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I have written before about how happiness can essentially be boiled down into three variables:
Autonomy – having freedom to do what you want
Mastery – working towards becoming a master in some line of work
Connection – developing and maintaining deep relationships
I have come to realize that the field of personal finance is perfect for crushing the first variable: autonomy. Once you save up enough money to be financially flexible, you gain the freedom to spend your time however you want. You gain the ability to quit that job you hate, the leverage to negotiate a promotion, or the confidence to start a small business and work for yourself.
This financial flexibility doesn’t guarantee happiness, though. We still need mastery and connection. And I’ll be the first to admit that this is a weird idea. Shouldn’t the ability to chill out and relax all day be enough to make us happy?
Why do mimosas on the beach become boring after a couple weeks?
Why doesn’t sitting on the couch all day watching Netflix make us feel alive?
I have read two books that shed some light on this topic. The first is Flow by Mihaly Csikszentmihalyi. In it, Csikszentmihalyi explains that people are typically happiest when they’re pushing themselves, doing challenging work, or trying to set a personal record. He explains this idea beautifully:
“Contrary to what we usually believe, moments like these, the best moments in our lives, are not the passive, receptive, relaxing times—although such experiences can also be enjoyable, if we have worked hard to attain them. The best moments usually occur when a person’s body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile.
Optimal experience is thus something that we make happen. For a child, it could be placing with trembling fingers the last block on a tower she has built, higher than any she has built so far; for a swimmer, it could be trying to beat his own record; for a violinist, mastering an intricate musical passage. For each person there are thousands of opportunities, challenges to expand ourselves.”
This rings true in my own experience. Whether I’m at the gym trying to set a new PR or sitting at my laptop working through a particularly difficult chunk of code, I often feel best when I’m pushing myself.
Conversely, I usually feel pretty awful after a four-hour Netflix binge or at the end of a weekend spent mostly playing Xbox and eating junk food.
It’s counter-intuitive, but we naturally feel best when we’re pushing ourselves, not when we’re lounging around (although there’s a time and a place for that).
The second book that helps explain why freedom itself doesn’t bring us lasting happiness is The Village Effect by Susan Pinker. In it, Pinker explains that people who have strong social ties with friends, who regularly spend time with loved ones, and feel like a member of a larger community, often feel a sense of purpose and connection in life. This leads to a healthier, happier, longer life.
I like to think of the classic example of Charlie Munger (94 yrs old) and Warren Buffett (87 yrs old). It’s no secret that these two love the work they do. Buffett is even famous for saying that he “tap dances” to work each morning because he loves his job so much. The tight friendship that Buffett and Munger share, along with their community of die-hard investor devotees is a perfect recipe for happy, healthy, long lives.
So, bringing it all together, what does money have to do with all this?
It turns out that money is a great tool for buying autonomy. And once you have autonomy, you have more time to pursue mastery and connection.
For this reason, you don’t need all the money in the world; you just need enough to gain the free time to pursue the real meat and potatoes of happiness – mastery and connection.
Paul Jarvis touched on this topic in his most recent Sunday Dispatch ( I recommend signing up for these Sunday emails – Jarvis shares powerful ideas in two-minute reads), when he explained the importance of defining “enough”:
“In order to be more aware of what makes sense for our lives and businesses, we need to be aware of what enough means.
Enough is different for everyone. For myself, I need far less than a family with six children, because my family is two people (and any number of pet rats). I need less money than someone living in an expensive city, because real estate and life costs less in the woods. I need less revenue than other businesses because my margins are high and my expenses are low based on the type of work I do.”
Jarvis runs a small business and he intentionally keeps it small. He isn’t trying to build a multi-million dollar empire or buy a ton of stuff with his income. He simply defines enough so that he can enjoy both his work and his time with friends and family.
I think we can all take a page from his book. We simply have to recognize that money is a tool, that “enough” should be our financial goal, and that mastery and connection are the real meat and potatoes of happiness.
My favorite free financial tool I use is Personal Capital. I use it to track my net worth, manage my spending, and keep an eye on my monthly cash flow. It only takes a few minutes to set up and it makes tracking your finances simple and easy. I recommend trying it out.
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