The post that considers the trade-off between earnings and happiness. Where do you fall on the happiness v money debate?
Last week I posed the question of whether you need money to be happy.
I concluded that I did. Not because money makes you happy. But because I, at least, can’t imagine achieving the peaceful state of mind that I associate with happiness without having money. Not having money can certainly make you unhappy. This is not exactly earth-shattering stuff.
What I was really saying is that not being shackled to work makes me happy. Research for the charity Mind found that work was the biggest source of stress, with over 34% of those surveyed saying their work life was stressful. This compared with 30% saying they were stressed by their financial situation.
So take work out of the equation (or at least, the obligation to work) and life gets a lot better. But for that you need money. You need financial independence.
Happiness on the Path to Financial Independence
Then I started to think a bit more about the correlation between happiness and money. Yes, if you’re living in a comfortable retirement I’d say chances are (underlying mental or physical health issues aside) you are likely to be happy.
However, on the path to FI many of us make a compromise – go for a job that pays better to get to FI quicker, even though this often comes with higher levels of stress (and therefore unhappiness).
This has caused me to create what I call the Contentment Matrix:
Here are the quadrants…
The ultimate goal. You’re making no sacrifices here because you are both happy and financially well-off. People in this category will either be those lucky individuals who have a well-paid job that they love, or they have got themselves to the point of a comfortable retirement.
The place where people do not want to find themselves. Badly paid in a job you hate.
Many of us, during our working career, will not be lucky enough to achieve green and are fortunate enough to avoid getting stuck, without hope of change, in the red.
Instead, we have to choose between the blue and the yellow quadrants….
This is where many people who are pursuing FI will find themselves. You earn more now in order to achieve FI quicker. But your well-paid job might not make you particularly happy.
Others have more of a “live for today” attitude. They have found a job they enjoy, which may not pay that well, but they don’t mind. They may retire later, but as they are doing a job they like, even love, that sits OK with them.
It’s fair to say that on the whole there will be positive correlation on the Matrix between happiness and money. You’re not likely to find many people that place themselves in that bottom right corner – living in abject poverty yet couldn’t be happier.
But within the more moderate options where do you place your happiness v money philosophy?
Points to note about the Contentment Matrix
The Contentment Matrix is subjective
These are subjective measures. The money axis is not assuming that at the top is a Jeff Bezos level of wealth. It is all about what level of income you have settled on and what you could attain. This will be different for different people.
The happiness axis is also subjective. You don’t have to be telling yourself, “Well my family and I are in good health and live in a wealthy country so I can’t really complain, I guess I must have to be high on the axis.” This is about your frame of reference and relative to your exeriences.
Another annoyingly middle class concept?
I accept that the idea of having a choice in your career and salary is a bit of a middle-class approach.
As I say, the money axis is subjective; the top of the axis is the maximum that you could earn. If the maximum you could earn still leaves you in poverty then this is all a bit of a pointless exercise as the yellow is not materially different to the red.
I do appreciate that for some there is a ceiling as to what they can earn (whatever personal finance gurus on Twitter may tell you about just needing to pull yourself up by your bootstraps).
Happiness is only measured in so far as it is linked to money
There are many things that can cause unhappiness that have nothing to do with money: bereavement, mental health, physical health. The Contentment Matrix only looks at happiness to the extent that it is governed by income.
Where do I fall on the Matrix?
Let’s use me as an example.
My current situation
At the moment I’m firmly in the yellow. Probably something like this:
Again, the money axis is subjective. In my profession in general there are people earning a lot more than me. But in my particular practice area, at this point in my career, I’m relatively near the top of my earning potential, so I’ve put myself quite high on the money axis.
Not so high on the happiness axis though.
What if I went part time?
No doubt some people will be asking why I am choosing money over happiness? Why not strive for more happiness in the short term?
Firstly, I should point out that, as for many people, my happiness “score” shifts and it’s quite difficult to determine an average. I’m writing this during a period of extended discontentment at work, so that is influencing where I place myself on the graph.
If you find yourself constantly near the bottom end of the happiness axis, then that’s when there is a problem that needs addressing now, such as in this sad case, which really chimed with so much we talk about in the FI community.
I often think about requesting part-time working or moving to a lower paid, but less stressful workplace.
One would hope that this would cause my Matrix to look something like this:
But what if it doesn’t? What if all I do is push myself further down the money axis with no change on the happiness axis? I’d be sacrificing a lot of years of retirement, which could jeopardise my happiness in itself.
As things stand, I don’t know what will make me happy. If I find my calling in a lower paid job that I’d happily do until I’m 80, then sure, bring on the blue quadrant.
For now I choose the yellow quadrant in order to speed up my access to the green quadrant.
So obviously I’m hoping that when I reach my financial independence/early retirement goal I’ll be in the green. Somewhere here:
For some, FI (and certainly early retirement) will be a blue quadrant thing. They accept much less money than if they were working in order to boost that happiness score.
This is where things can become subjective even within the life stages of a particular person. I am aiming to be slightly into the green because at FI I will have no mortgage so my expenses are way down. Although I’d probably have less income in pure money terms than in the part time job scenario above, I’ll feel richer as I have everything I need (financially) for a happy life.
Where do you lie on the Contentment Matrix? Are you prioritising money or happiness whilst you are working?