Money is often seen as the key to happiness, or so the adage goes. Making many of us believe that the more money we have, the happier we will be.
I'm not a fan of bringing the bearer of bad news, but research has shown that this is not always the case. In fact, a growing body of evidence suggests that having more money does not necessarily lead to greater happiness.
According to Research Gate, who conducted a study in 2018, a global sampling of 1.7 million people found that a happiness plateau occurs at $95,000 (€90,000) income per year for life satisfaction. Now to some of you, that might seem like a lot just to be clear, this number relates more to well-developed countries, where the cost of living tends to be higher anyway. The number for happiness in less developed regions is notably less.
So, if money isn't the answer, what is?
The answer lies in the power of choice. The ability to make choices and control our lives is a fundamental human need that is often overlooked in the pursuit of the flashier trend of financial success. While I am a strong advocate of building financial stability, I do so with the purpose of not being rich, aka Scrooge McDuck and his silo of gold coins.
But to create freedom and choice to live my life as I choose. If we are free to choose our own path, we are more likely to feel fulfilled and live that best life all the gurus are shouting about.
This post will explore the relationship between money, freedom, and happiness. I will look into the research that has been done on the topic, as well as give practical tips and strategies for achieving this choice and greater personal freedom. So, if you want to break free from the never-ending treadmill and live life on your own terms, read on to discover the power of choice and why it is the key to true happiness.
What does the science say?
Research has consistently shown that there is only a weak correlation between income and happiness. In fact, studies have found that once basic needs are met, such as food, shelter, and clothing, additional income does not necessarily lead to greater happiness. So why do so many of us still believe that money is the key to happiness?
One reason is that we often confuse financial success with personal fulfilment. We believe that if we achieve a certain level of wealth, we will automatically be happy and content. However, the reality is that happiness is a complex emotion that cannot be bought with money. Instead, it results from a combination of factors, including our relationships, health, a sense of purpose, and the ability to make choices that align with our values and goals.
This is where the power of choice comes in.
When we can choose how we spend our time, money, and energy, we are more likely to feel fulfilled and satisfied with our lives. This is because we can align our choices with our values and goals and pursue activities and experiences that are meaningful to us.
For example, someone who values travel may prioritize saving money for a trip instead of buying a new car or expensive clothing.
Being financially independence is the key to unlocking this power of choice. When we no longer rely on a paycheck to support our basic needs, we can pursue activities and experiences that are important to us rather than simply working to pay the bills. This can include pursuing a passion project, starting a business, or travelling the world.
Of course, achieving financial independence is easier said than done. It requires careful planning, discipline, and a willingness to make sacrifices in the short term to achieve long-term goals. However, the rewards are significant. Not only does financial independence provide greater personal freedom and fulfilment, but it also allows us to weather financial storms and unexpected expenses with greater ease.
So how do we achieve this financial independence?
Now let's dive into some practical steps you can take to achieve financial freedom and unlock that power of choice.
Define your financial goals:
Before you can start working towards financial independence, you need to clearly understand what that means for you. Then, set specific, measurable, achievable, relevant, and time-bound (SMART) goals for your finances, such as paying off debt, saving for retirement, or starting a business. The SMART method is old school, but it works.
Create a budget
A budget is a key tool for achieving financial independence. It helps you understand where your money is going, identify areas where you can cut back on expenses, and prioritize your spending. Create a budget that reflects your financial goals and helps you live within your means.
Reduce your expenses
One of the easiest ways to achieve financial independence is to reduce expenses. Look for ways to cut back on your monthly bills, such as cancelling subscriptions you don't use or negotiating lower rates for services like internet and cable.
Increase your income
While reducing expenses is important, increasing your income is just as important when it comes to reaching financial independence. Look for ways to earn more money, such as starting a side hustle, taking on freelance work, or asking for a raise at your current job. Or, one of my favourites, level up your skill set and ask for a raise.
This is a big one. You need to save aggressively. Aim to save at least 20% of your income, and consider automating your savings so that a portion of your paycheck goes directly into savings once your safety net is built up. Get investing.
Investing is a key part of achieving financial independence. Invest your money in a diversified portfolio of stocks, bonds, and other assets that align with your risk tolerance and financial goals.
Achieving financial independence requires discipline and commitment. Stay focused on your goals, track your progress regularly, and resist the temptation to overspend or deviate from your budget.
By taking these practical steps consistently over time, you can achieve financial independence and unlock the power of choice in your life. With financial freedom, you can pursue activities and experiences that are meaningful to you without being limited by financial constraints.
Financial independence is not just about having a large amount of money, but it's about having the power of choice to pursue the things that truly matter to us. It's about aligning our choices with our values and goals and living a more fulfilling life. Achieving financial independence requires careful planning, discipline, and a willingness to make sacrifices in the short term. It is very rare for a person to just accidentally become financially free. However, if you stick to the pan. The rewards are significant.
By taking these steps, such as defining financial goals, creating a budget, reducing expenses, increasing income, saving aggressively, investing wisely, and staying disciplined, anyone can achieve financial independence and unlock the power of choice.
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