Brother in law rule
Over the course of our careers, we have helped hundreds, maybe even thousands of local people plan for retirement. We have also observed people living in retirement; most enjoy higher well-being in retirement. But we have also seen some retirees really suffer from poor life satisfaction.
So, what’s the secret to living well in retirement? And is there anything we can do to increase our happiness?
If you ask someone what they think the key to their happiness is, they will usually answer health and wealth. And to an extent that is true. Certainly, the absence of wealth or multiple debilitating illnesses can be a fast track to misery. But money and health don’t affect life satisfaction nearly as much as we would think.
More than money
A ground-breaking study by Richard Easterlin first formulated in the 1970s, but revisited in 2014, showed that over a 70-year period, the trend in happiness has been slightly negative despite real incomes more than tripling.
What’s more important is how we feel about our wealth, encapsulated by HL Mencken’s ‘Brother-in-Law Rule’: wealth is any income that is at least $100 more a year than the income of one’s wife’s sister’s husband.
If we’re like Mencken, constantly looking for signs that that we’re worse off than others, we won’t be happy. It’s better to focus on our own situation, and if we have confidence to spend, then we have enough.
Not health either
A recent academic study in Japan found that people who become visually impaired experience emotional distress, but they’re subjective well-being and happiness are unaffected. Good health on its own is taken for granted, and only severe or multiple illnesses actually lower people’s normal level of positive feeling.
Secret to happiness
According to leading academic psychologist Martin Seligman, happiness has little to do with short-term pleasure, and more to do with developing personal strengths and character.
When we choose to develop on our strengths through will and determination, we feel pride in our accomplishments, we gain satisfaction in life, and happiness that is genuine.
Similarly, Seligman’s view is that genuine happiness arises through the slow development of what he calls ‘character’. Character in this sense includes universally admired virtues like wisdom, courage, justice and spirituality.
It seems happiness must be earned. There are no shortcuts to genuine happiness and life satisfaction. Your circumstances like wealth and health don’t really matter.
Instead, we can choose to be happy, by living consistently with our values, and leveraging our natural strengths with grit and determination.
So, what does this have to do with financial planning? Professional financial planners take the time to understand what’s most important to their clients. They then align the financial strategy with the client’s values, so they are free to live purposefully, spending their time and money with the people most important to them, on the causes they’re most passionate about.