Finding a different type of happiness

  • Article by: ROSS LEVIN
  • Updated: July 24, 2010 - 9:28 PM

Humans tend to remember what they've done but tend to forget why exactly they did it.

Several years ago, we were sitting around our office on a beautiful late spring day talking about how nice it would be to give the people in our company every other Friday off in the summer. Once we determined that we could adjust client coverage to make it work, we offered it up. It not only turned out to be a terrific thing for that summer, but, even though we didn't intend this, it became a permanent company benefit.

We often don't realize that when we spontaneously do something, the lingering effects can be pronounced. Just try getting out of that brutal book club where nobody reads the book but endlessly meets anyway. Or that special charitable donation you made when a friend was involved in the organization that's now become a permanent part of your budget.

"We humans have a very poor memory of our past emotional states ... but we do remember the actions we've taken. We make short-term decisions that can change our long-term ones," writes Dan Ariely in his book "The Upside of Irrationality.''

Over the years, several of our clients eventually dumped those really cute convertibles that they'd bought on an impulse for autumn drives. Their tune changed when they added up their year-round costs. One of our clients bought a time-share after a daiquiri-laden-and-sunset-filled presentation overlooking a beach in Mexico. The hangover from this purchase has lasted a decade. Every year they have costs on a place that they now have grown to hate yet are having a difficult time unloading.

That lingering effect can be more subtle. For example, if you pulled a bunch of money out of the stock market at the market lows only to go back in at higher prices, you may be inclined to jump out again at the first sign of trouble. By originally acting on your fear, you learned behavior that has negative long-term financial implications. Instead, you need to override your cascading emotions to establish coherent rules for when you buy and when you sell.

We also tend to exaggerate the lasting impact that something may have on our lives. One client took a great job in Florida where the couple built their dream home. His job disappeared when the economy tanked. The couple was angry, frustrated, and scared. The picture of their lives changed. They had to take a big loss on their house and move to a part of the country that held no allure for them. Yet they have now adjusted and joined a new community. They have a different type of happiness than what they imagined.

Ecstasy and misery don't last

Ariely's studies show that "even if you feel strongly about something in the short term, in the long term things will probably not leave you as ecstatic or as miserable as you expect." This is because we "usually forget to take into account the fact that life goes on and that, in time, other events (both positive and negative) will influence our sense of well-being."

This concept is extremely important for those of you who use purchases as an analgesic for what may ail you. We often adapt to what we buy so that we no longer feel the way we did when we bought it. One of our clients is a very successful professional who would work intensively for long periods and then shop almost as fiercely during her brief breaks. In many ways, the shopping served as her outlet from the focus on her less and less interesting career. The problem was that by consistently spending the rewards of her efforts, she was stuck in this less fulfilling job. Her success decreased rather than increased her options. Only after we were able to focus on paying down debt and building up money outside of her retirement plan could she focus on the possibility of doing something less lucrative yet more rewarding.

A friend was describing how he helped move his daughter across the country so that she could start graduate school. She had eight boxes, a bike and a mattress. She felt the move was overwhelming. My friend suggested that she remembers this feeling as she continues to add things to her life.

Most of us already have the objects that we really need. Years from now, we will be talking about the family trips, not the living room couch. Be it a camping trip or a vacation to Europe, it is the experiences that stay with us. Heck, maybe you can even apply this insight on a Friday off.

Spend your life wisely.

  • Ross Levin is the founding principal and president of Accredited Investors Inc. in Edina. He is a certified financial planner and author of "The Wealth Management Index." His Gains & Losses column appears on the fourth and fifth Sundays of the month. His e-mail is ross@accredited.com.

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