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(Image: Bianca Cross)
(Image: Bianca Cross)

MoneyFebruary 7, 2022

Money can buy you (11 minutes of) happiness

(Image: Bianca Cross)
(Image: Bianca Cross)

It’s broadly agreed that people spend money to lessen suffering and increase enjoyment. But the answer to the age-old question isn’t so simple – unless, of course, you’re Jeff Bezos.

In the middle of 2021, Amazon founder Jeff Bezos travelled to space with three others in a rocket ship named “New Shepard”. Eleven minutes later, the group returned to Earth, having viewed the “pale blue dot” through the biggest set of windows flown into space. Bezos emerged with a cowboy hat on his head and, when asked afterwards for his reaction, exclaimed: “Oh my god!”

For a man whose fortune is worth an estimated $265 billion, it seems money did buy Bezos happiness – all 11 minutes of it. But is the answer to the age-old question the same for everyone else? A study in the US in 2010 looked at two main strands of what psychologists call “subjective wellbeing” – people’s everyday experiences of joy, fascination or anxiety, for instance, and their thoughts about their life overall. It reported that as Americans earned more money their satisfaction with life increased, but their day-to-day happiness plateaued once their annual income hit US$75,000. A decade on, another study seemingly found the opposite – life satisfaction rose across income levels, but Americans’ daily wellbeing continued to rise even after the $75,000 mark.

“With a lot of psychology findings, one study that questions another doesn’t necessarily mean a complete reversal of what we think is true,” says Amanda Wallis, a research lead at Umbrella Wellbeing, a specialist mental health and wellbeing service provider for workplaces in Aotearoa. But the latest science reinforces the idea that people spend money to lessen suffering and increase enjoyment. There are, however, some fundamentals: the ability to maintain a roof over one’s head, put food on the table, care for whānau and friends and connect socially with others, and the worry about meeting those obligations week in and week out, are “basic psychological needs and human rights, you might argue”, she says.

Having or lacking money can also make it easier or harder for people to feel in control over the direction of their lives – an insight supported by the 2021 money-happiness study results. in August 2020, the latest instalment of a long-running study of young New Zealanders’ health found symptoms of depression and rates of suicide attempts were generally higher among those living in lower-income communities, according to the Youth19 survey. Moreover, a quarter of nearly 8,000 secondary school students reported that depressive symptoms affected their daily lives – a rate that has almost doubled since 2012. The worsening mental health picture couldn’t be explained by one theory, the authors said, but among the many factors at play were young people’s future worries like jobs and housing. At the same time, the average incomes of 15 to 34-year-olds have risen in the last two decades; those aged 30 to 34 are earning as much as $5,000 more than the median for all age groups. By comparison, three in five Australian teenagers in 2020 reported feeling happy with their lives as they earn less while others’ incomes keep rising.

Umbrella Wellbeing CEO Gaynor Parkin and research lead Amanda Wallis (Photos: Supplied)

The human tendency to compare one’s position in life to another suggests people are never satisfied with what they have – a theory that psychologists call the “hedonic treadmill”. The emotional spikes experienced from major life events, like winning the lottery, losing a loved one or flying to space, or from chasing pleasure and enduring pain, don’t stick over time. Instead, people’s happiness tends to flatten out after each burst.

For young people, they grow up observing that having a well-paying job and owning a house are markers of success. And as they earn more money, they tend to start making friends with other high-earners, which makes them earn even more. It’s a very western model of happiness, says Umbrella Wellbeing founder Gaynor Parkin, who questions whether it’s useful. “Is it better to shift it around and say ‘how else do you get happiness and meaning and purpose in different ways?’”

The Covid-19 pandemic has highlighted and widened the gap between the rich and everybody else. More than 160 million people have been forced into poverty and the incomes of 99% of people have fallen, according to Oxfam. And the fortunes of the world’s 10 richest men – Bezos among them – have more than doubled to $2.3 trillion. Moreover, rising inflation is making goods and services more expensive and making wages and salaries worth less.

Parkin describes the pandemic’s effect on the wealth gap as “hideous”. Sure, some of the super-rich have asked governments around the world to tax them to help bridge the inequality and fund governments’ responses to Covid. But in the case of Elon Musk, Bezos and Mark Zuckerberg getting unthinkably richer, “that made me feel a bit sick. That’s so not all right,” she says. “In any decent society, we must prioritise everyone having enough” – only then can whānau and individuals look to define happiness, not just for themselves but for their communities.

The pair agree that money is better seen as a means to an end, rather than an end in itself. People who earn more have greater, even better options, while those on lower incomes can still spend what they earn on what they care about. But Wallis acknowledges those situations are over and above the daily struggle that some people have of just trying to make ends meet. “I’m careful not to say ‘be grateful’,” she says. “It’s trite advice for people who are struggling to survive because, in that case, money can be the answer to feeling better.”

So, can money buy happiness? “It can, but it’s likely to be really fleeting,” Parkin says, before wondering whether the founder of Amazon is truly happy. Bezos’s trip to space was “probably pretty exciting, but I bet if we zapped into his world and asked ‘are you happy?’, I don’t know if he’d say he is. He might say ‘I need a bigger jet’.”


Follow When the Facts Change, Bernard Hickey’s essential weekly guide to the intersection of economics, politics and business on Apple Podcasts, Spotify or your favourite podcast provider.

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Oh no (Image: Tina Tiller)
Oh no (Image: Tina Tiller)

MoneyFebruary 6, 2022

Why your financial New Year’s resolutions have already failed

Oh no (Image: Tina Tiller)
Oh no (Image: Tina Tiller)

Everyone wants to be better with their money, and it happens one step at a time.

If you made a resolution on the first day of 2022, chances are you’ve already given up on it. So say the University of Scranton researchers that found 80% of new year’s resolutions in the US don’t stick. Their study over two years revealed that nearly a quarter of participants ditched their enthusiastically penned resolutions – those golden nuggets designed to transform their lives – within the first week of January, and just 19% made them last beyond two years. 

Why do resolution revolutions crash and burn?

Psychologists have touted a tonne of reasons for why our freshly minted listicle resolutions don’t work. Setting a goal using an arbitrary date – like January 1 – doesn’t automatically mean there’s an unwavering conviction for creating meaningful change. The cognitive bias of a “fresh start”, one aimed to separate us from our past perceived failings, can quickly become a burden that eats into our precious time. And we can be time blind, believing the illusion that having a whole new year ahead means we have more time in our lives than we realistically have. 

Then there’s setting resolutions in areas of our lives that we think we should want to improve but are not genuinely committed to. Or we craft audacious goals without a plan packed with easy, achievable milestones – including planning for potential slip-ups. It can become overwhelming, and the new year’s resolutions can be quickly trashed.

Stop making it so hard and embrace being crap

None of this comes as a surprise to TEDTalk alumnus Christine Carter, the sociologist behind the one-minute trick to forming new habits (not as impossible as it sounds). The self-confessed “go big or go home” high-achiever found a way to forge a path through her own challenging resolutions. It started by her accepting that when she starts something new, she might just be a bit crap at it

Carter learned by doing and failing. No sooner had she set her “big, juicy goal” to train for a half marathon during March 2020 stay-at-home orders, she was bunking off her own training schedule. Why? Because she hadn’t been willing to be bad at it, she’d only been willing to be very, very good – to be an athlete – so her perfectionism became her greatest hurdle. 

So, on the days when motivation escaped her, Carter donned her shoes and ran for just one minute. She reasoned that one minute of minimal effort was still better than no effort at all. 

Mistakes can still lead to changing a habit

The key to changing a habit is knowing that one misstep needn’t signal permanent failure. Think about toddlers learning to walk – they don’t just fall once! That same Scranton study showed that of those who stuck to their resolutions, 53% slipped up an average of 14 times, but 71% concluded that their mistakes made them even more determined to reach their goals.

Topping a CBS poll for 2022 resolutions were, unsurprisingly, health and finance, and Carter’s one-minute principle works for both. When it comes to investing, creating new habits – especially using the one-minute daily tactic – can be simpler than you think. It can be applied to the practical tasks, like signing up for just one investing newsletter or blog, following a couple of investing social media accounts, scanning news articles about companies or trends that interest you, or signing up for an investing account so you can make your first investment. Many of the tasks or habits can be simple and quick.

Mistakes might be part of the journey

Do gear up for mistakes because you’ll probably make them; the best investors do! Our investors tell us they’ve made five main mistakes (and learned from them along the way). They’ve fallen for Fomo investing – where they’ve made irrational decisions based on the fear of missing out rather than reading up on a company or fund’s performance and plans. This can lead to inflated share prices of fad stocks and the potential to lose money when the bubble bursts. 

Some have fallen into the trap of believing that researching a company or fund is hard. It doesn’t have to be! Everything’s a Google search away – you can do it relaxing on a hammock from your phone! There’s plenty of information freely available from company reports, websites and media dedicated to the share markets and a tonne of blogs by experienced investors, analysts, and financial advisors talking about the top investing trends.

Other traps can be trying to time the market or day trading – both are proven time and time again to not work. These rely more on luck than anything, and trying to guess when a share price will rise or fall can be like gazing into a crystal ball. A good alternative for many people might be to consider the long game. This leads us to emotions: and how to keep them out of investing. There’s no need to panic buy or sell or let fear or greed guide your decision making. Instead, create a plan and stick to it. And let the share market ride out any ups and downs – because history shows us they usually do.

And the top mistakes investors tell us they’ve made is not starting to invest sooner or believing they did’t have enough money to get started. Time can be the secret sauce when it comes to investing, so the more of it you have , the longer the opportunity for compounding growth to work its magic. Your first investment can be small too. Start with the cost of a meal out and call it learning money, because, as investing legend Warren Buffett says, “the most important investment you can make is in yourself”.

Take your most important next step

As the saying goes, the best time to invest is yesterday, the second best time is today. So instead of growing a garden, why not just plant a seed? Line up your goals, make a plan and then take one very specific, infinitesimal, but important next step. 

Kristen Lunman is CEO and co-founder of Hatch, the digital investment platform that gives New Zealanders access to the US share markets. 

This article is for information only and is not financial advice. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. And remember, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

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