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What Financial Independence Doesn’t Guarantee

What Financial Independence Doesn't Guarantee

We’ve all heard the saying, “Money doesn’t buy happiness.”

Well, it’s true—money doesn’t buy happiness and financial independence doesn’t guarantee happiness either. Personal income in the United States has almost tripled since 1956, but the number of Americans who claim to be “very happy” hasn’t increased—it has remained at about 30% year after year.

Income is up yet the level of happiness is flat.

Why? While there are thousands of factors that contribute to happiness or unhappiness, it appears that simply earning more money isn’t enough.

Academic research suggests that our current actions are based on predictions of future emotional consequences. Our decision to order a double bacon cheeseburger, compete in a marathon, work late nights and weekends, or purchase a larger house, is based on how we think we will feel once we’ve accomplished these things.

On the pursuit of happiness…

If we were good predictors of our emotional reactions to these events, this wouldn’t be a problem. According to Harvard psychology professor, Daniel Gilbert, we do a poor job at determining how we will feel as a result of something—we tend to overestimate the future positive effect of an action and how long we are going to feel good. We think the brand new car will make us feel much happier and for a longer period than it actually will. In other words, we overestimate those things that we think will make us happy. Gilbert’s research tells us that whatever we think will make us happy won’t make us as happy as much as we estimate or for as long as we estimate.

Does this make financial independence an unworthy goal?

Absolutely not. It means that financial independence is a means to an end, a tool. Financial independence alone will not make you happy. It’s what you do once you become financially independent that determines your happiness.

Most people know what they should want to make them happy.

Our brain is powerful beyond comprehension, but it is constantly trying to make things easier for us. As a result, we simplify and streamline what we think will make us happier. We are susceptible to ads that promise excitement and satisfaction without thinking critically about whether it really will or not. If we did, I would venture to say jeans’ ads with scantily dressed models (not even wearing the jeans being advertised!)—just oozing sex appeal—would not be as effective or entertaining.

Because of the billions of dollars spent on advertisements and marketing campaigns, we incorrectly assume that our happiness is linked directly to material possessions. 

As a result of this overly simple “follow the leader” approach to happiness, it is no wonder that we are poor predictors of our happiness. If we stop and honestly evaluate what will make our lives richer and more fulfilling, we might experience happiness.  Later lessons will help you determine what will make you happy—in effect, it will make you think, maybe for the first time, about what drives you.

Because of the billions of dollars spent on advertisements and marketing campaigns, we incorrectly assume that our happiness is linked directly to material possessions. Too often, we set goals about what we want to own. While these things can add to our level of satisfaction and happiness, happiness will ultimately come from accomplishing goals and growing as people. Advertisements trick us into thinking that a product will satisfy our needs. A Hummer will make us a rebel. A Rolex will make us sophisticated. Later lessons will strip away the ads and products and will help you determine what you truly want to accomplish and who you want to be.

Armed with the knowledge of what it will take to enrich our lives and add excitement, we can use financial independence as a tool to help us achieve our other goals.

What’s the worst-case scenario?

We become financially independent, get the things we want, accomplish what we want, and become who we want to be—and are no happier than when we started. Whoever said, “If I had a choice, I’d rather be rich and unhappy than poor and unhappy” was on the right track! In our pursuit of financial success, it is important to not neglect the other areas of our life.

The proceeding blog post is an excerpt from The Six-Day Financial Makeover: Transform Your Financial Life in Less Than a Week!, available now on Amazon.

About the Independent Financial Advisor

Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.

Reach us at (949) 305-0500