Does that $30,000 kitchen renovation really make you that much happier? Did you need granite countertops, new stainless steel appliances, built-in double ovens and recessed ceiling lighting?
Alternately, would new modern cabinetry with a standard countertop at a tenth of the price have been sufficient?
What about that $30,000 pool install? Did it need to be installed in-ground? Did you also need to replace your patio and extend it with high-end interlocking stone?
Alternately would an above ground pool that was a tenth the price have been sufficient?
Do these “luxurious” upgrades really bring you increased sustainable happiness or are you a victim to consumerism, short-term lust for higher-end physical possessions and, of course, trying to keep up with the Joneses.
The average salary is $50,500 in the U.S. and $49,000 in Canada. The average post-tax take-home pay is $32,825 in the U.S. and $33,320 in Canada. This means that each of the above “luxury” expenditures will cost us at least a full year of additional employment; and realistically an additional 5 years because average disposable income sits in roughly the 15-20% range in North America.
I know… I know… nobody wants to give up luxuries. In our minds we’ve convinced ourselves that we work hard and deserve it. We’ve convinced ourselves that these purchases are making our lives happier. But is it true? Would anyone be less happy if your pool was above ground instead? Would we be less happy if our countertop was made out of laminate instead? What kind of benefits do these physical “luxuries” really bring to us that the “ordinary” alternative doesn’t already provide? Are we enjoying our personal time and passions more because of these “investments”?
Let’s consider an alternative. Would we be happier if we could retire five or more years earlier for each and every one of these “sacrifices” we’ve made by purchasing an “ordinary” alternative instead of the “luxurious” high-end option? What if we woke up at the age of 40 or 45 and never had to work a day again in our lives? Oh sure, we may not wish to retire, but the option is now on the table and once we are no longer having fun, or simply desire to do something different, it’s entirely within our power to make it happen. How would that feel?
We are human and this creates a psychological disadvantage for each and every one of us. We make choices based on emotion and perform impulse purchases that many times irreversibly changes the financial stability of a future version of ourselves. We fabricate happiness with physical possessions that doesn’t sustain and then upgrade over and over again to re-gain that emotional high. We’ve become our own worst enemy.
Until we realize what we’re doing. This is what I like to call the “Aha!” moment.
One afternoon, five years ago, I was driving around town in a luxury car, shopping for a bigger home, fantasizing about having an in-ground pool, the list goes on and on… I then had my “Aha!” moment. I realized that I was imprisoning myself within the rat race with my own emotions. I couldn’t describe why I wanted all these “luxury” possessions. I started to review my financial decisions over the previous decade and assess the happiness that they had brought me. Not a single one of my purchases brought me any sustained happiness – not the luxury car, not the bigger home, not even the fancy renovations – they were all just, well… just possessions.
It was that day that I realized I needed to make a change. I started to face the lies I had been telling myself for years and I changed the way that I think about possessions and in turn the way that I purchase. Now, any time I want to make a purchase, I force myself to think about it for a specific amount of time. Purchases that exceed three digits or $100 requires that I wait 1 day; purchases that exceed $1,000 requires that I wait 1 week; purchases that exceed $10,000 requires that I wait 1 month, etc. Obviously there are exceptions to this rule (necessity or emergency), but to my best of ability I’m honest with myself when I classify something as such. During the waiting period I get the opportunity to think about the purchase and if it’ll deliver me sustained happiness, and I get the opportunity to consider lower cost alternatives that may provide the same benefits that I am seeking. I’m not perfect and still make purchases that I regret later, but the frequency in which that occurs is exponentially less than before.
This approach has dramatically transformed both my psychological and financial well-being. Not only am I genuinely happier, I am more confident, able to make decisions more succinctly and I have infinitely more personal time for my family, friends, health and every other facet of my life. No longer do I worry about more luxurious items, but most importantly in a few more short years I’ll be able to do what I want, when I want to, because I want to do it; not because I have to do it. That’s right, I’m on track now to retire at the age of 40 if I choose to.
There is not a single thing that I’ve done that anyone else can’t do as well. I simply took control of my emotions and impulses and it helped me to evolve how I think about purchases. You can do it too, and every day after you will be on a new path towards a different future, one where you can retire much younger and one that hopefully helps you to discover the same happiness and peace of mind that I have.
The next move is up to you. What’ll you do? Good luck on your journey and godspeed.
Founding Partner, Amplified Investments
Investing in real estate
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