In recent decades, there’s been a lot of academic research on the topic of happiness — and the resulting insights can benefit us all. Peter and Jonathan share these insights and more as they discuss the keys to a happier life. Plus, learn why you might consider consulting or working part time during retirement.
Hosted by Creative Planning’s Director of Financial Education, Jonathan Clements, and President, Peter Mallouk, this podcast takes a closer look into topics that affect investors. Included are in-depth discussions on financial planning issues, the economy and the markets. Plus, you won’t want to miss each of their monthly tips!
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Transcript:
Jonathan Clements: This is Jonathan Clements, Director of Financial Education for Creative Planning. With me is Peter Mallouk, President of the firm, and we are Down the Middle. Today, Peter, we’re going to talk about one of my favorite topics, happiness.
In recent decades, there’s been a heap of academic research on the subject, and the resulting insights can help all of us to lead happier lives. So Peter, you’ve had many speakers at your events who have made their living by researching happiness. What do they say are the keys to a happier life?
Peter Mallouk: You now we’ve had, to your point, we’ve had a lot of events where we have someone come in that’s a specialist on happiness, or written books, or top-20 TED speakers. And every now and then, someone will say, “Well, what does this have to do with wealth management?” And really, you know, when it comes to wealth management, everything is about “what’s your goal?” And a goal is another word for dreams. What is my vision for the family and myself, and what are my dreams, and how you increase the chance that these dreams actually come true, whether it’s as simple as just being independent yourself, or being able to help your kids, or help charities, or whatever. And all of those goals are really about happiness, right? You want to be financially independent because you will be happier if you know you can walk away from work whenever you want to. You will be happier if you can do what you want when you want to, and travel if you want to.
If you’re giving money away, you do it because you like the feeling it gives you for giving it away. You like making a difference or some other reason. You like giving to your kids, you feel some satisfaction out of that. All of these are about contentment and happiness. So we’ve probably had more speakers on happiness than any other topic, other than finance, of course. And it’s been interesting to me to look at the common threads. There’s a lot of different research around this.
You know, Harvard has the longest study ever on happiness. My one thing about that study that I don’t love is it’s about happiness and longevity. So it kind of muddles two things together. Shawn Achor, who we’ve had speak at a lot of CONNECT events — and right now we’re doing about 25 all over the country, and he’s speaking at a few of those — he has been one of the top TED speakers of all time. He has his own ideas, but I’ve seen the common thread across the four different speakers we’ve had, and they tend to overlay the same things.
The big one is having an emotionally steady state, and that’s really not what people would normally think about, but it makes sense, right? If you’re depressed, if you’re anxious, if you’re stressed out, if you’re thinking about the past, if you’re thinking about the future, it’s certainly hard to be content, and you cannot be happy if you’re not content.
The other common theme is being healthy, right? There’s a saying, and I couldn’t agree with it more, you know, everyone’s got a million problems, but if you have a health issue, you’ve got one problem, right? One really, really big, big problem. And so, you know, being able to manage health is obviously a very big part of happiness. Then the common theme you see across all of the research, and what Harvard put at number one, was interesting: is quality relationships. This doesn’t mean who has the most friends. In fact, that doesn’t seem to be an indicator, it’s do you have somebody you can have meaningful conversations with?
It can be only one or two people, but the depth of the relationships matters more than the quantity of the relationships. You and I have talked about this a lot. There’s some research that comes out that says money does not impact happiness. That research is ridiculous and not true, right? So I agree with Harvard and Shawn Achor and everyone else that’s written something credible about it. There is no question that people that have the ability to do certain things are generally happier.
Now, there is research that suggests there is a point where that diminishes. There becomes a point where, okay, you get to a certain point: if you want to eat out, you can. If your kid wants to play softball and soccer at the same time, you can afford to do it. The ability after that, there is pretty significant consensus that the advantages of money diminish, and may even go the other way, may even cause more stress.
But I’ll tell you, the only people that I’ve ever seen that say money doesn’t matter are people that have it. Now, I spend a lot of time with people that on the charitable side of our lives, my wife and I are involved in a lot of things, there’s a lot of people that have never said the words to me, “Money doesn’t matter.” Those are people that know what it’s like to truly live with fear of not having enough money to do something.
And then another big factor across all the research is purpose. It doesn’t have to be like “I’m changing the whole world.” It’s just like something that you feel you get satisfaction — that you’ve got a reason to get out of bed, and you feel satisfaction. It can be I’m being a mentor to a parent or a grandparent. It can be I’m a great aunt or uncle. It can be I’m building a business. It can be I’m educating people — but it’s having some kind of purpose.
And then a couple more that don’t go across all the research, but most of it, and this is interesting, and people have different impressions of this, but in the three top studies on this, faith is a very big part of happiness.
And, you know, people have tried to interpret well, why is that? You know, and there does not seem to be a consensus on what that is. My own theory is however more emotionally stable, you feel more secure, if you have someone in your life that is like the sun: the planets revolve around the sun. Every now and then, a family loses a matriarch or a patriarch, and everything feels disoriented because that person was the magnet, that person was the sun that everyone could count on. And if you’re lucky to have two parents, then you’ve got two of those, and maybe there’s somebody else in your life that’s like that. But faith is like that too, right? If you have really strong conviction, you believe that there is a greater being there that is there for you all the time, and you could have that relationship.
And so, I’ve seen two speakers now on this topic that really struggled with this, and both of them said the same thing. They said, “I wanted this to not be true, that faith is an important part of happiness, because I’m an atheist.” And they said, “But I can’t get away from the fact that people that have faith are generally happier people.” So I thought that was really interesting.
And then moderate exercise, everyone agrees that moderate exercise is part of it. There’s a disagreement on how much, but the general consensus from Harvard, Shawn Achor, and others is, “Hey, if you’re going for a walk every day, good enough. You’ve checked that box that you are doing something that makes you active,” and so on.
And then a couple of these studies, including Harvard and Shawn, talk about gratitude and kindness. People that are nicer, they just live longer and they tend to be happier. And this is not, this shouldn’t require research to figure out, but people that have gratitude, that’s different. Gratitude’s unlike kindness. I think kindness comes naturally to some people. I think gratitude, you really have to learn gratitude and appreciation, and people that get up and go, “I’m thankful for this. It’s not what I don’t have. It’s I’m thankful for what I do have,” that’s another big factor.
And so those are a lot of different things. When you isolate them down to the biggest things, it tends to be social connection, mental well-being, and having those key figures in your life, whether it’s God, or family or something else beyond just having some friends. I know you’ve done a lot of writing, a lot of research around this. What do you have to add or what do you think about all of that?
Jonathan: Well, I think the one thing that I would add, particularly given that this is meant to be a financial podcast, Peter, is that a sense of security, and particularly a sense of financial security, could be a huge contributor to happiness. To your point, you know, people who have money say money doesn’t buy happiness, but people who don’t have money, who don’t feel financially secure, suffer anxiety every day.
And this is why the research has shown that even something as simple as keeping $5,000 in the bank can make people measurably happier. So if you’re living paycheck to paycheck, if you’re nervous every time you open the credit card bill, you are not helping your happiness. Having some money set aside, doesn’t have to be a huge sum, can greatly ease that sense of unease. The other thing was coming back to money doesn’t buy happiness, we all have heard these reports that once you hit $75,000 a year in income, you can’t boost your happiness any further.
Well, that research has since been withdrawn. People have poked holes in it. It seems that happiness does continue to rise with income, even into the stratosphere, but, and I think this is an important point, because it goes to what you’re talking about in terms of gratitude and so on, is what matters is what you focus on. And so when people who are well off, rich, whatever term you want to use, are asked about their happiness, they think about the fact that they’re financially secure, and that prompts them to say that they’re happy.
So by the same token, you know, if you want to make yourself feel happier, think about what you’re focusing on. If you’re focusing on what’s going on in the Middle East, or what’s going on in the down day in the stock market, you’re not going to be happy. If you focus on the good things in your life, your kids, your grandkids, your neighbors, your church, whatever it is, that will boost your happiness.
So Peter, there’s a lot of talk in happiness research about there being a happiness set point, that people are innately more or less happy. Do you think that you’re an innately happy person, or is it really a conscious effort in terms of the way you live your daily life?
Peter: Well, I think separate from me, to your point, the research pretty clear, that people tend to set this at a very young age. I mean some people are debating, is a certain level set you have there at birth or not? But people generally seem to stabilize into a certain mindset at a very early age. Shawn Achor and Harvard both write about the ability for us to change that through proactive things, like expressing gratitude, going for walks, working on our relationships, what you focus on, but that you do have a set point you’re moving off on, just like your personality. I mean you can be an extrovert or an introvert, and you can work on it, you can move yourself a little bit. But at the end of the day, we’re all generally are who we are. I mean I grew up in a household that was constantly talking about how lucky they were: immigrants that came to the United States that literally that lived in a basement of other immigrants. You know what I mean? And so when you’re just hearing that all the time, you just, by the time I was old enough to know there’s other things, all I had in my head for, you know, 15 years was how fortunate we have been. That mindset was built in very, very, very early.
Jonathan: So they often talk about happiness and the various components, and then there’s your set point, the activities that you intentionally engage in, and your life circumstances, how much money you make and so on. And there’s some debate about how this three-part pie chart divvies up. But in terms of the innate part, the set point part, it’s generally said to be 50 to 80% of happiness. So if you want to boost your happiness, you have to focus on the other two things, which is your life circumstances and the intentional activities that you engage in.
So things that Peter was talking about, expressing gratitude, volunteering, socializing and so on, those are the things that can potentially boost your happiness, even if you feel like your happiness set point is too high or too low, depending on how you want to look at it. So Peter, one of the other robust findings from the happiness research is that people start out pretty happy in their early twenties, and then their happiness diminishes through their twenties and thirties.
And in the developed world at least, apparently we hit rock bottom somewhere around age 47, and then we rebound from there. I certainly felt in my late forties like life was more of a struggle than I do today or I did when I was younger. Does that research resonate with you as well?
Peter: I mean so the research says that people feel that, and it gives some theories as to why. And one of them is you’re at your peak financial stress, you’ve got your kids, they’re going to high school and college, you’re having to pay for all of that. They’re eating more. They’re driving cars. You’re trying to keep up with your neigh — there’s all of that demand, and you’re a sandwich generation.
You’re also at that point beginning to take care of your parents, who need your help too. So you can’t just fix the Wi-Fi in your house or the remote control in your house. You’re going to go to your parents, and you’re going to help them too. So there’s all of this pressure of taking care of the generation below you, the generation above you, and all of the financial stress that comes with it. And that’s the theory of it. But I think this is very much like Harvard, and Shawn Achor, and Tony Robbins, and everyone else says, this is a mindset thing, right?
And to me, you can complain to yourself about how you’re having to take care of everybody, or you can tell yourself, “How fortunate am I to be able to have a parent or parents to take care of? How fortunate am I to have kids or nieces or nephews to take care of?” And so I really do think the way we think about things, there’s a Buddhist saying, “your thoughts become your words, then your words become your habits, then your habits become your actions, and your actions become who you are.” You just wake up and that’s who you are.
So it starts with how you’re thinking about things, and I think the difference between 47 and 57 for most people is they’re no longer taking care of those two generations, right? The younger generation’s out of the house, and on their own, and off the economics. The parents unfortunately are probably no longer with us. And you’re at your peak performance at work, you’re probably the highest you’ve ever been, and your 401k is bigger than it’s ever been. Of course you’re, you know, at that point, people are going to be happier. But if you’re focused on that destination, it’s going to be a sad life. You’ve got to be thankful for what you have and celebrate any wins along the way to avoid that U-curve, I think.
Jonathan: All right. I have one final question for you, which is what spending brings you the greatest happiness?
Peter: The spending that brings me the greatest happiness, by far, is making a difference for somebody else. That’s easily, and it’s not all altruistic, it’s very selfish, it’s a good feeling. I remember sitting with a client and they were, just really put an impression on me like 15 years ago, and they were taking care of everyone in the family. They’re paying for everyone’s school, did all this stuff. Their family was struggling.
No one in my family is struggling. My brothers do great, my parents do great, all of those things, but they were really able to help a lot of people make a difference. I said, “Does it really wear on you?” And she said no and she quoted something from Genesis. She said, “I’m blessed to be a blessing.” And I thought what an incredible way to think about it, right? If you want to be on the side that needs the help, that needs the basic services, or the food bank, or whatever, or do you want to be on the side where you can help be in a position to be able to help those people?
So that’s now, by far, the best. Now, I have the luxury, and I understand this, of course, that’s the best because the other stuff is covered. You know, when I was younger, the best thing was just being able to pay for my kids to be able to play the sports they wanted to play and those kinds of things. And as, you know, life progresses, what brings the most joy changes.
How about you, Jonathan? As a student of finance, education, happiness, all the writing you’ve done, all the speaking you’ve done, and just the life that you’ve lived, how has that evolved for you? Not just what do you think today, but how has what you, spending, what has brought you the most happiness then and now?
Jonathan: Well, unfortunately, I’m going to give a similar answer to you, Peter. I mean I do believe we’re here to serve others. Doing what I feel is good work, work that helps other people, that brings me joy. I mean it’s the reason I get out of bed every morning and immediately sit down in front of a laptop, and corresponding with people, and so on. I just want to be helpful.
And it’s, as you said, it’s not because I’m really looking forward to being a big help to other people, it’s because it’s what makes me feel good. There is a great pleasure in helping other people.
Peter: No doubt.
Jonathan: All right, Peter. It’s time for the tip of the month. What have you got for me?
Peter: Tying in with what we talked about, we all are thinking all the time about what we’re trying to accomplish. And every now and then, if you need to set it on your calendar, focus on how far you’ve come. Don’t just look at where you’re going but how far you’ve come. And a lot of people do a journal every day, where the first thing in the morning they write down three things they’re grateful for.
I don’t do that, but I do think it’s a good idea to at least think about every day some things that you’re grateful for. And I think that’s the beginning of planting the seeds towards a more fulfilling life.
Jonathan: So my tip of the month, as people approach retirement, they do all kinds of things. They check on their finances, you know, they make sure they get health issues dealt with while they still have their company’s insurance. They go to the dentist, they get the mortgage paid off. There’s all these things that people do in the run-up to retirement. I would add one more thing to your to-do list, because it may take a few years to put the pieces in place.
Think about what you might do to make a little money in retirement. Maybe you want to do some consulting, maybe you want some sort of home-based business. Whatever it is, think about it. You may decide in the end that you just want to cut the cord, retire and never work another day in your life. But I do think it is valuable for retirees to have some sense for what they might do to make a little bit of money once they quit the workforce.
It’s not simply because the money can come in handy, it’s because having that work can give them a sense of purpose. It can make their lives more fulfilling. It can ease the emotional transition from the workplace to retirement.
Peter: Good advice.
Jonathan: So that’s it for this month. This is Jonathan Clements, Director of Financial Education for Creative Planning. I’ve been talking to Peter Mallouk, President of the firm, and we are Down the Middle.
Disclosure: This show is designed to be informational in nature and does not constitute investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.
