Financial Independence Is A Byproduct Of Mindset is a series in which I provide a detailed explanation of what I would tell someone if they asked me “Zach, how do I achieve financial independence?” Throughout this series I make the point that obtaining financial independence is simply a byproduct of having the right mindset. Once you have the necessary mindset, financial independence occurs naturally.
In part 1 of this series I covered the first step someone must take if they hope to achieve FI some day: develop a personal philosophy. Once you have a personal philosophy, the next step is to gain an understanding of human psychology. Psychology is the study of the human mind and how it is related to human behavior. There is an immense amount of research in this field that offers insights into what makes us happy, the most common fallacies of finding happiness, and explanations for excessive spending and consumerism.
To Be Happy
If you ask a complete stranger what is the one thing they want in life they will likely say “To be happy”. This is a universally shared goal. Deep down we all just want to be happy. The problem, however, is that as humans we are notoriously awful at predicting what will make us happy. We think that if we can just land job X or get admission into school Y or earn a salary of Z then we will finally achieve the ever-elusive happiness and fulfillment we have been seeking. But more often than not, when we do achieve X, Y, or Z we find that this doesn’t bring us everlasting happiness or solve all our daily problems, and we are left wondering why this is the case.
One of my favorite quotes of all time regarding happiness is by famous comedian and actor Jim Carrey:
“I wish everyone could get rich and famous and have everything they ever dreamed of so they would know that’s not the answer.”
Spend, Spend, Spend
The biggest problem with not understanding what will make us happy is that we attempt to find this happiness through spending. We buy houses and cars and gadgets and smart phones and sneakers (guilty) and move to new cities and spend, spend, spend but still never find the overflowing fountain of happiness we think must be hiding behind the next purchase.
Luckily, psychologists have uncovered the reason why this constant consumption doesn’t make us happy. The idea is called the hedonic treadmill. It’s the tendency of humans to make a purchase, experience a short term increase in well-being, and then quickly return to the original level of happiness and well-being they were at before the purchase. When we buy something we actually do get pleasure from the purchase and it genuinely does bring us immediate happiness, but the problem is this happiness doesn’t last nearly as long as we expect.
Adaptation – A Blessing and a Curse
The underlying problem is that as humans, we adapt to our environment and circumstances alarmingly quickly. From an evolutionary standpoint this is good – it means we find ways to adapt to our climate and overcome tragedy and loss and despair. In fact, we are great at overcoming misfortune and hardship over the long term.
But this trait is a double-edged sword. Just as we are able to overcome hardship and return to a baseline level of happiness despite misfortune, we also return to this baseline level of happiness after life blesses us with positive experiences too. Our happiness and well-being spikes upwards after making a new purchase. Buying a new outfit is a thrill. Putting a down payment on a home is exciting, it represents a new chapter in life. Purchasing a new car is exhilarating, and it offers us the opportunity to post about it on social media and pat ourselves on the back for making an awesome purchase that brought us happiness.
But over time we find that we return to a similar level of happiness we were at before making these purchases. So what is the underlying reason behind why these purchases don’t permanently increase our happiness and well-being? The field of human psychology gives us a sensible explanation: It’s because we are still the same person. Nothing about us has changed, we simply own more stuff.
But the reality is: Stuff is stuff.
Stuff might be useful and add value to our life in some way, which is great, but over time we become accustomed to it. We begin to take it for granted and just as quickly as we made a purchase, we are back on the prowl for something else to buy. It’s a never ending process. It is a treadmill. No matter how much you buy you will still be running towards the next purchase in search of the thrill.
Where Is Happiness Hiding?
So if stuff doesn’t bring us happiness, what does?
Fortunately, psychology has found the answer to this question as well. Countless research studies on the nature of happiness and well-being have shown that there are two major qualities the happiest people in the world all share:
1. Close relationships with people around them
Humans are social by nature. Whether you are introverted or extroverted, it doesn’t matter, everyone needs some type of interaction with other people on a regular basis. But an interesting discovery made by psychologists and sociologists alike is that we not only need relationships with people around us to survive, but we need them to thrive.
When we fall short in life we need a support system to help us get back on our feet. We need to know that there are people in our lives who can help us celebrate our victories and also overcome our struggles. Another fascinating discovery that has shown up time and again in research studies is that regular human interaction actually improves physical health and strengthens the immune system, making us more likely to fight off disease. So not only do close relationships help us emotionally and psychologically, but they’re also vital to our physical health.
One of the most eye-opening books on the psychology of happiness is The Village Effect by Susan Pinker. In the book she explains how having close relationships with people around us and forming a personal “village” we can rely on and interact with on a daily basis is the number one predictor of longevity, happiness, and health.
So no matter your net worth, no matter your situation socioeconomically, no matter where you are in life, if you have close relationships with people around you that you can count on, you are far more likely to find happiness and well-being in life.
2. Freedom to do work they find meaningful on a regular basis
Outside of having a strong social circle, the next strongest predictor of happiness is the degree to which you have freedom to do work you find meaningful on a regular basis. The unfortunate truth is that the majority of people are in a situation where they must go to a job they don’t love 5 days a week because they’re in a situation financially where they are completely reliant on a job to pay their bills.
But studies in psychology have shown that in order to thrive in life we need to be able to do work we find meaningful that we believe has an impact on the world. It’s important to note here that what you consider to be meaningful work might be different than what someone else considers meaningful. One of my favorite tales that illustrates this point is as follows:
Once there were 3 bricklayers. Each one of them was asked what they were doing.
The first man answered gruffly, “I’m laying bricks.”
The second man replied, “I’m putting up a wall.”
But the third man said enthusiastically and with pride, “I’m building a cathedral.”
The third man found a great deal of meaning in the work he was doing, while the other two men did not. But that’s okay! Not everyone finds the same meaning and value in the
same type of work. The important thing here is to find what brings you happiness. It doesn’t matter if someone else would enjoy doing the work you do, because we’re not focusing on their happiness. We are focusing on yours.
The Great Contradiction
Let’s recap what we think will make us happy:
Let’s also recap what has been shown to actually make us happy:
1. Strong relationships
2. Freedom to do meaningful work
There’s something amazing to be seen here. What we think will make us happy costs a lot of money. What actually makes us happy costs nothing. Of course I’m simplifying things greatly here. There is some stuff worth having and there are certainly some costs associated with finding freedom to do work we love. But ultimately we need to spend way, way, way less than we think to find this elusive happiness we are all seeking.
In addition, seeking stuff as opposed to seeking relationships and freedom are in direct contradiction to each other. The more time we spend accumulating stuff, the less time we have to spend working on building relationships. Likewise, the more money we spend on stuff, the worse off we are financially, thus making us more dependent on a job for income and as a result less freedom.
Even if becoming financially independent isn’t a goal of yours and all you care about is living the most amazing, meaningful life possible, the best way to do this would be to build up relationships with people around you and strive to gain the freedom necessary to actually do work you enjoy. The natural byproduct of these actions is financial independence in the long run.
Read Part 3 here.
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