Lifestyle items give short-term happiness. Experiences give long-term happiness
Can money buy happiness? The jury is divided on that, but my own experience and journey of financial freedom makes me believe that money can buy time and help achieve some happiness. But a lot depends on how you deal with your money.
Investors often spend so much time searching for the “best" investment product that can give the highest returns in the shortest period. With the continued bull market and low interest rates, investors are investing in high-return products, but without being fully cognizant of the high risk involved.
Investors also do not judge if they have the time and ability to manage these investments. I recently read about a group of investors who spent 10 years trying to get their money back from an art fund. While one may argue that these are high net-worth investors, would they really want their hard-earned money and time spent in fighting court cases? What if markets crash or the NCD (non-convertible debenture) defaults? Would investors want to use their resources in grievance redressal, or would they prefer to use the money to make life convenient, thus freeing up time?
Transaction costs and tax impact can add up and these are not being properly assessed by individuals in do-it-yourself (DIY) investing.
Wouldn’t it be better to leave money management to a mutual fund, which charges 1.5-2% or work with a financial planner who can structure your financial life?
A cost-benefit analysis would reveal that DIY investing in trending products or following social media influencer suggestions without proper asset allocation would be much more expensive than investing through an adviser.
While planning their financial lives, investors should spare a thought on how money can be better utilized on things that give them happiness and on how money can be used to free up time for these things.
A close friend in his 50s, exited his business and decided to stick with a simple mutual fund portfolio (on my recommendation!) as he wanted to spend time on teaching and golf. Even for those who are not financially independent, money and time can be spent on experiences rather than being stuck to the screen trading stocks. After all, it is time that is needed for experiences that can give happiness and build memories.
How can you take advantage of your money to buy time and happiness?
Make money work for you: Have you checked your finances at an overall level? Make a list of all your investments and if you have investments all over the place, start pruning down the smaller/underperforming/high-risk investments. Evaluate the risks in the instruments held. For example, if you have bought an NCD or an investment into fractional property, now that you are aware of the risks, exit if it is not as per your risk profile. Simplifying your financial life is a start to making money work for you. Next, work with a financial planner to structure your finances as per goals.
You spend freely for a high-end mobile or other luxury items regularly. Why not for your money? Do you scrounge on medical expenses? If not, why for financial advice, which can free up the most precious commodity—time?
Make a list of how you can use money better: Start with the chores and errands that can be outsourced. That will free up some time. Of course, spend on material things you have always wanted and don’t beat yourself about it. As long as you stay within your budgeted discretionary expenses and are not spending out of peer pressure, it is fine.
Lifestyle items give short-term happiness, as they become part of life soon. It is experiences that give long-term happiness. And experiences are not only about travelling, but they are also about your aspirations.
In the businessman’s case, he wanted to spend time golfing and that can be an experience.
A lot of these experiences will be over and above regular financial goals such as retirement and the education of children. Since they are essential for happiness, these need to be planned for meticulously.
Money may not be able to buy everything, but it can buy you a better life, help create good memories and stability, which makes finding happiness much easier.
The next time you invest, think about how the instrument allows you more time for a meaningful life.