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In the movie Shrek, there’s a scene where Shrek and Donkey have to rescue a princess from the highest room in the tallest tower of a castle guarded by a dragon.
Instead of attempting to fight the dragon directly, the two take an unorthodox approach. Donkey distracts the dragon while Shrek fetches the princess and carries her down the stairs to the ground level where they eventually make an escape.
On their way down the stairs, the princess hears the dragon roar in the distance and is shocked to find that Shrek bypassed fighting the dragon altogether.
“This isn’t right! You were meant to charge in, sword drawn, banner flying. That’s what all the other knights did,” she exlcaims.
Shrek laughs and points to the remains of the other knights who tried to fight the dragon.
“Yeah, right before they burst into flame.”
Shrek didn’t use the tactic that he was supposed to use to rescue the princess, which is exactly why he got a different result than the other knights.
This scene offers a nice metaphor to personal finance.
The Traditional Approach
For most of my childhood, I grew up thinking that a high income was the main ingredient in the recipe for a good life. After all, a high income would allow me to buy all of the things that would bring happiness: a nice house, a nice car, nice clothing, and all the other stuff that was needed to live a good life.
I assumed that the good life was locked up in the highest room in the tallest tower and all I needed to do was earn a high income so I could buy all the stuff I needed and slay all of my material desires. If I could simply buy everything I desired, then surely I would be happy.
Essentially, I grew up believing the “traditional approach” was a tried-and-tested approach to lead a good life:
1. Earn a high income.
2. Use that income to buy all the stuff I desire.
3. Enjoy the good life.
This is why, once I started researching the psychology of happiness, I was so surprised to find that earning a lot of money and buying all of the things one desired was actually not a proven path to a good life.
William B. Irvine shares in A Guide to the Good Life:
“Throughout the millennia and across cultures, those who have thought carefully about desire have drawn the conclusion that spending our days working to get whatever it is we find ourselves wanting is unlikely to bring us either happiness or tranquility.”
The simple explanation: often when we finally acquire that thing we desired for so long, that thing suddenly loses its appeal and we become used to it quite quickly.
The new house, the new car, and the new shoes all become ordinary once we own them and we eventually slide back down to our baseline level of happiness.
“We humans are unhappy in large part because we are insatiable; after working hard to get what we want, we routinely lose interest in the object of our desire. Rather than feeling satisfied, we feel a bit bored, and in response to this boredom, we go on to form new, even grander desires.”
Fortunately, I learned that there’s an alternative path you can take, one which doesn’t involve fighting the dragon face to face in order to reach the good life hidden in the highest room in the tallest tower. It turns out that you can, just as Shrek did, bypass the dragon altogether.
The Unorthodox Approach
If getting all of the things you want isn’t a proven path to a good life, perhaps simply wanting the right things in the first place is a better strategy.
Irvine shares in A Guide to the Good Life:
“A much better, albeit less obvious way to gain satisfaction is not by working to satisfy our desires but by working to master them. In particular, we need to take steps to slow down the desire-formation process within us. Rather than working to fulfill whatever desires we find in our head, we need to work at preventing certain desires from forming and eliminating many of the desires that have formed. And rather than wanting new things, we need to work at wanting the things we already have.”
This doesn’t mean you have to desire nothing, but instead by desiring the right things you free yourself of the obligation to run on the hedonic treadmill for several decades, often stuck in a work situation you don’t love just to earn income to buy things that you quickly get bored of.
So, what are the “right things” to desire?
It varies from one person to the next. I personally know that a fancy car wouldn’t make me any happier. Owning a yacht wouldn’t do much for me. I don’t care much about fashion, so newer clothes would’t bring me much satisfaction. I don’t love housecleaning, so I’m not particularly interested in owning a large house.
I do know, however, that spending money on Chipotle, houseplants, coffee, a quality laptop, headphones, and a gym membership all bring me an absurd amount of happiness.
This is why I’m following the unorthodox approach to lead a good life:
1. Earn a high income.
2. Learn to desire the right things, then use my income to buy those things.
3. Enjoy the good life.
Notice the subtle, but important, difference between the traditional approach and the unorthodox approach:
|Steps||Traditional Approach||Unorthodox Approach|
|1.||Earn a high income.||Earn a high income.|
|2.||Use that income to buy all the stuff I desire.||Learn to desire the right things, then use my income to buy those things.|
|3.||Enjoy the good life.||Enjoy the good life.|
The main difference between the two approaches is that the unorthodox approach allows you to spend far less money without sacrificing your quality of life. And by needing less money to lead a good life, you can obtain financial flexibility or financial independence much more easily.
So, rather than blindly attempt to acquire all of the things you think you need to live a good life, take some time and identify the things that actually bring you joy or value. Then, use your income to buy those things exclusively. This will help you keep more money in your bank account without negatively impacting your quality of life.
I’ll leave you with this neat four-minute video on hedonic adaptation as some food for thought:
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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