Published in: Banks | Sept. 20, 2019
The Scandinavian Secret That Could Make You Happier and Wealthier
By: Dana George
The people of the Nordic nations are among the happiest in the world. Here's one of the reasons why.
If happiness were a competitive sport, Scandinavian countries would take the gold (and silver and bronze) medal. According to the World Happiness Report, released in March by the Sustainable Development Solutions Network for the United Nations, Nordic citizens are loving life. In fact, all five Scandinavian countries -- Finland, Denmark, Norway, Iceland, and Sweden -- ranked among the 10 happiest countries.
What makes Scandinavians so happy despite their notoriously long, harsh winters? To hear them tell it, it's a variety of things. Scandinavians appreciate their publicly funded healthcare system, nearly free childcare, free higher education, and gender equality.
And there's something else the Nordic have. It's a practice called lagom (pronounced "la-gum"), a Swedish word that, roughly translated, means "just right." If you've ever used the phrase "everything in moderation," then you have a fair sense of what lagom is about. Nordic life focuses on finding a healthy balance, or getting it "just right." It applies to how many hours a week a person works, the amount of food they eat, and what they do with items they no longer need. Lagom is not about restricting yourself, but rather about avoiding excess.
Lagom applied to finances
You're not likely see a Scandinavian flashing cash or bragging about how much wealth they've accumulated. What you are likely to notice is how simply people from Nordic countries live, as if "less is more" were ingrained in the public consciousness.
That mindset means only bringing things they adore into their homes, rather than filling their space with stuff. It means spending time and money in a thoughtful, purposeful way. Lagom is sometimes described as a form of minimalism. It leads to less clutter, less waste, and more money to save or invest.
Swedish death cleaning (döstädning)
The practice of lagom calls for you to do wonderful things like spend time with your family, enjoy the great outdoors, and practice teamwork. It also endorses the concept of "Swedish death cleaning."
The Swedish like to say, "You can't take it with you." And because you can't take it with you, you should not buy more than you need. It's considered rude to leave a house full of junk for family and friends to clean up after your death. As you fight the temptation to purchase another throw pillow or tool you "might need one day," imagine your family having to dispose of it after you're gone.
The IKEA approach
You don't have to like IKEA furniture to appreciate the way the Swedish powerhouse bases its business on lagom. IKEA sells home goods that are simple, functional, and moderately priced. The company offers workshops in which they advise participants to avoid waste and, in turn, save money. The workshops cover everything from deciding how much stuff you actually need to buying only the amount of food you will eat.
The real-life impact of lagom
A report released by Barclays and the Center for Economics and Business Research found that practicing lagom with finances can make you happier. After surveying 4,000 adults in England, researchers reported that lagom helped consumers step away from constant consumption, reassess their priorities, and ultimately save money.
One interesting takeaway of the report is that people would rather be able to put a little money into a savings account each month than receive a raise in pay. In other words, having enough money matters more to people than earning a high amount.
Make over your finances with lagom
- The lagom way means buying items that meet your needs, but no more. For example, you might buy a reliable car, rather than spend more money on a flashy sports car.
- No matter how much (or little) you paid for an item, take care of it. You can make anything last for years by looking after it properly.
- Be conscious of how you shop for food. Plan for the week ahead, create meals that allow enough leftovers for lunch the next day, use coupons and store specials, and buy only what you know you will eat. Planning meals reduces spontaneous trips through the drive-through and results in less food waste at home.
- Get rid of junk mail. It's tough to achieve balance when you're being barraged with advertisements, each designed to make you believe you need something new. EcoCycle offers a few great ideas to stop unwanted junk mail from landing in your mailbox. And the junk you receive via email? Take a moment to unsubscribe.
- One pillar of lagom involves reusing items that might otherwise find their way to a landfill. For example, buy a used coffee table and refinish it, shop for clothes at a thrift store (many sell high-end designs at a fraction of the original price), or trade different sizes of baby clothes with a friend.
The payoff for you
The average American adult spends $1,497 per month on non-essential items, according to a poll conducted by OnePoll. Eating out, receiving subscription boxes, paying for cable and streaming services, and other gratuitous expenses add up to nearly $18,000 a year.
You may not eat out much or pay for a streaming music service, but if you're like most people and spend an average of $109 per month on impulse purchases, you may be surprised by what that modest amount could do for you over the long run.
Say you invest that amount every month at a compounded interest rate of 9% (the S&P 500 has produced total returns of 9.7% annually since 1965). You'll have $1,372 put away after one year. In 10 years, it will be $20,841, and in 20 years that small investment will be worth $70,180. And that's just $109 per month. Imagine how much you can save by looking for other small leaks in your budget.
Ultimately, what lagom offers is a way to live simply and with balance. It's a way to focus less on your stuff and more on the people you care about. The fact that it could make you wealthier is a lucky byproduct.
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