take?”
“If everything goes well, at most 25 years,” replies the businessman.
“Then what?” asks the fisherman.
The businessman laughing says, “That’s the best part, when the time is right, you sell your business to the public by doing an IPO and make millions!”
“Wow. Millions, I can’t even imagine. Then what’s after that?”
“After that, you’ll be able to retire, live in a tiny village, sleep late, play with your children, catch a few fish, take a siesta with your wife, and spend your evenings drinking and playing guitar with your friends.”
The moral of the story is that you can become more with less. The Greek philosopher Epictetus said, “Wealth consists not in having great possessions, but in having few wants.”
The fisherman already achieved his end goal, so pursuing wealth for the sake of money was futile and frankly a waste of time. If you are going to pursue money, pursue it for a reason. Money should only be a process in obtaining your goals, not the means in itself. The first thing you should do then is to determine what your reasons are when wanting to make money.
Too often, people get wrapped up in the wanting more, more, more, thinking, “If only I had more money, I’d be happy...,” believing, consciously or unconsciously, that the next purchase will be the cure-all to their problems. In the 1943 influential paper, “A Theory of Human Motivation,” American psychologist Abraham Maslow proposed that healthy human beings have a certain number of needs, and that these needs are arranged in a hierarchy, with some, such as physiological and safety needs, being more fundamental than others, like social and esteem needs. Maslow’s ‘hierarchy of needs’ is often presented in a five-level pyramid, with higher needs prioritized only after lower, more fundamental needs are met. Looking at the pyramid, we often are trying to achieve esteem and self-actualization needs by buying our way there.
If we apply this model to our financial lives, as long as our basic needs are met, money adds little to our happiness. Ironically, by chasing the next big thing, we tend to jeopardize our safety needs by being less financially secure. As a result, we can feel stressed about finances, insecure about where we are in our careers, and dependent on a certain income. If we go too far, we cannot afford to do the things that really make us happy.
Many people say that money does buy happiness, and they would be right. Statistically speaking, household income is strongly related to both emotional well-being and a person’s evaluation of their own quality of life—up to a point. Past that, however, there are diminishing returns between dollars earned and happiness.Multiple studies[1]show that after making $75,000 to $80,000 per year, the difference in the emotional well-being an extra dollar makes in reducing negative emotions becomes less and less. The difference between earning $20,000 and $40,000 is huge and life-changing. The difference between earning $120,000 and $140,000 means your car might have nicer seats. The difference between making $1,000,000 and $1,020,000 is a rounding error. You require a certain amount of financial security before you can move onto your other needs and move up the hierarchy.
After over a decade of studies, University of Illinois psychologist and researcher Dr. Edward Diener, who specializes in what makes people happy, concluded that money can add pleasure to people’s lives, but it does not bring the true happiness that comes with self-respect, accomplishment, and satisfaction. Diener’s conclusions are supported by Richard Layard, British labor economist at the London School of Economics, who writes, “Despite our huge increase in affluence, people in the West have grown no happier in the past fifty years.” We keep striving for more and more things, living in the most prosperous historical period of all time, and yet, we are not getting happier.
“The desire for more positive experiences is itself a negative experience,” Mark Manson points out in his book The Subtle Art of Not Giving a F*ck. “And, paradoxically, the acceptance of one’s negative experience is itself a positive experience.”
Manson goes on to say that the more you pursue feeling better, the less satisfied you become, as pursuing something only reinforces the fact you lack it in the first place. The more you desperately want something, the more you feel inferior. It is a nice thought that we can ultimately reach some sort of “ultimate happiness.” But alas, this can never be. What made us happy today may not make us happy tomorrow, whether it be buying that new $80,000 car or $500,000 house. We constantly feel inadequate. Psychologists refer to this as the “Hedonic Treadmill.”
This predicament goes by many names. Historian Yuval Noah Harari in his book Sapiensrefers to it as the “luxury trap.” He asks, “How many young college students have taken demanding jobs in high-powered firms, vowing that they will work hard to earn money that will enable them to retire and pursue their real interests when they are thirty-five?” He warns, “But by the time they reach that age, they have large mortgages, children to educate, houses in the suburbs that necessitate at least two cars per family, and a sense that life is not worth living without really good wine and expensive holidays abroad.” We become used to life’s luxuries and are caught up with wanting more, never satisfied.
This is causing some serious social consequences. Economist Arun Abey in his book How Much is Enough? says:
“Youth and adult suicide rates have doubled or tripled over the past forty years. The biggest-selling drugs are those treating depression, anxiety and stress. The onset of depression now occurs at age fourteen, anxiety at age eleven. Obesity and diabetes have reached epidemic proportions.”
We are trying to chase happiness but never seem to get there. How can we ever be content?
WHAT MAKES US HAPPY?
Most of your assumptions about happiness are likely wrong. Psychologists[2]over the years have found that people are bad at perceiving happiness and estimating what will or will not make them happy. Furthermore, multiple surveys[3]show that despite differences in income, geography, culture, and gender, people tend to have the same level of happiness on average. If these are not reliable predictors of happiness, then what is?
We Are Bad at Determining What Makes Us Happy or Unhappy
Most people believe if they won the lottery, they would be much happier. However, on average, when measured a year later, people who had won the lottery were not any happier than those who had not.[4]There have even been accounts of lottery winners taking their own lives because they thought they would be happy, but the money changed their lives negatively, either through changing their relationships with friends and family or feeling like they did not deserve the money.
We are also bad at remembering what made us happy or unhappy in the past. Previous moments are, most of the time, not as unpleasant or enjoyable as we remember them. Our brain generalizes one feeling for an entire event. If we remember a moment as pleasant and enjoyable, we tend to remember the entire experience as pleasant and enjoyable. Equally so if the experience was unenjoyable.
Happiness Tends to Be Misconstrued as Pleasure
When people want happiness, they tend to seek pleasure, which is not the same thing. Pleasure is related to happiness but is not the cause of happiness. Ask a drug addict how their pursuit of happiness turned out. Ask a recovering gambler, who lost everything, whether the pleasure of gambling made them happy.
Research[5]proves that people who focus their efforts on materialistic pleasures end up more emotionally unstable and unhappy over the years. The seeking of materialistic pleasures often forms the basis of a focus on money. More money can afford more pleasures, yet something rings hollow. There is more to life.
We have all heard of a story from a coworker, friend, or family member who had a lot of money and yet was still miserable. At the same time, we have heard that saying, “Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.” The question then becomes how do we make enough money to meet our basic needs while focusing on our self-fulfillment needs? The goal is to have enough money to have our own version of a Jaguar but not cry along the way. We want to be happy right now, however, money is part of the process of getting to where we want to be and should not be the end goal.
Our Values Should Drive What We Do
True, long-lasting happiness is derived from the deeper values we define for ourselves. Our ultimate happiness is not defined by what we do and what happens to us, but why we do what we do and why it happens to us.
Think about what motivates you. Is it an intrinsic or extrinsic motivation? Being motivated to make money just for money’s sake will lead to an unstable emotional state and superficial behavior. Having a deeper purpose like making more money to take care of your family will be more rewarding. Although, it is easier said than done. Most of us compare ourselves to others, trying to keep up with the people we interact with daily and those in our community, both online and in-person. If you compare yourself to someone who makes you feel financially inadequate or broke, change that. How? Focus on your own race, meaning your life.
Everyone comes from different backgrounds and life experiences. It is likely the people you are trying to keep up with are struggling financially, so keep that in mind if you find yourself comparing yourself to others. When we compare ourselves upward, we tend to feel inadequate. There was a study published in 1992 that compared Olympic athlete’s reactions after winning either a gold, silver, or bronze medal. The researchers, Victoria Medvec, Scott Madey, and Thomas Gilovich, found that silver medalists were unhappier than bronze medalists. The reason? The silver medalists felt they just missed out on winning gold, while the bronze medalists were happy to receive a medal. The same idea goes with comparing our financial situation to others.
Comparing our financial situation and seeking the approval of others can lead to neediness and be a turn off to those same people. On the other hand, if you are motivated by the approval of your closest friends, then that can help you through good times and bad. For example, I do not let my financial situation define who I am. Who I am is separate from my finances, and I take comfort in knowing my friends love and care for me regardless if I have money or not. Your values dictate your perspective on money. Change your values, and you will change your perspective and allow you to take control of your finances.
Write down what you want written on your gravestone, and then write down what would be written today if you passed away. Albeit a bit morbid, this powerful exercise develops a perspective and vision regarding your values. On your deathbed, the last thing you want is a list full of regrets and people remembering you for the wrong reasons.
The top five regrets of the dying[6]as observed by an Australian nurse who spent years working with patients during the last 12 weeks of their lives are:
1. I wish I had the courage to live a life true to myself, not the life others
expected of me.
2. I wish I hadn’t worked so much.
3. I wish I’d had the courage to express my feelings.
4. I wish I had stayed in touch with my friends.
5. I wish I had let myself be happier.
Focus on limiting your life’s regrets and concentrate on what you feel in your heart. Remember, no one writes on their tombstone how much money they had.
Steve Jobs said it beautifully:
“Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything– –all external expectations, all pride, all fear of embarrassment or failure– –these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”
THE HAPPINESS EQUATION
One way to think of happiness is as an equation:
happiness=[7]reality - expectations
Another way to think of it, which is advocated by Neil Pasricha in The Happiness Equation, is:
“Want Nothing + Do Anything = Have Everything”
The idea is that you can work on lowering your expectations, improving your reality, or both to be happy.
Reducing happiness to an equation oversimplifies it but can be useful. The largest flaw with this approach is the belief that happiness is derived from being without. In other words, if you decrease your expectations, you still view happiness in terms of external validation. Life is about growing, achieving, failing, and learning from everything in between. It is better than raising your expectations to become happier, as long as you are internally rather than externally motivated. You will be made happier by setting a goal and failing to achieve it than setting no goals in the first place. At the end of the day, many complex factors play a part in what makes us happy.
According to a November 2017 National Geographic study, the three happiest places in the world were Singapore, Denmark, and Costa Rica. What does each of these places have in common? “Their people feel secure, have a sense of purpose and enjoy lives that minimize stress and maximize joy.” What is so intriguing about the study’s results is that people living in each city do it in differing ways.
• People in Singapore are very achievement-based, so they are focused on improving their reality.
• In Denmark, the joke is that people living there are happy because they have low expectations.
• The people of Costa Ricaare somewhere in between.
I found this to be true with my own experiences abroad. When I was 18, I lived in the Philippines for a time and saw people living on less than $10 per day leading happier lives than most people I knew back in Canada. I saw children with literally nothing but a tattered shirt and worn out sandals playing in the street with a smile on their face. I watched people sacrifice what little they had for complete strangers, which brought joy. Close relationships were everything to them, and it did not matter if they had money or not. People in each country focus on different components of the happiness equation to be happy. Which part you focus on determines what you should do in your pursuit of happiness.
Changing Your Expectations
“True happiness is to enjoy the present, without anxious dependence upon the future, not to amuse ourselves with either hopes or fears but to rest satisfied with what we have, which is sufficient, for he that is so wants nothing. The greatest blessings of mankind are within us and within our reach. A wise man is content with his lot, whatever it may be, without wishing for what he has not.” — Seneca
Research published in The How of Happiness by University of California psychology professor Sonja Lyubomirsky tells us exactly how much of our happiness is based on our life circumstances. The shocking figure? 10%.
Ten percent of our happiness is what happens to us, and the other 90% is based on our own expectations of the world. Expectations, not material wealth, play the biggest part in being happy.
There are two ways to change our expectations: Rethinking our Perspective and Practicing Gratitude.
1. Rethinking Our Perspective
There are about 7 billion people on Earth today and 115 billion people who have ever lived in the history of the world. That means 108 billion people are dead. Most people have already lived their lives and will never experience the pleasures of life again. They will never experience having kids, watching them grow up, growing old, and enjoying simple experiences like watching the sunset. Being alive means we have won the lottery.
Next time you look up in the sky, look at the stars. Hundreds of billions of them are out there, and this planet we call Earth is the only planet we know that has life. It makes any problems you are experiencing small in comparison to the vastness of space.
Look at median annual incomes across the world, adjusted for purchase power parity (PPP). If you make more than $1,500, you are already better off than more than 50% of the planet.
Do you make more than $50,000 per year? Forget about the top 1% because you are in the top 0.31%. It would take the average laborer in Ghana 312 years to make the same amount. If you are reading this book, chances are you either had the money to buy it or the time to read it. Either way, you are better off than most people in the world.
Next time you have a bad day, take the time to reflect and count how lucky you are.
2. Practicing Gratitude
What do Oprah Winfrey, Richard Branson, and Tim Ferriss have in common? They consciously practice gratitude.[8]Gratitude is defined as the quality of being thankful, a readiness to show and return kindness. Psychologists have said that when we appreciate the present, we become happier. Some studies have shown that being grateful can increase happiness levels by as much as 25%.[9]
Grateful people are more giving, less selfish, and more generous. Gratitude brings people closer together and improves relationships. Ray Dalio, one of the most successful hedge fund managers in the world, said one of the secrets to happiness is having “meaningful relationships.” Being grateful toward others helps build these meaningful relationships.
Gratitude is real. To practice gratitude, write down the good things that happen each day. One way to do this is to keep a journal. I use the 5-Minute Journal, which was recommended by Tim Ferriss, but you can use any form. Either before bed or as soon as you wake up, write the top three things you are grateful for and spend a few minutes thinking about them. After a few weeks, look back and reflect on your list of things you were grateful for. It will change your expectations of what really makes you happy.
Changing Your Reality
“You will never be happy if you continue to search for what happiness consists of. You will never live if you are looking for the meaning of life.”— Albert Camus, philosopher
What most people do not realize is that happiness does not come from money. One part of the happiness equation stems from changing your reality or, in Mark Manson’s words, “solving problems.” To be happy, we need something to do. It is an activity, not something that is passively bestowed upon you after the purchase of something. It does not magically appear after you receive that raise or promotion or finally have enough money to buy that new car.
Living day-to-day brings its own set of problems to solve, like what are you going to eat for dinner, planning a date, and so on. Happiness is a work in progress because solving problems or taking action is a work in progress. When you solve your health problem by getting a gym membership, it creates a new problem of working up a sweat, having to shower before you go to work, and changing so that you do not stink up your workspace. There is always more work to do, more happiness to pursue. Note that Manson means that solving problemsis key, not having problems you are unable to solve.
According to Tim Ferriss in his book, The 4-Hour Workweek, the question you should be asking isn’t, “What do I want?” or “What are my goals?” but “What would excite me?” “Excitement is the more practical synonym for happiness, and it is precisely what you should chase. It is the cure-all.”
What creates excitement? Taking action. Want to take ballet lessons? Do it. Want to learn how to scuba dive? Do it. Want to learn a new language? What is stopping you?
To progress, you need action! Every big name in the world is advocating it. Action, not money, makes you happy. This is how you change your reality with the happiness equation.
“You’re not supposed to optimize for money; you’re supposed to optimize for happiness.” — Mr. Money Mustache
You should take action to feel more control over your life.
Take Action to Feel Control
Taking action makes us feel like we have control over our lives, which helps drive how happy we are over the long term. People who feel they have little-to-no control experience low levels of happiness, regardless of their circumstances. They can be rich, famous, or have won the lottery, but if they feel they had no control over it, like they did not earn or deserve it, they will be unhappy and likely depressed. This explains why some celebrities become addicts and even take their lives.
How do you take control of your life? There are three ways:
1. Take responsibility for your actions. You cannot control everything that happens in your life. Setbacks happen to everyone. The difference is how you respond.
2. Set goals and achieve them.No matter how small, setting daily goals builds momentum and allows you to accomplish big things over time. For example, if you work out for 20 minutes a day, eventually you will find yourself more fit in the mirror.
3. Minimize your reliance on external validation. External validation is seeking approval from other people. It is about how you feel you appear in society. Internal validation, on the other hand, raises self-esteem and baseline happiness.
FOCUS YOUR SPENDING
While taking action allows us to feel control over our lives, we still spend money almost every day. This is not to say you should not spend money, but be conscious toward the things you spend money on and ensure that they will improve the quality of your life in the most measurable way. They should be meaningful to you, not to your friends or family. One way to implement this approach when spending money is to ask yourself, “Will this take away a negative?”
Tim Ferriss suggests creating a list of things that drive you crazy or drag down your quality of life. Spend money to solve these problems, and test these changes weekly to find the smallest changes in spending that result in the biggest increase in happiness. For example, I find that having unreliable cell service makes me frustrated. I would rather pay a higher monthly fee from a reliable carrier than pay less with a budget company. The cost to my sanity would be too great if I tried to save money on an inferior service.
Another approach is to write down the things you spend money on regularly that do not bring you happiness. Then, create another list that brings you happiness and rank each on a scale from 1 to 5. By performing this exercise, you identify and remember what expenses make you feel happy or unhappy. So, the next time you swipe your card, you will be able to remember your motive. When you understand what triggers feelings after a purchase, you can reflect and avoid the expenses that make you feel broke, guilty, or afraid and focus on the spending that brings you joy. Over time, cut back or eliminate the expenses that make you feel guilty, like taking an expensive taxi home or buying a house you cannot afford.
LEARN FROM THE BEST
If you want to retire earlier and be happier, learn from the best. What is the recommended way to do this? Mimic people who have done it before. The book The Millionaire Next Doorstudied the habits of the wealthiest people in the world. The authors, Thomas J Stanley and William D Danko, studied the habits of the people they perceived as rich: Those with big homes, fancy cars, and living in wealthy suburbs. They came away surprised. The people they interviewed had high incomes but were drowning in debt. They were spending more than they were saving, running on the “Hedonic Treadmill.” Not only that, but they were miserable worrying about their finances. Remind you of anyone you know?
The authors then changed their tactic to look for people who had over a million dollars but lived modestly. What they found was shocking. They discovered that “over 80% of U.S. millionaires are ordinary people who have accumulated their wealth in one generation.” People with actual wealth followed the tried-and-true philosophies in this book by living on less. They are long-term investors, own shares, avoid debt, and save. They live in modest homes and neighborhoods. They do not focus on material possessions and are happier.
Remember, peak happiness per dollar is achieved when you make between $75,000 and $80,000 a year. Then why save and invest to have more money? The reason why is so you can retire faster, maintain that level of income throughout your retirement, and do things you love in your spare time. The most precious resource in the world is not money but TIME. The only way to gain time is to cut back your spending now so that you can save more, invest more, and be happier now by focusing on things that will actually make you happy like gratitude, meaningful relationships, and taking control of your life.
SUMMARY
Changing your attitude about money has everything to do with investing and budgeting. To be able to live within your means, budget, and save for retirement requires an entirely different perspective on money altogether. While this book serves as a guide for what you need to do to retire, it all starts with your attitude about money.
• Aim to be happier without using money as the influencer. Ask yourself, “What do I need right now to be happy? Do I need anything other than what is happening right now to be happy?” “Am I being externally or internally motivated?” Focus on what makes you happy and your core values.
• Remember the happiness equation: You can work on changing your expectations, improving your reality, or both to be happy.
• To change your expectations, rethink your perspective or practice gratitude. When it comes to rethinking your perspective, focus on how lucky you are. You are alive right now and likely in the top 1% of the world’s population in earnings. As for gratitude, remember that it brings people closer together and improves relationships. The world’s top performers all recommend it.
• Set goals and achieve them. Taking action allows you to feel like you have control over your life, which leads to greater happiness over the long term.
• Focus your spending on items that not only improve the quality of your life in the most measurable way but are meaningful to you, not to your friends or family.
• Learn from the best. Your next-door neighbor could be a closet millionaire. People who avoid debt, save money, invest wisely, and live in modest homes and neighborhoods are happier on average. These people have realized that happiness is driven by things other than money.
[1]David Clingingsmith, “Negative emotions, income, and welfare: Causal estimates from the PSID,” Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), 1-19.
[2]Daniel T. Gilbert, and Timothy D. Wilson, “Affective forecasting knowing what to want,” Current Directions in Psychological Science, 14 (3), (June 2015): 131-134.
[3]Raksha Arora, Ed Diener, and James K. Harter, Weiting Ng, “Wealth and happiness across the world,” Journal of Personality and Social Psychology, 99 (1): 52-61.
[4]Philip Brickman, Dan Coates, and Ronnie Janoff-Bulman, “Lottery winners and accident victims: Is happiness relative?” Journal of Personality and Social Psychology, 36 (8): 917.
[5]Bart Duriez, Joke Simons, Bart Soenens, and Maarten Vansteenkiste, “Materialistic Values and Well-Being Among Business Students: Further Evidence of Their Detrimental Effect, Journal of Applied Social Psychology, 36 (12): 2892-2908.
[6]Bronnie Ware,The Top Five Regrets of the Dying: A Life Transformed by the Dearly Departed(Hay House Inc., 2012).
[7]Tim Ferriss, “Managing Procrastination, Predicting the Future, and Finding Happiness,” The Tim Ferriss Show, November 30, 2017.
[8]Faisal Hoque, “Why extremely successful people swear by this 5-minute daily habit,” accessed August 6, 2018, http://www.businessinsider.com/why-extremely-successful-people-swear-by-this-5-minute-daily-habit-2015-11.
[9]Robert Emmons, Thanks!: How the Science of Gratitude Can Make You Happier(Mariner Books, 2008).
