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How Much Happiness is in Your Financial Plan?

A Wall Street Journal article on March 18, 2006, highlighted the work of several researchers, all attempting to quantify what produces happiness. It was of interest to me, since I view financial planning as helping clients use their resources to bring greater peace and joy into their lives. Here were some of the findings:

The primary happiness indicator of senior citizens is not their income, but their level of physical activity. Not even the security of a big retirement account will make you happy if you aren’t healthy enough to do things you enjoy. Edward McCauley, a kinesiology professor at the University of Illinois, found that "sedentary seniors get happier after embarking on exercise programs: five years later, self-esteem and confidence remained higher." The more often grandma visits the gym, the happier she is going to be.

You are more likely to be happy if you are a Republican, earn over $100,000 a year, and attend religious services. This was the finding of a survey of 3,015 Americans completed by Paul Taylor of the Pew Research Center. Don’t look for the DNC to cite this in the upcoming elections.

But maybe this isn’t the real story. A survey reported in Time magazine in January 2005 found there is no significant increase in happiness for those Americans earning over $50,000. This would seem to contradict Mr. Taylor’s findings. However, the Time survey said nothing about the participants’ political or religious affiliations. Maybe the real story here is that it takes an extra $50,000 a year for a religious Republican to be as happy as a non-religious Independent or Democrat who earns $50,000.

Dreaming about what you want to buy is far more satisfying than owning it. Internalizing this principle could save everyone a lot of money. Brian Knutson, professor of psychology and neuroscience at Stanford University, studied the differences in oxygen flow in the brain as subjects first anticipated receiving something and when they actually owned it. He found that people get more happiness from the anticipation of a purchase than the actual ownership of the item. Don’t look for the retail sector to embrace this principle any time soon.

If you have a bad marriage, are single, or are not having a lot of sex, you need to earn an extra $100,000 a year to be as happy as someone who is in a great marriage. David Blanchflower, a Dartmouth College economics professor, surveyed thousands of people in 35 different countries in a quest to put a dollar value on a good relationship. He found a solid relationship was worth $100,000. Interestingly, the couple who has sex once a month needs to be earning $50,000 more a year to equal the happiness level of those couples having sex once a week. Blanchflower is working with divorce lawyers who are interested in using his research in attempting to quantify "loss of happiness" and "loss of sex" damages in a failed marriage. That is something to watch!

Based on these studies, and the finding from our research on happiness and money done at the Klontz-Kahler Institute, the best financial plan would provide for the following factors:

· An annual income of $50,000

· A healthy, monogamous relationship with couple vacations, retreats, counseling, etc.

· A weekly support group of some type: church attendance, 12-Step group, etc.

· Daily meditation or prayer

· High level of physical activity

· Less focus on procuring items and more focus on renting, borrowing, and buying pre-owned.

If your financial plan doesn’t have these items in it, maybe it’s time to take a serious look at what really will bring you happiness.

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