This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.
Life can be complicated, can’t it? There are so many distractions, sometimes it’s hard to keep focus on the main objectives of life, one of which surely must be to maintain our wellbeing.
Being happy doesn’t come easily. It takes work and nurture. We need to actively ensure that we spend our time and money promoting the things that will bring us joy.
Some of these things are fairly obvious – a roof over our heads, food on the table, good health, love, and kindness.
Some are less obvious. Indeed, some are actually part of the problem, things we think will bring wellbeing that turn out to be false objectives, like a bigger house or an expensive car.
There is one particular piece of research, however, that reveals the secret to a happy life, something that has been shown to be the main contributor to our long-term wellbeing. It is the thing on which we should surely focus our time and money, and, as a result, our financial plan.
The Harvard longitudinal study
Researchers at Harvard University asked a cohort of young people – some of them Harvard students, and some from poor areas of Boston – what they thought would make them happy as they went through life.
Overwhelmingly, these young people reported two anticipated sources of wellbeing: money and fame.
The researchers then went back to those young people every two years. They asked them how happy they were, and what factors were helping or hindering their wellbeing.
They have been doing so ever since, for the last 80 years or so. They brought on new cohorts, and so now have a huge bank of information about the contributory factors to a happy life and long-term wellbeing.
The secret to wellbeing
Perhaps unsurprisingly, those who became famous reported no higher levels of wellbeing than those who did not. What may be more of a surprise, however, is that those who became wealthy also reported no greater levels of wellbeing than those who were not wealthy.
There was, however, one overriding factor that affected the levels of wellbeing – the quality of their social relationships.
Note that it is not the quantity, but the quality.
Those who reported high quality levels of social relationships were happier than those who did not. This even ran so deep that those who reported being lonely often died younger.
The application to financial planning
Buying a luxury item might make us happy for a while. However, it is unlikely to have a significant impact on longer-term wellbeing. If owning bigger and more things is not a source of wellbeing, but quality of social relationships is, how does this impact our relationship with money?
The key question of financial planning is: how much is enough? This Harvard study tells us that we need to extend this question – how much is enough, and for what?
One of the keys to increasing financial wellbeing is having a clear path to identifiable objectives. What are those identifiable objectives that your financial plan aims to make real? Do they include any references to the quality of your social relationships?
In practical terms, this might be a trip to visit friends or loved ones living far away. It could be moving to a four-day week to spend more time supporting a charity or other organisation you are involved with. Or you may change jobs to one that pays a bit less, but allows you to walk the kids to school and tuck them into bed at night. I’m sure you could think of many other examples.
With so many distractions and complications, it is so easy to get distracted from the main contributor to our wellbeing. This is what your financial plan is actually for. To create that clear path to identifiable objectives, and then to review progress regularly. In this way, you can ensure that your financial plan is helping you to focus on the things that are the secret to happiness.
You can read all about the Harvard study on happiness in the book The Good Life by Robert Waldinger and Mark Schulz.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients