FOOL ON THE HILL
Happiness: Your Greatest Luxury

Contentment isn't a feeling or a mood; it's a decision. Only by choosing to be content with what you already have can you accomplish your budget, saving, and investing goals. Without choosing contentment, you'll be ensnared by a subtle but ever-expanding appetite for money and all the things it can purchase -- and worst of all, it's an appetite that's never fulfilled.

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By Matt Richey (TMF Matt)
December 24, 2002

[Editor's note: This article originally ran on March 22, 2002.]

Happiness is less a matter of getting what we want than of wanting what we have. --David G. Myers, Ph.D.

As a professor and author, Dr. David G. Myers is an authority on the psychology of happiness. The above quote comes from an article earlier this year by Dr. Myers entitled, "Does Economic Growth Improve Human Morale?" This article caused me to noodle over the importance of how contentment affects the way we handle our finances.

Contentment may seem too touchy-feely a topic to be of importance to those who associate finance purely with hard numbers, but I think this subject gets at the root of why we spend and save the way we do. In fact, I would go so far as to say that making a deliberate, daily decision to be content forms the very foundation of a sound financial life.

Need some examples? Being content with my current income and choosing to live within its boundaries prevents me from racking up credit card debt. Being content with my current car prevents me from running out and buying that Porsche Boxster that I love but can't afford. Being content with my cash investment portfolio prevents me from greedily pursuing outsized returns by using margin and other leveraged instruments (e.g., options) in excess.

In sum, being content prevents me from buying into the lie that more or better stuff leads to happiness. Don't get me wrong, I'm not at all against material goods. I'm proud of America's free-market economy and all the value and diversity it affords its consumers. My warning here is against the futility of trying to find contentment in money and the things it can buy for us. Dr. Myers says wealth is like health: "Although its utter absence can breed misery, having it does not guarantee happiness."

To borrow some stats from Dr. Myers' article, consider that in 1957, when economist John Galbraith described the United States as The Affluent Society, the average per-person income, expressed in today's dollars, was $8,000. Today, the figure is $16,000. In spite of that doubling in real income, the number telling the University of Chicago's National Opinion Research Center that they are "very happy" has declined from 35% in 1957 to 30% today.

Step back and think about all the innovation since 1957, all the wonderful improvements in technology and medicine, and then consider that we Americans are, as Dr. Myers put it, "Twice as rich, and a little less happy."

This research establishes what most of us already know in our hearts: Wealth and material possessions, while not bad in and of themselves, are not the route to happiness. And yet even though we know this, we as affluent Americans can still so easily find ourselves caught up in materialistic-based unhappiness. For example, are you unhappy with your current home, current income, current portfolio? Or on a more subtle level, let me ask you, have you already purchased the car you wanted, the home you wanted, the stuff you wanted, but in the process you took on debt that you can barely afford or that cuts into your ability to save adequately? In either case, your wants are getting the best of you and preventing you from finding real contentment.

Part of the reason behind why our material wants can overpower us is because of something known to psychologists as the adaptation-level phenomenon: Whatever it is that's going on in our life, we immediately adapt to it and then that becomes neutral. So if you get a big promotion and raise, you'll think that's wonderful -- for about six months, and then it becomes neutral... and eventually not enough.

The problem isn't having an appreciation for the bigger and better, the smaller and faster, the newer and cooler; the problem is when this appreciation becomes an appetite that eats at you and robs you of your happiness. Living in an affluent and innovative society, it's only natural that we in America are subjected to ever-expanding wants -- for newer cars, smaller cell phones, better restaurants, fancier abodes, higher salaries... the list goes on and on. And it's true, all of these things are exciting -- for a time -- but then they're just a part of everyday life. That's why they don't bring lasting contentment.

For those of us who are aspiring to be Foolish with our finances, I think Myers' findings on happiness and the adaptation-level phenomenon have some pretty important implications. Do you find that your wants and desires are always being ratcheted up a few notches higher than what you currently have? Can you not get out of debt because your wants are expanding faster than your income? Is even a portion of your happiness based on the size of your portfolio or its recent performance? If the answer is "yes" to any of these questions, you're setting yourself up for persistent dissatisfaction and possibly an inability to meet your financial goals. The only solution is a decision to be content with what you already have.

If you make this kind of willful decision to live contentedly within your current financial picture, I believe you'll find it much easier to stay within a budget, to save properly, to give generously to charities and those in need, and to invest with a healthy mindset of getting rich slowly (What's the rush? Research proves you won't be happier anyway!).

In aggregate, we Americans are materially blessed. As the opening quote so poetically expressed, the key to contentment is choosing to enjoy and be thankful for what we already have.

Matt Richey (MattR@fool.com) is a senior investment analyst for The Motley Fool, where he's very content. His boss, however, should not view this contentment as a sign that he wouldn't be willing to accept perks, raises, or bonuses. For Matt's best Foolish stock ideas and in-depth analysis that you won't find anywhere else each month, check out our newsletter, The Motley Fool Select. The Motley Fool is investors writing for investors.