The difference between your reality and your expectations dictates your happiness

Recently, I was listening to a podcast which featured Morgan Housel (the author of The Psychology of Money). During the interview Housel made many insightful comments about wealth, greed and happiness.

His book states that your personal experiences can drastically alter your perception of the world. For instance, if you grew up relatively poor then you could be more likely to value savings and fear debt. Or maybe you had a mortgage back in the early 1980s and you remember the pain of high interest rates (back when a 5-year fixed cost over 19%!). Conversely, the past 18 months might have been the first time those born in the 1990s have ever even considered the effects of inflation.

One story Housel mentioned was about famed physicist Stephen Hawking. When he was diagnosed with ALS shortly before his 21st birthday the doctors told him he would be dead within two years. With that, Hawking’s expectations instantly dropped to zero. Nearly 50 years later, he stated that it was due to those lowered expectations that led him to be so happy later in life. He ended up living to the age of 76 and everything after age 23 was a bonus!

For those of us that are fortunate enough to have reasonable health, reasonable income and reasonable comfort, it is natural to strive for better. However, short-term gains do not necessarily result in lasting happiness as humans tend to constantly adapt to our current circumstances.

How does this equate to personal finance? Well, if your expectations grow faster than your income, you will never be pleased with your situation. Furthermore, if your spending increases in lockstep with your income, you will never get ahead financially.

Unfortunately, thanks perhaps largely to the pervasiveness of social media, we went from trying to keep up with the Joneses to trying to keep up with the Kardashians. This is not a healthy mindset! Material possessions do not result in lasting happiness. Sure, it may be fun to unbox the latest iPhone, but do we really need a phone “forged in titanium”? The joy that new toy brings is fleeting; however, the accompanying payments may last for years.

While it is not necessary to take on a minimalistic view, it is important to be grateful for what we have and appreciate that more is not always better. Supposedly, when John D. Rockefeller (the first billionaire in the US and once the richest man on Earth) was asked by a reporter “How much money is enough?” he answered, “Just a little bit more.”

When it comes to investing, the takeaway should be to keep your expectations in check, understand your risk tolerance, be careful with leverage, create a plan in calm times and be committed to stick to that plan when uncertainty may cause others to act irrationally. After all, merely average returns compounded over an above-average period of time can lead to fantastic results.

• -Ryan Secord, Senior Mutual Fund Advisor

Ryan Secord is a Senior Mutual Fund Advisor at Endeavour Wealth Management with iA Private Wealth Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.

This information has been prepared by Ryan Secord who is a  Senior Mutual Fund Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Senior Mutual Fund Advisor can open accounts only in the provinces in which they are registered.

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