2019 Q1 Quarterly Newsletter & Performance Report
The Money & Happiness Edition - Our First Quarter Report
“What's the use of happiness? It can't buy you money.” - Henny Youngman
Throughout the ages, the relationship between money and happiness has been pondered by theologians and philosophers as well as anxious souls and corny comedians.
Today financial planners have a say about money and happiness, an implied theme inseparable from the planning process. Money is loaded, much of it good in a proper perspective.
Consider this: after meeting basic needs, how should one spend his or her money toward wants and wishes? Which expenditures might provide the greatest pleasure, meaning, impact, or enduring memories? With a little help from social science, the question is less amorphous.
A Princeton University study shows happiness grows significantly with increases in income up to $75,000. In California, with a higher cost-of-living, the threshold is $95,000. Beyond that, additional income shows little to no effect regarding happiness. As subsistence fears subside, other values emerge in one’s quest to be happier - strong personal relationships, social connections, and a sense of purpose. This dynamic is analyzed in Maslow’s Hierarchy of Needs, a popular theory for understanding motivation.
Entire nations are also measured and compared for well-being or happiness. Notably, the Himalayan nation of Bhutan treasures its Gross National Happiness index more than its Gross National Product.
Though the world’s wealthiest nation, the U.S. ranks mid-range for well-being, or happiness, among the 34 nations belonging to the Organization for Economic Cooperation and Development (OECD). Nordic nations receive top marks for happiness. Americans, according to international experts, will be happier if they work less, spend more time with friends and family, and become more engaged in organizations and communities - just what the Boy Scouts and Girl Scouts have been preaching all along.
Despite the universal axiom that money can’t buy happiness, some expenditures make you happier than others. Experiences rank above the acquisition of objects. For instance, a trip to Chile instead of a new smartphone is far more memorable and likely to remain “special.” Traveling, attending a concert, or even shopping at a mall ranks as a happier experience when done with others. An even bigger boost comes when spending on others, especially those closest to you.
At the individual or family level, where you and I have choices, there is the written financial plan. Through an interactive approach, our clients can calculate their degree of financial freedom - how much they can spend on what matters most to them without fear of outliving their money. With one hour of a client’s time and with basic personal data, our office can demonstrate the degree of choice and financial freedom. Typically, it is greater than what clients previously assumed.
To prepare a plan, our staff inputs the client’s financial profile (income, debt, assets) and his or her wish list (travel, car, vacation home, etc.). We then quickly test various “what if” scenarios, such as, “What if I retire in five years instead of 10? I want to travel abroad every year but want to be prepared for long-term care needs.”
Drawing on historical investment data, we are able to compile easy-to-understand projections that show how well the nest egg is likely to hold up over time. One’s personalized plan, which can be updated periodically, should create grounded confidence regarding spending and gifting whether it takes the form of travel, vacation home, a worthy cause, or family member’s education. These are then treated as possibilities, not mandates.
As charitable giving is a growing focus within our practice, more clients have had the personal satisfaction of making gifts during their lifetime, rather than leaving them as bequests. Prior to expanded generosity, of course, the client must be confident of not outliving his or her money. The financial plan provides guidance here as well.
At Hanke & Co. Wealth Management, we often say good financial planning changes lives. And we have seen it, one client, at a time. Through easy-to-do financial planning, clients better understand the full measure of their financial freedom. We are willing to speak with anyone considering the benefits of this process.