Luckily the annual Australian Unity wellbeing index – the statistical smile tracker – was released this week, which helped shed some light on this consumerist conundrum.
The what-makes-us-happy report discovered that happiness starts to stall as household income passes $100,000.
According to the authors, once you crack six figures “money loses its ability to reliably raise wellbeing and does not increase in line with increasing income”.
Economics of ‘enough’
Which makes perfect sense. It’s a fancy way of describing what I call the economics of enough. This is when we reach a point where we have enough money to comfortably keep a roof over our heads, food on the table and clothes on our backs. After achieving this, much of our economic
stress and angst is eliminated.
Each dollar thereafter is a sliding scale of diminishing returns, which no amount of stuff can fill.
After 16 years of economic boom, we are the wealthiest we’ve ever been. Yet, despite the prosperity, depression is a major problem. Beyond Blue estimates that one in five Australians will suffer from mental illness at some time in their lives.
So now we’ve established that more money isn’t the answer (God knows the banks have shovelled enough at us over the past decade), what is?
Well, to answer that question we need to turn to the bald badger with the Texas swagger, Doctor Phil, who is fond of saying “we value most what we get the least”. In today’s fast-paced environment the most valuable currency is time.
Time: most valuable currency
According to data released last month, full-time employed Australians put their nose to the grindstone longer than any other of the OECD countries – racking up an average 43.5 hours a week.
The groundhog day existence of spending money you don’t have, on stuff you don’t need, to impress people you don’t like, ultimately robs you of this most precious resource. As much as Cher would like to turn back time, it’s one of those reserves that’s non-renewable.
My first book focused on the importance of time – in terms of investing and within the broader context of goals. The sexiest part of getting your finances sorted isn’t in lauding it over the Jones’. It is to eventually get yourself into the situation – preferably sooner rather than later – of moving away from the grindstone and devoting more of your precious time towards the things that produce you the most pleasure.
Three ways to plan effectively
There are three main ways to achieve this, and all of them involve using time effectively.
The first is to understand the time value of money. The process of investing is foregoing spending your money in return for more of it. The longer you sock it away, the more you should expect in return. It really is as simple as that. If you have a timeframe that’s measured in decades don’t put your money in a bank – buy shares in the bank.
Now that you understand the time value of money, make sure you don’t give anyone else the deal of a lifetime at your expense. If you have a credit card balance, you’re effectively guaranteeing your bank will earn an 18 per cent return on any money it lends you! Consumer credit is a tax on people who don’t understand the difference between needs and wants.
The final way is to be ruthless in valuing your time. To do this effectively you need to work out what an hour of your time is worth. Let’s say you earn $60,000 a year. A rough rule of thumb is this: cut off the last three zeros from your annual salary, and then divide the number in half (60 divided by 2), which gives $30 an hour.
This is how much an hour of your (working) time is worth. Look at all the things you do that could be done just as effectively by someone else for less than $30 an hour – in other words outsource your non-core activities so you can focus all your energy on bringing home the bacon.
It’s all a question of priorities.
After you’ve hit the economics of enough, money has little use, other than as a tool to allow you the economic advantage of creating the life you want with the limited time you have left.
A final thought to leave you with wherever you may be reading this: Wide Bay, Queensland, recorded the highest personal wellbeing score in the country, despite having one of the lowest average household incomes. All things considered, how would you score?
Tread you own path!
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