Step 1 - Happiness

Optimizing for Happiness

There are few elements so common to the human experience as the quest for happiness. No matter what stage of life you are in, what financial situation or where in the world you live, happiness is your goal. And financial independence, at its core, is just that, a quest for happiness. The trite expression is that money can’t buy happiness. That’s true, but what money can buy is peace of mind. Money can buy stability. And most importantly money can buy time. And it is these things that money can buy which open the door to finding true happiness.

Happiness is an ever present theme in the journey for financial independence. From beginning to end, it is one of the most important considerations that you must take into account. So if you are just beginning your financial independence journey, it is important that you take time to figure out what it is that makes you happy. Let’s take a look at some of the ways happiness plays into the story of your financial independence.

The first place most people start in analyzing their finances, and where I recommend you start, is your spending. Controlling your spending is the fastest change you can make to impact your finances. You can’t get a pay raise overnight, you can’t see an immediate return from and investment you make, you can’t cancel your debt instantly, but you can make the choice not to spend at any moment. So how is happiness relevant to spending? Because every time you make the choice to spend money, the evaluation you need to make is: is this spend going to make me more happy than any of the other things I could do with this money? What is the happiness return on this investment?

My wife and I discovered the concept of financial independence in early 2019, and the prior fall we had made plans to get a patio put on the back of our house. We picked a great contractor and designed a beautiful space, but it didn’t come cheap. We had the savings to cover it, so that wasn’t a huge concern, but since the work wasn’t going to start until the spring we decided we would try to save up in the interim so that we didn’t have to dip into our savings at all. We were able to do it, but in essence, it took us about 9 months to save up what it would cost to have this patio put in. Once I discovered financial independence I immediately began questioning whether that was the right choice. My wife and I effectively traded 9 months of our lives for that patio, not to mention the compound effect if we had invested that money instead. So was it the right choice? Some might say it wasn’t but I think the jury is still out. Our kids are young and I think we have a decade or two of continuing returns of happiness out of that spend ahead of us. So in the end, our happiness ROI may not be too bad.

The fact that I may judge such an exorbitant expense as justified makes an important point. Each person has their own take on what brings them happiness and what is worth a given expense. What might be the right decision for me might not be right for other people. And that is what makes this such a personal journey. No one can tell you what you should and should not spend money on. There might be general recommendations that you can follow or suggestions on how to get comparable products for a lower cost, but ultimately it is up to you to decide what is worth it to you.

The same goes for earning income. When my wife and I discovered financial independence we began hustling. Hard. Despite having two young children, we started about four simultaneous side hustles/businesses and did a first pass investigation of about three others. Why would we do something so crazy? First, because we knew most of them would fail, so if we tried a bunch all at once hopefully one would take. But more importantly, we didn’t know what kind of side hustle we would bring us happiness. We wanted to try out as many different side hustles as possible so that we could find the one or two that brought us the most happiness. Then we could focus on those and put in more effort.

And rounding things out, when it comes to the retirement portion of FI/RE. While you may be thinking you would like to sit around and do nothing at all, it is likely that what you mean by “doing nothing” isn’t literally sitting and doing nothing. Ok, maybe for a few weeks it would be sitting and binging Netflix, but after that you would likely get bored and want to get out and do something. And likely it would be something to bring yourself happiness. Whether it is volunteering or starting your own business, there is something that you want to be doing.

The funny thing about the financial independence community is that many seem to feel there are rules that need to be followed as to how much you should save and how much it is ok to spend. But some people may discover financial independence and find that the savings rate that works for them will mean that they need to work 40 years before they can retire. I say that if that is where they find they are most happy, then I support that person 100% in their decision. There is no right or wrong way to go about this. If I tap into my engineering background, I see it as an optimization problem. There are many variables at play, but no single right answer. We simply search for the most optimal outcome. And since this is a personal journey, everyone’s answer is going to be different. So start thinking about what it is that makes you happy. What are the things that truly bring you joy in this world?