It's funny how much time and energy we put into obtaining possessions, while mounting evidence indicates that these items don't really buy us happiness. I saw this great infographic from Happify, and it's well worth sharing. As I read through it, six factors jumped out at me as the keys to finding and living a happy life, one that is both emotionally satisfying and financially rewarding.
These include giving to causes we find important, the value of experiences versus physical possessions, and building strong relationships. One of the most interesting things? Money does buy happiness -- at least up to a certain point. Beyond that, the extra money doesn't seem to add extra happiness.
In short, the idea is that we should focus less on buying stuff and more on paying ourselves. After all, when retirement approaches, financial freedom will be what pays for all those experiences, charitable giving, and time spent with people we care about. Here are a few slides I put together based on Happify's findings:
In short, money is important, and things are, too. But only to a point. It looks like it's better to use disposable income to support causes we care about and to build up our nest egg. After all, when retirement comes, every dollar will help us enjoy more experiences with the time we have left on Earth.
One simple strategy? Invest in index funds such as the Guggenheim Rydex S&P Equal Weight ETF (NYSEMKT:RSP) or SPDR S&P 500 Index Fund (NYSEMKT:SPY). Both track to the S&P 500, so by investing in either of these two funds, you are basically "buying" the whole index. The difference? The Guggenheim Rydex Equal Weight offers just that, equal weight of all 500 stocks. The SPDR S&P 500 is weighted by market cap, just like the actual index. In other words, the larger a company is, the larger a percentage of the index represents.
Since larger companies aren't as likely to go up in value as quickly, this weighting can limit the impact of the gains of smaller, faster-growing companies. On the other hand, those larger companies can provide more stability in a market downturn. From July 2007 to March 2009, the S&P 500 and SPDR index fund both lost about 54%, including dividends, while the Guggenheim Rydex Equal Weight fell more than 60%; investors lost at least 6% less in the SPDR. However, the Rydex Equal Weight has absolutely outperformed since the bottom, gaining some 276% in total return, compared to 200% for the SPDR index fund.
The most important message? Money and possessions can help us live happier lives, but only up to a point. Beyond that, we often get much more from experiences and giving to others. Plus, keeping treats just that, and not regular everyday experiences -- even a bar of chocolate -- usually means we will enjoy them more.
Pay yourself first, making deposits monthly, or even out of every paycheck. Invest in every market, without fail, for many years. The evidence shows that you'll quickly adjust to the smaller paycheck, and when retirement comes, you'll be more likely to have financial freedom. That means you'll be able to do more of the things that Happify claims will lead to a happier life.