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[tweetmeme only_single=false http://www.URL.com]We all know happiness comes at a price right? Well, according to Arun Abey and Andrew Ford, not necessarily.
In their book, How Much Is Enough, Abey and Ford propose the idea of hedonic arbitrage – basically the notion of increasing your happiness without increasing your spending or wealth. This is an idea the authors have been exploring in conjunction with behavioural finance authority Shlomo Benartzi.
The basic underlining principle is that we are best off spending our limited resources on the things that are going to make the biggest contribution to our happiness. Sounds pretty simple doesn’t it?
The only problem is, when it comes to knowing what is going to make us truly happy – not just fleetingly, but over the long term – us humans tend to come up short.
This point is well illustrated by the fact that although our wealth has risen exponentially over the past 50 years, happiness levels have barely changed. Obviously, we aren’t using our increasing wealth to improve our happiness.
The good news is there are things we can do to get in touch with what makes us happier, and spend less money while we’re at it.
In the pursuit of happiness, leading positive psychologist Martin Seligman emphasises the difference between pleasures and gratifications. Pleasures come from external stimuli bringing immediate delight to the senses and tend to be momentary – for example, enjoying a glass of wine, listening to your favourite song or taking a warm bath on a cold day. Gratifications on the other hand involve us getting lost in activities that challenge and engage us. This could include rock-climbing, dancing, painting or playing chess.
As gratifications have a longer lasting impact on our happiness, hedonic arbitrage dictates channelling more money to these things and less to the momentary pleasures. The good news, gratifications also tend to be cheaper! For more information on gratifications, check-out our earlier post finding flow
take the eating out test
Happy, fulfilled people know what experiences they value and invest their time and money on those things. Here is a short activity to help you get in touch with what experiences you value and why.
First ask yourself which experience you would prefer and why:
- Dining out at an expensive restaurant
- A cheap and cheerful night out with a group of colleagues
- Cooking at home with a handful of friends
Now try each of these experiences and take note of which you most enjoyed and why. Did your expectations match the outcome? Did your preferences have more to do with dollar outlay, ambience or the people involved?
the $50 test
Similar to the eating out test, this involves you getting in touch with the experiences and things you value most. Over the next few weeks plan three activities spending less than $50 each. This could include a anything from dinner with your partner, taking children to the movies, buying art supplies, doing a cooking class or planting a small vegetable garden. For each activity rate how happy you think it will make you, how happy it makes you immediately after and how happy it makes you a month later. What did you discover? Did your expectations match the outcome? Which activity gave you the most happiness over the long-term?
keep a happiness diary
This is similar to a keeping an expense diary but with an extra column for how happy each item makes you. Over the next week or two record everything you buy and do, how much it costs and how happy it makes you both immediately after and a month later. Now look at what you’re spending most of your money on. Does it match up with what makes you most happy? If not, why not?
Finding out what makes you happy takes time and effort, but in a world of prioritisation what could be more important?
For more information on hedonic arbitrage, or to order Abey and Ford’s book, check-out http://www.howmuchisenough.net/
[tweetmeme single_only=false http://www.URL.com%5DIn 2007, the American Association of Retired Persons held a competition on YouTube called ‘U@50’. The concept was for people between the ages of 18-30 to demonstrate what they expected their lives to be like at the age of 50.
The following video Lost Generation by Jonathon Reed placed second in the competition but quickly went viral, capturing the attention of millions of people around the world. Like reflections, it challenges us to think about what is most important in our lives, and to plan accordingly.
[tweetmeme only_single=false http://www.URL.com]Amid reports that almost 50% of adult Australians do not have a valid Will in place, the NSW government is urging people to make and update their Wills this week for the annual Good Will Week.
At ipac we believe planning is a vital part of any financial plan – ensuring your assets pass to the people you want in a timely and effective way. Here’s what Paul Clitheroe has to say about why Wills matter.
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A new concept in personal transport, car sharing is growing in popularity across Sydney and Melbourne, with more and more people attracted to it as a cheaper, greener alternative to owning a car.
Car sharing gives you temporary access to a car when you need it. After you’ve signed-up to a car sharing organisation all you need to do is book a car online or by phone, walk to a car sharing pick-up point, use your special swipe car to open the car and drive away. Then when you’re done you bring it back to the same spot for the next driver.
Bruce Jeffreys, co-founder of car sharing service GoGet, believes car sharing can be a lifestyle improvement for many people.
“GoGet is all about having the fun and convenience of driving brand new cars without the costs and hassles of ownership. In fact many members find it better than owning a car because you get to use different types of cars for different trips and you don’t have to worry about a car when you don’t need one.”
This takes the stress out of owning a car because you don’t have to find car parks, pay for a mechanic when things go wrong or upgrade your car every few years. And because with car sharing you only pay for a car when you use it and not for insurance, petrol, maintenance or repairs, let alone repayments, people who don’t use their car frequently can save a lot of money.
“Car sharing is a good option for anyone who has a car they don’t use every day, especially people who can get to work without driving. That could be someone who catches the train to work and needs a car on the weekends, or a family that may need a second car from time to time. We also have a lot of businesses who use GoGet to save money instead of owning a fleet vehicle,” says Jeffreys.
Car sharing also has environmental benefits, taking cars off the road when they aren’t needed, and replacing out-of date cars with newer more fuel efficient models.
“Each GoGet car is used by 20-25 members,” says Jeffreys “And on average each car means over nine cars are sold or not bought by members.”
To find a car share near you visit the following companies’ websites:
GoGet is available in Sydney across the inner city and from Maroubra to Pittwater and out to Parramatta. In Melbourne they have a network from South Melbourne through the CBD to Northcote and Brunswick. They also operate in the Adelaide CBD.
Flexicars live on suburban streets in Melbourne and Sydney, including Brunswick, St Kilda, Manly and Surry Hills.
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In this episode, Arun Abey and Scott Pape talk about specific strategies to bring certainty to your superannuation.