The route that our lives take is influenced by the decisions that we make along the way. Financially, those choices hinge on how we spend our time and money. That seems overwhelming when you are at the base of the climb. However, there are a number of principles that we can use to guide those decisions.
In this episode, we discuss how to practically apply what we know about time, money, and The Good Life to day-to-day decision making and larger strategic decisions. To make that simpler and actually usable, you can make decision rules. That saves your mental and emotional energy to spend on the more important aspects of your journey. So, strap yourself in and join us for Episode 3 of The Money Scope.
[00:00:02] BF: Welcome to the Money Scope podcast, shining a light deep inside personal finance for Canadian professionals. We are hosted by me, Benjamin Felix, Portfolio Manager and Head of Research at PWL Capital. And Dr. Mark Soth, aka The Loonie Doctor.
[0:00:16] MS: Great. Welcome. In our last two episodes, we discussed the elements that tend to contribute to lives that people then look back on, and think positively about them. A lot of that information was pretty abstract, but we can use that to evaluate and guide our own lives. In addition to that, we really also need some concrete strategies, so that’s what we’re going to come to today. We’re going to talk about some concrete strategies that people can use in planning their lives. and their finances. We’ll lay out some principles to help with some day-to-day decision making, and planning decisions that we make.
We’ll pepper that with some practical strategies, and also make some examples from our own lives to try to illustrate what it is that we’re talking about. In our next episode, we’re going to go more in-depth on defining your life’s values, how to apply that to making bigger strategic life decisions, basically purposeful and effective goal setting. That’s where we’re going to go next after this episode.
[0:01:06] BF: Yes. I don’t think Mark, when we set out to do this podcast, we didn’t expect to do so much content on living a good life, but I do think it is very important. So I’m glad that there has been and will be for the next episode this much focus on these topics.
[0:01:22] MS: Yes. We have to know this to know where we’re going.
[0:01:24] BF: Exactly, yes. All right. I’ve got the therapeutic money school prepped. Are we ready to go?
[0:01:29] MS: Yes. I think I’ve got everybody sedated already, so intubating, here we go.
[0:01:37] MS: Great. Today’s main topic, we’re talking about good life principles, or actionable advice, and strategies that we can use to apply some of the information we’ve learned about. So we covered a lot of ground last two episodes, we’re going to tie it together with actionable principles. We make hundreds of decisions every day. Some of them are big decisions, some of them are small decisions. They don’t all require the same amount of effort, but it is important to focus really on the big decisions. But also remember that decisions throughout your life represent your only way to purposely influence your quality of life. That’s a quote from a book by Ralph Keeney, Give Yourself a Nudge: Helping Smart People Make Smarter Personal and Business Decision.1 But it’s really applicable to what we’re talking about.
[0:02:19] BF: Ralph Keeney was a guest on Rational Reminder. I just remember that quote as being mind-blowing when I read his book, because it’s so obviously true when you read it, but it seems like an extreme statement the first time you see it. I also remember a Canadian astronaut, Chris Hadfield, when he was on Rational Reminder, there was another quote similar to the Keeney quote that kind of blew me away. But Chris said, “What matters the absolute most is what you’re going to do next. When you think about it, your life is just a knitted together series of all your little decisions of what to do next. The deliberateness of how you make each of your small decisions every day, that’s going to be your life.”2 That’s like mind-blowing stuff that your life is just the knitted together small decisions that you make along the way.
[0:02:57] MS: Yes, no pressure. Then we have to be careful as we don’t get analysis by paralysis, because we stress out about it all. But that’s why I think having some big broad principles that we can use can be very useful.
So we know kind of what makes people happy and regret on a population scale. But we need some sort of simple mantras that we can use as shortcuts or rules of thumb just to help us when we are thinking about. Because our default mode of thinking is very simple, so we need to be very simple as well.
None of this will be specific advice that applies to all circumstances, but they’d be good, quick, simple filters to run stuff through without using too much of your cognitive energy. So we’re going to go through a bunch of sort of rules of thumb and shortcuts, whatever you want to call it.
Choose Experiences Over Things
The first one I’ll talk about is choose experience over things. That’s a mantra that’s trotted out pretty quickly whenever anyone’s talking about money and spending. There’s a good reason for that. It’s the principle that experiences matter more than things. That’s very well popularized. But we talked about why that is earlier. So we talked a bit about adaptation, and that we have weak effective forecasting. So experiences have some unique attributes to them, that make them harder to adapt to. So that’s one of the reasons why it actually works as a principle. It also makes it easier to predict their impact on your happiness. So when we’re talking about effective forecasting, that’s what it is. Predicting the impact that it’s going to have. It’s easier to do that with experience than it is actually to do it with objects.
People also tend to cling more closely to cherished experiential memories than to things. And the other aspect is that experience form part of our identity.3 So all of those aspects give you a stronger hit to your happiness than objects do generally. The other thing is, you can also get multiple hits from that one experience. So there’s data suggesting that anticipating future experiences may contribute even more to happiness actually than remembering the past experiences.4 So planning can be part of it, you get happiness from that.
Experiences are less likely to be compared to other options.5 When you buy something, it’s very easy to compare that to something else that’s an object and then become dissatisfied, particularly as it becomes outdated, or outmoded, or there’s a newer thing that comes along. But experiences aren’t really the same in that aspect. They’re harder to compare to other things, because every one of them is unique, and they’re not like things which are static, and then there’s a newer model that comes out.6
[0:05:20] BF: I think another big one on experience, and we’ll talk more about engagement specifically later. But people are generally happier when their mind is focused on what they’re doing in the moment, and experiences offer that type of engagement.7 Experiences are also more likely to contribute to successful social relationships,8 because a lot can be shared. And we know, of course, this also comes up in a bunch of these principles. We know that relationships are core, one of the core elements of happiness. One of the strongest long-term predictors of happiness is relationships.
Now, experiences don’t need to be expensive trips to exotic places, they can be things like spending time with other people outside, like, I don’t know. Going for a walk in the forest, or whatever, or going for a meal together. But those aspects of engagement, being engrossed in what you’re doing, and doing stuff with other people are big contributors to why experiences tend to be good predictors of happiness.
[0:06:15] MS: Yes. I think there is an important exception to make. And that is, if you’re buying a thing that helps to facilitate those experience, so that can make a lot of sense. That can even be contrary to the usual thoughts about careful budgeting that you hear about in personal finance shows. Like an extreme example from my life is, that we spent literally hundreds of thousands of dollars on a motorhome. In fact, we did it more than once. We’ve had a couple of motorhomes. Personal finance shows will say, “Avoid buying depreciating expensive vehicles with high maintenance costs.” I think if you look that up in the dictionary, that’s like a picture of a motorhome right there. It’s all of those things.
We had a really big one that burned $20 bills for fuel, basically, they never went anywhere. But that was money well spent. I mean, we explored a bunch of beautiful places with our family, which included dogs, guinea pigs, fish, a snail. Everything came with us. Prior to that, we actually didn’t travel very much and didn’t make those experience because we would go to a beautiful resort or be doing something really interesting. But by day three, everybody wanted to go home because they all missed the dogs, and couldn’t really enjoy the experience. So for us, buying that really, really expensive, depreciating vehicle actually helped us out to build more experiences together.
[0:07:28] BF: Where about do you guys explore in the motorhome?
[0:07:30] MS: We went to the East Coast; we went to all along the east coast of the US down the Central US through the mountains. Over to Hilton Head Island, is a beautiful place. We’d go there in the fall, and then I go down to March with my dad to Florida, for a few weeks, and then I’d swap them out for my family for another few weeks. I would have spending most of March in Florida, with either my dad or my family. It was awesome.
[0:07:53] BF: Yes, that’s awesome. We’re living with pet travel anxiety right now too. We were trying to think about what we wanted to do this summer, but we got a cat about a year ago. He’s a Maine Coon. They’re very, very social cats. When we leave the house, but went for like an hour or something, we come back, he’s like, super excited to see us like a dog. So we feel really guilty leaving him. Maybe there’s a motorhome in our future, I don’t know.
[0:08:17] MS: Oh, yes, it’s awesome. The other reason why a motorhome was actually useful for us as a thing is, that it actually helped me with the earning-spending trap. We talked about that in episode number two. But I was very strongly lured to work all the time. But spending that money on a motorhome pulled me away from that. That may seem counterintuitive because it is actually spending more money. But I had spent that money, and that frugal part of me, because I’d spent the money, wanted to make sure I got my money’s worth out of it. So it psychologically forced me to actually take more vacations and more time off work, because I’d essentially paid that money already.
[0:08:49] BF: That’s interesting. Pre-paying for future experiences as a commitment device to actually pursue the experiences. It’s a neat idea. Commitment devices are huge. I have a friend that comes over once a week just to hang out. He comes at 6pm on Wednesdays, and that’s the one day where I know I won’t work until eight o’clock or whatever.
[0:09:10] MS: Yes. You need to have strategies like that.
Count The Times Left
[0:09:12] BF: Yes. Another good one on making sure you actually do the stuff that you want to do is an exercise called counting the times left.9 We got this from Cassie Holmes, who’s a professor at UCLA. This is in her book, but she also talked about it on Rational Reminder. We know that the way that we use our time is very important to our happiness. But it’s – we’re just talking about with commitment devices, it’s easy to get distracted, or sidetracked, or pulled into a bunch of small things that result in missing the bigger important things. That’s loosely a phenomenon called time confetti,10 where you just do a bunch of little stuff like check your phone, you check your email, I don’t know, take the garbage out. And then all of a sudden, you’ve used up all of your fun time or all of your time to do the activities that you care about.
Time also feels like it moves faster when we’re busy11 and when we have conflicting goals,12 but we’re often culturally rewarded for being busy and for having a little leisure time.13 So it’s kind of a – there’s an interesting situation right now where we have more leisure time, but people feel like they’re busier and have less leisure time. Even though we technically have more, it feels like we have less because there’s so many draws on our attention. Most people listening would be familiar with the feeling of a day passing by without taking the time to go for a walk. That happens to me all the time. I want to go for a walk every day, but some days, I don’t. Lots of days that I don’t.
[0:10:26] MS: Yes. You have to prioritize it to make sure it happens before it’s pushed out.
[0:10:29] BF: Yes, exactly. Yes. Then over time, that adds up, kind of like that idea of foundational regrets. Stuff compounds over time, and then all of a sudden, you don’t have any time left to do those things that you really wanted to do. I think good examples are related to kids, because obviously kids get older and eventually want to do their own thing. Take trips in the motorhome as an example. I don’t know if my numbers make sense for your situation, Mark, but I’ll throw it out there anyway.
So if we take the motorhome example, this idea of counting the times left is to say, maybe it’s three trips for summer that you do, and you’ve been doing that for eight years. So you’ve done 24 trips, and you calculate how many you have left. So say it’s maybe four more years at the same rate. So you’ve got 16 trips left. So that means you have 40% of your lifetime family motorhome trips remaining, and that makes it feel more pressing, to carve out time to make sure that you do the thing. It could be other stuff, it could be taking your spouse out for dinner, or going for walks, or taking your kids for a walk, or something like that. But I think that can help with motivation, and managing trade offs. Instead of thinking about it as that one off, you think about what does this constitute in terms of the total number of times that I will be able to do this activity again in my life.
[0:11:49] MS: Yes. I think that kind of burning platform, or pressure to take action, it’s really useful to frame it that way. I think it’s really useful for those of us who have a hard time spending now, because we have a fear of not having enough later on. When really, there may actually be some things that we aren’t going to be able to have later on even if we have the time or the money. So there’s a risk to not spending it now sometimes.
[0:12:08] BF: Yes, that’s another really good use of that framing for sure.
Sweat The (Future) Details
The next principle is to sweat the future details. I think this one’s really important. One of the reasons we talked about affective forecasting, and one of the reasons that people are bad at predicting what will make them happy in the future, is that they form an incomplete vision of the future.14 So that can lead to predicting things as being far better or far worse than they will actually be because we focus on one significant event that we perceive as particularly good or bad, while ignoring all of the details that actually affect the experience. And the reason that it’s the details that matter is that our day-to-day experience or day-to-day happiness is shaped more by how we spend our time minute to minute than by our stable life circumstances or major life events.15
The frequency of positive experiences is more impactful than their intensity.16 So people might imagine some really good thing happening in the future or some really bad thing that they want to avoid. But that really big thing is going to be less impactful than all of the small little things that happen throughout the day. So one of the ways to deal with it is by visualizing how you’ll spend your time in the future, when you’re considering a major decision. We talked about the cottage example, in the past episode. Instead of focusing on the rosy image of the nice sunny, sunny day at the cottage, you got to think about how you’re going to get there. Think about where you’re going to pick up groceries on the way. and whether that grocery store has your favourite snacks. Who’s going to close the cottage down for the winter and open it up for the summer. I think a nice way to summarize it is, in any decision, you’ve got to think about how it will impact how you spend your time in the future and whether that’s aligned with how you actually want to spend your time.
[0:13:42] MS: Yes, there’s all those little details of maintenance, and costs of time and money that go into these decisions that we just don’t really appreciate until after we’ve actually made the decision.
[0:13:52] BF: Yes. Well, that’s exactly it. It’s called focalism, where we focus on the one big thing, but it’s a little – the key, though, is that the little details matter more than the big thing. It’s not that they’re equally important or whatever. It’s like the minute-to-minute stuff is more impactful to happiness.
[0:14:06] MS: Yeah, totally. You get ground down by that day-to-day, menial tasks that sort of dulls that big event that you’re hoping for.
Find and Savor Frequent Small Pleasures
[0:14:14] BF: A hundred percent. So I think related to that, to the small things mattering is finding and savouring frequent small pleasures. I guess it’s aligned with what we’re just talking about. But frequent small pleasures are more impactful to happiness than a fewer large ones.17 So having multiple small pleasures spread throughout the day, like enjoying tasty snacks. I bring snacks up a lot, I guess. I like snacks.
[0:14:34] MS: Yes. You get along well around here. It’s the same thing.
[0:14:38] BF: Taking a walk with your dog. Like I mentioned, I don’t have a dog, but wanting to go for a walk every day. I find that is really impactful to the way that I feel. Enjoying a coffee is another one. And same thing, I have an espresso machine that I bought 10 years ago and it’s my routine. I love making my one espresso in the morning and that’s it, but it’s a whole thing. Reading a book that you love, talking to a friend, those are all small pleasures. These things are also less financially impactful than saving up for big things like buying a jet ski is obviously more expensive than making your own espresso at home every morning. I think small pleasures are different for everyone. But everybody can kind of figure out what theirs are and really embrace them.
Then the other thing is that, to make the most out of small pleasures, it’s important to savour them. People who – empirically, people who enjoy the small, mundane pleasures of everyday life are happier in general than those who don’t. An interesting point on that is that there’s actually a negative relationship that has been observed between wealth, and the ability to savour small pleasures.18 That doesn’t mean that has to be true for people that have wealth, but it’s just interesting to note that people with wealth seem to enjoy those small pleasures less.
[0:15:44] MS: I think another interesting data point that’s related to that is that, what we get pleasure from actually changes as we age. So we have more lasting experience of happiness from exceptional experiences when we’re younger. Then as we get older, it’s those day-to-day common experiences that actually does seem to result in more lasting happiness.
[0:16:02] BF: That is really interesting.
[0:16:05] MS: So maybe we learned to pay attention to them.
[0:16:06] BF: Yes, maybe. That’s very interesting. The authors of the study that I mentioned on wealth, depreciating the small pleasures. The authors of that study suggested it supports the idea that having access to the best things in life may actually diminish the small pleasures, which is kind of in line with just the general concept of hedonic adaptation. If you’re used to amazing, amazing hedonic experience, then it’s harder to appreciate the small things that you could appreciate. So there are a few ways to make this actionable, savouring the moment. So like I mentioned, going for a walk. When I’m doing that, I always try to really focus on how awesome it is that I’m walking, and looking at the trees.
I remember when I went to Newfoundland quite a while ago now to go for a multi-day hike with a friend. I remember the first day we were in the woods, he was like, “Let’s just stop for a second, look around and look at the shades of green that you can see in the forest. Is that incredible? You don’t see that in the city.” I was like, “Wow, it is incredible.” So I try and appreciate stuff like that. That actually prolongs the positive emotions when you do that.
[0:17:09] MS: It’s real mind shift to shift to that sort of mindfulness, paying attention, pausing mentality when we’re so goal-driven, and focused in the rest of our day-to-day lives. You really have to shift gears.
[0:17:21] BF: Oh, yes. It’s a conscious thing. It’s not even a – I don’t even know if you can form it as a habit. It’s like you have to remind yourself to savour the moment. Another one is writing down three good things that happened each day and why they happened.19 That’s been shown to make people happier and less depressed up to six months later. Taking time to reminisce about positive memories can also boost happiness.20 So just sitting back and thinking about an enjoyable thing that you did previously, and that I think relates back also to why experiences tend to be more predictive of happiness than things.
So that I think in the context of spending, spending on frequent small pleasures, like maybe it’s going out for a coffee once a week or something like that. That’s more impactful to happiness than buying the jet ski that I mentioned earlier.21
[0:18:06] MS: Yes. I mean, for me, I’m more of the [inaudible 0:18:06] pausing to enjoy what’s going on than gratitude journaling. I mean, I know that it gets brought up a lot in wellness literature. But to me, gratitude journaling is like kind of like writing lines on the chalkboard at school. It feels more like a punishment to me, which I guess I just dated myself and expose my checkered past. But I think the key really is, as you said, reliving that positive experience. Kind of like how athletes, when they visualize their performance, they actually activate the same parts of their brain as they do perform any activity. And we reactivate our [inaudible 0:18:36] centers whenever we’re thinking about pleasant activities, whether that’s the activity that’s going on now, or the one that we’re planning, or the one that we already had before.
[0:18:45] BF: Yes, you and I are on the same page. I mentioned the journaling because, like you said, it comes up in all literature, but I’ve never been able to get into it. But I do try quite hard to really appreciate the little stuff day to day.
[0:18:56] MS: Yes, it doesn’t come naturally.
[0:18:58] BF: No, no, no, it doesn’t.
Prioritize Time Over Money
[0:19:00] MS: The next principle we’re going to talk about is prioritizing time over money. This is one of the issues where we saw from previous data that being time poor is associated with misery, and lower productivity, and more stress.22,23 While time and money are theoretically interchangeable resources, we exchange our time for money, we spend the money to buy some time. But ironically, with that high income households tend to feel actually more stress about time, not less, even though they have more money. So theoretically, they could spend money to buy time, but they don’t, and they feel more stressed about it.24
There’s studies apprehended that multiple possible reasons for that. Some of them may be due to increase in the value of their time, making it feel more scarce.25 They may be hesitant to trade money for time because the monetary cost of their time is much higher. So it’s hard to give up your time when you know you can make a large amount of money for it by working instead. So I think that can play into the equation. High income earners as we talked about in the previous episode, they have really in-demand skills and be tempted to work perpetually more. And they can fund their lifestyle with that, and they all kind of feed off each other, trading that time for money, which is the earning spending trap we talked about previously. But I think it’s important to know, the opposite trade it is also true. So using money to buy time actually can help to improve wellbeing.
[0:20:21] BF: Yes. There’s lots of data supporting that, that buying time or just prioritizing time over money is really impactful. People who prioritize time over money tend to be happier,26,27,28 and a lot of studies confirm that they tend to have greater social connection.29 They tend to have a better relationship with their spouse,30 and they’re also more likely to choose work that they enjoy.31 That’s just having the preference for time or prioritizing time over money. But I do think it’s important to note that money is not an unconditionally bad thing to pursue. And more time is not always, it’s not unconditionally good either.
Of course, in order to trade money for time, you do need to have money, even excess money more than needed to just survive. Being financially independent opens a lot of doors to how you spend your time, and that’s something we’re going to talk in detail about in our next episode. Then on the other hand, having too much discretionary time is actually linked to lower subjective well-being.32 Though in the study, they found that the effect could be mitigated by spending some of that discretionary time on productive activities. But I think just the main point is that having an abundance of time is not unconditionally good. So there is some nuance there, but that general preference for time over money I think is a pretty clear message.
Be in Nature. Not in traffic.
[0:21:35] MS: Yes. How and where you spend that time too is really important, which is our next section, which is to be in nature and not traffic. There’s actually data on both sides of that statement. So again, that’s another simple mantra you can use to help you make decisions. We talked earlier about adaptation. But one of the circumstances that we do not really adapt to is being in nature. That’s actually a good way that we don’t adapt to it, so it doesn’t really lose its shine. We still get the same happiness hit per dose when we’re in nature. There’s data showing that people living in rural areas, rather than urban areas, or living near green space, or even having good access to green space, all of those contribute to happier and higher life satisfaction.33,34,35 There’s research to back up that sort of rule of thumb.
You’ve already mentioned walking in nature. I mean, we do that every day with our dogs as well. It produces more positive emotions than walking in a city.36 We’re fortunate to have a big conservation area where we are that we get to walk in. That boost and positive emotions exceeds the boost that you’d even expect.37 So you may think, “Yes, I know I’m going to feel pretty good going outside.” Actually, when you go do it, it actually is more than even what you had realized it was going to be. So I think that’s kind of cool to have a pleasant surprise with it. There’s a ton of other nature-related benefits as well to your health and overall well-being, and there’s lots of data around that with blood pressure, and stress and, and other aspects of our health.38,39,40
[0:23:00] BF: Yes, and kids too. There’s really interesting studies on the future psychological health of kids who grew up near green space or spent time in nature.
[0:23:07] MS: Yes, less allergies, less anxiety, more resilience.
[0:23:12] BF: Yes, it’s really fascinating stuff. I already mentioned how I like going for walks. But the nature stuff is personally really, really big for me. I grew up that way out in British Columbia. But living in Ottawa, I used to drive out of the city as much as possible to get into the forest. So we talked about commuting being miserable. I used to live walking distance to my office, but commute to the forest. But then as soon as I could work from a home, so I didn’t have to worry about my office commute anymore, that pushed our family to move out of the city. Now we live in a very forested area in Quebec.
[0:23:44] MS: Yes, that’s interesting. We moved out into the country as well, and I had to commute in from there into the city where I was working in. For a lot of us, we can’t work from home, and that commute can be pretty major. But there’s other options to change how you commute, which can affect that as well. So I mean, the most commonly cited solution is to live close to work like you were doing. But for us who chose not to live in that environment, we change how – we live in the country, but I actually had an e-bike. I bought e-bike way before they were even a thing. By that, I mean a bicycle with a little assist motor, not the scooter that has pedals tacked on to say it’s a bike. The real, real deal. I can take that on this nice trail whenever. Right from my backyard, basically right to the hospital almost.
So it made this sort of 16 kilometre each way commute actually pleasant, because I could go out and exercise. With the e-bike, I wouldn’t get there all sweaty, and I wouldn’t have a bad time at the end of the day if there was wind in the wrong direction or something because I had the motor to help me get there. It actually ended up being as fastest traffic, especially after I built my custom-made e-bike later on. So it’s really awesome and it was fun to do it. So changing the way you commute, even though it may cost you money, or living in the country, it may cost you some money. But those are good examples of spending money to take control of how you’re living your life on like a sort of a big day-to-day bases that can boost happiness. It’s evidenced, that’s based on that to impact us. I actually miss that commute. I don’t do that anymore.
[0:25:08] BF: Yes. I probably miss my forest walk into the office every day, because now it’s a discretionary walk, even though it is a walk in the forest. It’s not as persistent maybe as my walk to work used to be. But your point about commuting and travelling, I think it’s important to just re emphasize. It’s one of those major circumstances that people don’t seem to adapt to. Even after years of commuting, people who commute in traffic arrive at work with higher levels of stress hormones.41,42 So it’s something that if it can be avoided, I think is worth considering. That’s specifically commuting in traffic. Commuting on an open road is not so bad.
[0:25:43] MS: Yes. I mean, I’ve heard that being one of the reasons why people might decide to buy themselves a luxury vehicle, even though from a specific cost standpoint. If they’ve got that commute, they enjoy it more, caressing the leather on the steering wheel than they would otherwise. I don’t know whether it’s true or not.
[0:25:59] BF: There’s study on that. We didn’t have it in our notes, but I’ll mention it, since you brought that up. That says that people with luxury vehicles, imagine their experience of driving their vehicles being better. But when you actually measure the experience, while they’re driving, it’s no different than someone without a luxury vehicle.43 So it’s like they like the idea of having a luxury vehicle, and it’s a nice story to tell yourself and tell other people. But when you measure the actual experience, it’s no different. Maybe the idea is worth something, I don’t know.
[0:26:29] MS: Yes, that’s a great data point. Plus, sweating all the details of the experience, I guess, was the previous point we’ve made. That’s awesome.
Bundle the Good Stuff
The other thing I think to say is that, we have these activities that we can do like activities that build relationships, or skills, or physical activity, time in nature, helping others. All of those have been shown to help improve our happiness, but we’re all limited in time. So if we tried to do all of those things separately, there’s just no way we could ever fit that in without having more being time-poor again, which is kind of counterproductive.
So one of the approaches is to bundle the good stuff and try to take as many of those features in an activity, bundled together for the same unit of time that you’re spending. So combining those can help you out in a time-efficient way. Having some external accountability also helps because, you know, you have multiple competing pressures of your time. But if you have some accountability to do something that ticks all those boxes. Like for example, I was helping my son trained for Nordic skiing over the last couple of years, it hits all of those boxes, and things that make you happy. Similarly, he was actually taking up karate with my kids that broke me out of the earning and spending trap back when I was in that.
[0:27:34] BF: Well, you got to expand on that. That sounds like a big deal.
[0:27:38] MS: Yes. Karate has had a pretty pivotal role in our family. I mean, karate is not going to be for everybody. People need to find their own karate. But I think there’s a bunch of important features from that activity, that are really applicable for people to think about in choosing some activities for themselves. One of them, it bundled all the lot of those good things. It also helped me because delivering on my account always is one of my major values. I had major responsibilities at work, I had two small kids at home, and that just translated into not enough time. I was the typical high-income, time-poor person. My personal health and my social networks outside of work are what got neglected first, because those are kind of the least accountable things. Everything else had a direct accountability.
But with karate, I had accountability, I had to do it because my kids were doing it and set a good example for them. And being a good dad is another major value for me. So that value was able to compete with the other one. It wasn’t an adult class, so I had an attendance requirements, I had testing every month. I had to – maybe accountable to attend classes, practice at home, because I didn’t want to embarrass myself. My kids are doing the same thing. During our black belt tests, which I did with each of the kids, we had to do exercise every single morning and training every single day before school. It’s really humbling to be told by your daughter who’s young to suck it up buttercup and do your push ups. There’s all that accountability there to exercise and do the right things. The other thing I found is it was much easier for me to say no, when I was asked to do something, when I was clearly a saying yes to something else that I valued. So it was there already set in stone and had external responsibility for that.
[0:29:17] BF: That’s interesting. That ties into one of the other values that we’ll touch on later, which is to have decision policies, but I like that. So bundling good stuff that’s aligned with your values and making you accountable and remembering to say no, because you have a very clear commitment. And you’re not just adding a bunch of things that you’re not going to be accountable to the pile.
[0:29:38] MS: Yes, that’s great. Definitely. The other thing I would say about karate, which for me was it helped me gain some perspective because another key feature was, it was outside of work. And I was socializing two to three nights per week with non-medical people from quite literally all walks of life. It’s easy to get lost in your work if your only social network is that work, but it helps to ground you when you build relationships with people who are outside of work, particularly people that work regular hours in a non-professional setting, because they have no problems calling you out and saying, “You’re crazy,” when you let work take over your life because they would never let that happen. So yes, it’s a good segue to our next strategy actually is then, it was good for progressive challenging, and frequent milestones, because there was belts and you had to struggle, but I quit. It helped to push you towards short- and long-term goals.
I think all of those features that are there that I just mentioned are also features of finding flow, which is also strongly related to happiness. There’s even some data in healthcare jobs that having this type of finding flow within your job, they help you with resilience and satisfaction.44 So Ben, could you talk a little bit about finding flow and how you find flow at home and work as some examples?
[0:30:48] BF: Sure, yes. Flow is just an absolutely fascinating concept. I guess we have it in here is one principle, but it kind of covers a lot of different ideas. So it could be finding work that you enjoy, it could be finding hobbies that you love, but to think about it. So flow is, imagine the last time you’re doing something immersive, but challenging. And before you knew it, hours had passed by. Think about it, think about what type of activity puts you in that state. That is the characteristic of a flow state. The researcher who discovered this aspect of happiness, he explained in his research that the best moments in our lives usually occur when a person’s body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile.
Flow is the total state of involvement in an activity that requires complete concentration. It’s an experience so engrossing and enjoyable, the time is forgotten, and people will do it for its own sake, even though it may have no consequence outside the activity itself.45 I think that’s important to recognize for everyone. States of flow and finding flow. But as professionals in particular, I think we have the ability to move our careers in directions that get us into frequent flow states. For me, as an example, writing this podcast series that we’re delivering right now has been a great example of finding flow, like it’s a blast to write it, and think through how to communicate this stuff. Writing with you, Mark has been a ton of fun. Time just melts away. That’s like when I mentioned, I’ve missed my walk, because I worked until 8pm.
[0:32:14] MS: Yes, it’s funny. It was the first thing I thought about when I was thinking about flow at work.
[0:32:19] BF: Yes, it’s funny. Now, this is part of my job, though. Like, I’m employed by PWL Capital, and this podcast is a PWL Capital podcast. The fact that I’m doing this thing that I have to force myself to stop in the evening to make sure I do other enjoyable things, the fact that’s part of my job is not a mistake. I’ve very intentionally progressed in my career to primarily doing things that I thoroughly enjoy doing. I think that people working in professional careers have that opportunity.
[0:32:50] MS: Well, that’s pretty funny, because I called it my job. Actually, don’t really make money doing this as my job anymore, but this is one of the powers of financial independence as a professional because you can shift the work that you do and do some work that you really thoroughly enjoy and find flow in, even though it doesn’t really pay a lot of money to do it.
[0:33:08] BF: Yes, there’s two prongs there. There’s finding work that you can get flow states in is one piece of it. Well, you are required to work, like I’m not financially independent, but I love spending time in my job. Then achieving financial independence lets you do things that you find flow states in without them necessarily being as financially rewarding as you need them to be. Or as you wouldn’t have needed them to be if you were not financially independent.
Then outside work, so you mentioned flow states outside of work, which I think are as important, especially for people are considering or aiming for retirement where you no longer have to work. Having non-work activities I thing is important. So I mentioned hobbies earlier, but personally for me, like I love basketball. I think part of flow states is having spent a lot of time getting good at them. Because that’s one of the things with flow states is, it has to be something that you’re good at, but that you can do at a level that is still challenging. Like I don’t know, like skipping rocks on the river. That’s relatively low effort, and you probably won’t get a flow state doing that. It might be fun for a little bit.
But anyway, so for me, I love basketball, which I’ve spent, like I don’t know how much time, but an incredible portion of my life in the gym practicing. Now, I love like I love going to play basketball, but it’s not going to be the same for someone who hasn’t put the time in to practice. I actually have a basketball hoop in my house, in my living room. Then I have a pickup game that I play in once a week, which was another one of my commitment devices. That’s another one of the accountability things, where if I don’t show up, the other people that I play with, they’re going to be like, “What are you doing? Where were you?” I’ve also got a 3D printing hobby. That’s another thing. That’s a funny one, because that one, I can just dump time into, but I never feel that rewarded afterwards, because I make like a little piece of plastic comes out of all the work. Is that really worth that time.
[0:34:46] MS: Yes, it was worth the process.
[0:34:49] BF: Yes, that’s probably true.
[0:34:50] MS: Yes. I heard that that hoop actually replaced a trampoline in your house.
[0:34:53] BF: Yes. We had a huge trampoline in our living room, which was super fun. But our house isn’t like that big. We have a fairly large kind of front room in our house, big enough to house a huge trampoline. It’s got a super high ceiling, like I don’t know, high enough that you don’t have to worry about it. So I had to ditch the trampoline. We had the basketball hoop and the trampoline together for a couple of days. But my wife was like, “This is not okay. There’s just no space.” So I had to ditch this trampoline. Kids were not happy.
[0:35:17] MS: Yes, that was like my first thought, because I need the trampoline to actually reach the hoop, I’m pretty short. That was like my first thought, wow, a trampoline and a hoop. That would just be perfect for me. I think that development of flow opportunities outside of work, I think is actually an excellent point that deserves a bit of repeating. I think when – I see a little – I have friends and colleagues that have retired multiple times. I think one of the challenges they face when they retire, or even when it’s looming is that they haven’t taken the time to find flow in non-work activities. It’s one of those things that can really help you launch into that next phase of your life. If you’re thinking about retiring, is to make sure you’re building up those activities outside of work.
I think the same applies to relationships too. If you invest our time on non-work interests and relationships. That compounds over long periods of time. It’s one of those things that it takes time to develop that skill to make flow possible. Because you mentioned that you have all the time you spent playing basketball to get really good at it, and that’s why you can have flow in it. I think we can’t just pick up something and instantaneously find flow in it. It takes a bit of time to build there. Same thing with relationships, and it’s like compounding interest, it’s not one of those things, that it’s easy to go back in time and then make up for it later on. You kind of have to make that investment along the way.
[0:36:34] BF: Yes, that’s a huge point. It ties into the foundational regrets that we discussed in a previous episode. One of the biggest areas of regret that you can’t fix in the future, because you didn’t build the foundation. Like you said, you can’t just go and build that foundation later. But I think when you’re working toward financial independence, having things to bridge that gap between work life where you’re super engaged in what you’re doing for work, and then having other stuff that you can be engaged, and then find flow states and post work is huge. But like you say, that point is super important, that it’s not the kind of thing that you can just decide to start doing once you’ve stopped working. Like, okay. Now, I’m going to start the rest of my life. Like you have to be working toward that pre-retirement. So that when you do retire, you have things that you’re already good at, and that you can already melt time into enjoyably.
Consider Other People
Another big one that’s a common thread through a lot of the well-being literature is considering other people. So it’s a big thing, because it matters both to how we spend our time and how we spend our money. I’m kind of talking about two things when I say considering other people. One is relationships, which we’ve mentioned quite a few times. I mean, I guess you can kind of see how important relationships are considering how much we haven’t mentioned them. But it also talks about pro-social activities that’s doing things that benefit other people. So it can be spending money on other people, taking somebody out for a meal, or donating money. But it can also be giving time. So that could be volunteer work or something like that.
Personal spending is generally unrelated to happiness, but pro-social spending, so that’s the donations or spending on other people is predictive of elevated happiness.46 Pro-social behaviour in one study was associated with better well being consistently across regions during the COVID-19 pandemic.47 People who engage in pro-social behaviours seem to experience greater meaning in their lives, higher personal worth and higher self-esteem.48 And then on the relationships, people with strong ties to friends, and family, and a commitment to spending time with them have the highest levels of well being,49 and the quantity, and depth of social interactions is also positively associated with greater well being.50
[0:38:32] MS: Yes, that’s a great one. I think that’s going to have to be a whole episode. There’s so much good data in there that we can talk about with how to give effectively, not just for the impact, but also for your happiness. That is also tax effectiveness, giving as well. So we can do a whole episode on that one.
[0:38:49] BF: Yes, there we go. We’re up to however many episodes you have planned, plus one.
[0:38:54] MS: Yes, we keep tacking them on.
Set Decision Policies
[0:38:56] BF: Another principle that I really like, and I got this from Ralph Keeney’s book51, who we’ve mentioned in the beginning of this episode is to set decision policies. This is a quote from Ralph’s book, “A personal policy decision involves selecting a rule for making specific decisions that frequently occur in your life. Following that rule for these decisions, provides consistency and saves time.” I love that. We make a lot of decisions every day, which is another thing you mentioned the beginning of the episode. Creating policies for decisions that we know we’re going to have to make repeatedly, can be a really nice idea.
I have a recent personal example. It’s not a huge decision, but it’s just a recent one that I had to make. So it’s top of mind. I’m six-foot-eleven. I’m taller than the average person. I had to book a flight recently, after not flying for years. I don’t know when the last time I flew. I can’t even remember, but it’s been a long time. Definitely not throughout the whole pandemic situation. So I had to book a flight, and I was sitting there, agonizing unnecessarily over whether I should book the extra legroom. It’s like, “Oh, it’s a six-hour flight. Four and a half hours, maybe. Six hours total, yes. Two different plates. I was like, “Oh, it’s going to be miserable without the extra legroom, but it was like $80 to upgrade.” I was just like, “Ugh! I don’t really want to do that.” I just decided after thinking about it for a few minutes, like, “You know what? At this point in my life, I’m a little stiffer than I was 10 years ago, and maybe a little bit more financially healthy than I was 10 years ago.” So I was like, “You know what? My policy going forward is that any flight over an hour, I’m going to pay for the extra legroom, it’s going to be whatever. A couple $100 maximum.” That decision is done now. Whenever I book a flight, I booked the extra legroom. But I think Little things like that can be super valuable to set personal decision policies for.
[0:40:30] MS: Yes, that’s great. Policies for common things that would relieve a lot of the sort of emotional and cognitive load of those frequent decisions. I’m already thinking in my mind, some ones that I might make like a – I’m thinking now, we moved a barbecue earlier this week, my wife and I did. And we’ve moved everything ourselves for multiple house moves, furniture, whatever. We’re not super large people, but we do this. And I’m now pulling things, and I’m thinking, I’m going to make a policy about anything over 300 pounds is hire it out.
[0:41:01] BF: That’s perfect. That’s a perfect example of a policy.
Know Your Values
[0:41:03] MS: Oh, I love that. The other thing I think you need to do is know your values. This helps to dive into making your decisions. We’re going to do a deeper dive into that in some other episodes. We’ve already spoken a lot about that in the previous episodes, but it’s probably the most important point on our list in that. In decision theory, before making a decision, you need to know what your decision values are. So that actually guides the decision. That’s what we did as the first couple of episodes in this series, as we started talking about these things that make people happy. But knowing your values will help you with this decision making.
Remember everything we’re seeing here is descriptive, not prescriptive. So you all need to kind of take the time to figure out what your own values are. That actually is something you have to actually take the time to do. It’s not something that you’re going to just have happen. You have to actually think about it. You can use that to help to define your good life, and your decision-making policies.
We did also talk about regret in episode number one, and one of the things to use that regret knowledge that we have as principles for decision making. So making it actionable advice.
Lean into regret
I think the key with regret is to lean into it and use it to your advantage. So not all regret is bad, and it can actually help us in many ways. It can help improve future decisions, it could boost your performance, and it can deepen meaning for things.52 I’m going to just give a few points about that. So one of the things that regret aversion can improve our decision quality. Part of why it makes us improve our decision quality is that it makes us pressured into collecting more information.53 So we talked about thinking about all the details. We’re using regret as a way that we can make ourselves gather more information before making a choice. So we can sweat those details downward counterfactuals. [Inaudible 0:42:42]. It could have been worse, at least it wasn’t that. That can make people feel better about what’s going on upward counterfactuals. So if only I’d done this, it could have been better. Well, that can improve your performance if you take that and then do it the next time.54 So it has that ability as well.
And then thinking about alternative outcomes can also lead people to deriving more meaning from important events.55 So if you think about what’s happened, and some big important life event and all the things that could have happened, then you may actually appreciate what’s going on better. So there’s research data to show that, and it’s ironic, because there’s this popular phrase about having no regrets. But it may actually not make any sense. Because if you don’t have regrets, you can’t use them to appreciate what’s going on and make it better. So I do think it’s true that frequent episodes of regret in the absence of self-regulation are detrimental to well being. So if you’re just regretting all the time everything that’s going on, that’s going to be bad for you.
But it can be a valuable emotion if you use it right — to your advantage. So people value their regrets, actually substantially more than they do other negative emotions.56 So it’s probably one of the most important negative emotions that we have, because we can actually use it. I think this is the key point, is that rather than ruminating on regrets, use them to improve your future decisions, which is, we’ve talked about ways to do that.
[0:44:02] BF: Yes, I love that. No regrets is maybe not a good idea. But there are ways to use regrets to make better future decisions.
Satisfice on small decisions. Maximize on big ones.
The other principle related to regret that I think is worth thinking about is to satisfice on small decisions and maximize on big ones. So there’s pretty interesting research on maximizing versus satisficing. I’ll explain what those mean maximizing is like trying to optimize every decision and examine every possible path for the decision. And then satisficing is kind of being more willing to settle on a reasonable decision as opposed to trying to optimize everything. Now, maximizing and this is why this is important to what we’re talking about. Maximizing is negatively related to happiness, optimism, self-esteem, and life satisfaction, and it’s positively related to depression, perfectionism, and regret.
Maximizers tend to be less satisfied than satisficers with their consumer decisions, and they tend to be more likely to engage in social comparison, which we talked about in past episodes. And they’re more adversely affected by social comparison. Maximizers are also found to be more sensitive to regret.57 So maximizing everything, like maximizing where you’re going to go for lunch, or which path to take on your walk, all that kind of stuff, trying to maximize those are probably not a good idea, because it can lead to more regret or I don’t know. Like which iPhone to get is another one. Maximizing that might lead to wondering, “Oh, what if I’d gotten the other modeler? All that kind of stuff. But then for larger decisions – large is obviously subjective, but more material decisions about strategic direction of life, or maybe decisions that are related to the four core areas of regret. In those cases, I think it does make sense to apply the kind of thought process that we’re going to talk about in our next episode. To maybe try and, I don’t know if I’d quite call it maximizing, but to thoughtfully consider the decision.
[0:45:49] MS: This is great. This is exactly why we’re doing this podcast series for high income professionals. Because this is something that we actually have the ability to sacrifice a lot of those simple decisions day to day and not worry about it, as long as we maximize the really important ones. It’s critical. This is different than a lot of what we hear about in personal finance, which I think is why it’s really important. We’ve done these first few episodes about these topics, because a lot of personal finance will say, “Oh, penny pinch on the budget here and there, and watch all these day-to-day little tiny decisions and focus on optimizing how you can get points on your credit card, and 0.1% lower on your line of credit interest rate. But those are smaller things, you got to think about these big decisions and put your energy there instead.
[0:46:32] BF: Yes, that’s a great point.
[0:46:35] MS: I think we’ve covered a number of treatment modalities that we can use in building the good life. So I think we’re pretty much to the end of the procedure here, we’ll pull the money scope out, do a quick debrief and plan for the next episode.
Great, so in the first two episodes, we talked about what generally makes for life satisfaction and happiness. Today, we discussed a number of strategies to actually use on a day-to-day basis to do that. The good life isn’t really a destination, it’s a journey. So all these day-to-day decisions are actually important. We talked about how we can do that efficiently and offload some of that cognitive load. Because you want to enjoy that journey, so that it makes you happier along the way. You don’t want it to be a miserable journey for some vaunted destination you may never reach. And it keeps you motivated along the way, if you’re doing it well to then work towards the longer-term goals.
[0:47:47] BF: We’ll dig more into that in our next episode, we talk more about goal setting. But there’s interesting data on that too about attainment of progress toward a goal gives you satisfaction. Attaining the actual goal gives you satisfaction, but once you attain the goal, it doesn’t last that long. Whereas, the progress points, they kind of keep going. So yeah, enjoying the journey is super important. I think we talked to Chris Hadfield about that too, and he was on Rational Reminder about having big goals that you may not actually achieve. He talked about his – he wanted to be an astronaut. Pretty big goal, he achieved it.
But he talked about how much he loved the journey, and so you have to love the process of trying to achieve especially big audacious goals like that, which is just statistically there’s a good chance that you won’t be able to achieve. So he talked about how he would always ask himself, what would an astronaut do? So when he’s trying to make these decisions, what would an astronaut do in this situation? So you can think about it as, what would a really good dad do in this situation? You have to enjoy the answer to that question. In Chris’ case, what would an astronaut do? He loved the answer all the time. So I think that’s super important. Okay. So to kind of recap on some of our principles, choose experiences over stuff, unless that stuff helps with experiences.
[0:48:58] MS: Yes. If you have a hard time spending money to do that, because you have the frugal gene, like I’ve had pre-pay to use it in your favor, and count the number of times left for activities that you love to increase your motivation to do them, rather than put them off.
[0:49:13] BF: Yes, sweat the future details, think about the little day-to-day details when you’re making decisions. And then you may actually get some pleasure from anticipating that as well. And these don’t need to be big things we can enjoy frequent, small, simple things, but the trick there is savouring them, and enjoying them, and being mindful of how awesome they are.
[0:49:33] MS: One of the rules of thumb is to prioritize time over money. It’s ironic that high income people often feel more time poor. So recognize that if it’s you, and use your money to your advantage.
[0:49:44] BF: Be in nature, not in traffic. That’s worth thinking about for where you live, where you work, and play, and the commute in getting between those places.
[0:49:52] MS: Yes, bundle the good stuff together with activities that check multiple boxes of what makes you happy, so that you can use your limited time to get as many of them in as you can, and use accountability to help you.
[0:50:04] BF: Find flow with activities that engage you with the right level of challenge. So there’s a lot of pre-work there to gain skills that you can then apply. But I think that’s really important. Then, we did have a couple other ones which were considering other people be considerate of other people, that pro social activities is a big one that matters, both how we spend our time and how we spend our money. Set decision policies for small recurring decisions, and then know your decision values, which is something that we’re going to spend a lot more time in the next episode.
[0:50:35] MS: Yes. Don’t worry about regret. It’s actually one of the most powerful negative emotions if you use it the right way. So let your past regrets be a guide for your future decision making, and don’t try to maximize every little decision because then you can just overwhelm yourself and be counterproductive. So try to just satisfies for the minor everyday things and then focus your energy to maximize the things that are really important, but infrequent. So I think we’ve covered a lot there, and we will make sure that for the next time, we’re going to cover some more the goal setting and some financial independence. In the meantime, pick one or two of the strategies that we talked about today and see how that might apply to your own life. Just make sure you make it small, frequent, and savour it.
[0:51:18] BF: All right, that’s it. We’ll see you for the next procedure.
