How To Be Both Rich And Happy!

You can be both rich and happy, but (1) you need to understand that an investment portfolio is simply a tool or a utility to achieve your goals, (2) you need performance information to make it easy to manage your money wisely, and (3) you need to understand what makes for a happy life.

An Investment Portfolio Is Only Useful If It Helps You Achieve Your Goals

If investors think their investment portfolio has some use other than as a tool to achieve personal goals, then they will focus too much attention on the portfolio and not enough on what the portfolio can and should be used for.

Without a clear purpose for an investment portfolio, and without confidence that it’s being managed wisely, a large portfolio can be a source of worry. As an example, I recently spoke to one individual who owns a mansion in the Bahamas but when he looks out over the magnificent view of the harbor, he doesn’t enjoy the beauty because he’s constantly wondering if he should be doing something different with his investments.

Investors Need A Benchmark Performance Report

Many investors spend too much time thinking about the wrong investment issues. One reason is that without a performance report, which points out the real problems that need to be addressed, investors don’t know what to focus on to determine if they’re being well compensated for the risk they’re taking.

When investors receive a clear performance report that shows they’re on track, they stop worrying and thinking about their portfolio and they start enjoying life. And, if the report shows they’re not beating their benchmarks, they’re not on track or their advisors are not adding value—then they can make a change, correct the problem and get back to enjoying life.

What Makes For A Happy Life?

If we think a happy life is like what is portrayed by fictional characters in TV shows or beer commercials, we’ll be disappointed. Periods of peak happiness—winning the race, achieving a goal, attending a child’s graduation—are great but don’t last long.

Most of our life is spent doing routine things like working, eating, commuting, watching TV and dealing with family issues. When we are so fully absorbed in what we’re doing that we temporarily forget who we are and where the time went—we say we are ‘living in the moment’. Over a lifetime, it’s not the peak experiences we enjoyed, but rather how we experience our day-to-day routines which make for a ‘happy life’.

Happiness comes during moments when we have no unfulfilled desires—and this happens many times each day. It happens when we stop thinking about ourselves because we’re focused on work, when we’re sharing a joke with a friend, when we sit down to enjoy a good meal, and when we’re excited because our favorite Blue Jay just hit a home run. These moments are as good as it gets—and it makes little difference whether we are rich or poor.

You’ll be happier if you recognize these many opportunities for happiness when they occur each day. Then you’ll know you’re getting your share of happiness. When you enjoy a coffee with a friend, or work on your crossword puzzle—you should recognize that this is as good as it gets. A billionaire may also enjoy his coffee and crossword puzzle but gets no more pleasure from solving the puzzle than you do.

What Prevents Happiness?

Worry keeps us from being happy. We all worry. Some people worry about who will look after them in their old age, parents worry that their children will be unhappy, and investors worry that their money is not being managed wisely. Worry is the desire for things to be different and the desire for things to work out the way you hope they will.

The worry/desire might be to lose weight, to have financial security, or for world peace—it doesn’t matter how worthy or unworthy the desire, if you have a desire, and it remains unfulfilled, this is the source of unhappiness.

We can easily imagine having things that are bigger and better—and this can contribute to unhappiness. A billionaire who owns a 200-foot yacht can be totally miserable and consumed with envy and jealousy if he starts to imagine himself in a 400-foot yacht like the one his friend owns.

Happiness is elusive when thinking about the things we want for ourselves. The experience of ‘living in the moment’ reappears when we are so focused on what we’re doing we forget everything else. One reason why people who work in the helping professions are usually quite happy is because when they are focused on helping others they’re not thinking about themselves.

Investing For A Happy Life

Investors increase their happiness when they stop thinking about the things they can’t control and start to think more about things they can control—such as getting performance reports that show whether changes are required. Below are common and unnecessary worries suffered by many wealthy investors.

Am I taking too much or too little risk? Is my portfolio performing as it should? Am I properly diversified? Am I paying too much in tax or management fees? How do I determine the amount to leave to my children to avoid doing more harm than good? How do I ensure that my children grow up with a work ethic rather than a sense of entitlement?

Some of these questions are answered with a financial plan that shows what has to be done to achieve goals. Some are answered by following a disciplined investment process and by receiving proper performance reports that clearly show if there is an issue that needs to be addressed.

The question about how much to leave to the children requires discussion and soul searching. Experienced estate planners can help one make this important decision. For most people one of the most difficult challenges is to become clear on their long term goals.

Dealing With A Surplus

If the financial plan shows there will be a large surplus at the end of your life, you can enjoy greater happiness while living by clarifying goals and estate planning issues. You may decide to start giving more to family members or the charitable causes you support. Someone once said “the Brinks truck doesn’t follow the hearse to the graveyard”—when people remember this it makes it easier to enjoy their money while they’re living.

Philanthropists give their money away while they’re living because they have fun doing it. Helping others creates happiness in two ways: first, there is the good feeling from being recognized by your community, and secondly, there is the happiness that comes because when you are helping others you’re not thinking about your own problems. In other words, you’re ‘living in the moment’.

When we understand the rules of any sport and recognize a great move when we see it, we get more enjoyment from watching a game. Similarly, when we understand the source of happiness, when we start to recognize ‘living in the moment’ opportunities each day, and when we use surplus capital to achieve our goals—we will enjoy a happier life.

Warren MacKenzie, CPA,CA is the founder of Weigh House Investor Services and a Stewardship Counsellor with HighView Financial Group. Email: warren.mackenzie@weighhouse.com Tel. (416) 640-0550