You can’t buy happiness, so don’t try. Here’s how to get out of that rut.
When Lisa Zamparo was 19, she wrote down her goals. By 30, she had accomplished them.
She was a chartered professional accountant. She spent years at a big firm on Bay Street before taking a finance director’s role with an $ 85,000 salary. She lived what she calls a Sex and the City lifestyle, shopping and wining and dining.
Yet, she felt unfulfilled and decided to re- evaluate her life and her relationship with money.
“I was at a high- paying j ob and I was spending a lot — almost as if I was compensating for not being happy,” the 32- year- old Toronto resident says.
“I came to realize that I had set goals based on the idea that I measured my success by dollars. But that kind of success is empty.”
So Zamparo quit her job and, in August of 2015, started her own financial coaching company, helping people realign their spending with their values.
While not everyone will reach an outcome as drastic as Zamparo’s, challenging your financial beliefs and behaviours can go a long way toward replenishing your bank account and enriching your life in general.
Here are five financial habits you would be wise to leave behind in 2017:
NORMALIZING IN DEBTEDNESS
“Two generations ago, the conventional wisdom was that you never borrowed money to buy depreciating assets,” says Preet Banerjee, a personal finance commentator and management consultant to the financial services industry.
“Today we think in monthly payments.” Household debt continues to hit record highs, with Canadians owing $1.67 for every dollar of disposable income they earned at the end of the third quarter of 2016.
“We need to shift our thinking back to the tried and true principles of personal finance,” he says. “Borrowing money today is like negotiating a pay cut with your future self ( due to the interest you’ll pay) ... If you find you can’t buy depreciating assets without borrowing money, that’s simply an indication that you can’t actually afford it.”
RELYING ON WILLPOWER TO SAVE MONEY
Your willpower is like a muscle, Banerjee says. It can be depleted and it can be replaced. You must appreciate how taxing it is to make f i nancial decisions and give yourself time to consider them or come up with money-smart strategies.
For e xample, r emove temptations: If you must, avoid malls, and don’t shop on an empty stomach or when you’re feeling tired or stressed.
Siphon money automatically out of your account so you don’t have a chance to spend it. To reach a big goal, break it up into mini bite- sized goals and find a savings buddy ( Chilean entrepreneurs who reported weekly to a self- help peer group deposited 3.5 times more often into their savings accounts than those without s upport). Just get into a habit of putting money aside.
PRIZING CONVENIENCE AT ALL COSTS
We are quickly becoming a cashless society. Only 25 per cent of Canadian transactions were in cash in 2015, according to a survey by market and consumer information firm GfK. We also shop with a click of a button or a remark to a virtual assistant and order items on auto-refill.
Yes, technology makes life easier; but experts also warn that it makes spending money easier. Retailers and financial institutions want the payment process to be as “frictionless” as possible; for example, MasterCard announced that customers will be able to verify their online purchases with the quick swipe of a fingerprint or a snapped selfie in lieu of entering a password. A faster checkout process removes any pain that you’ll feel when spending money and that can be hazardous to your bank account. Pause before big purchases. Use apps to set shopping budgets.
Have your bank balance appear with a click on your mobile device. And consider going old- school and using cash. Dilip Soman, a professor of marketing at the University of Toronto, references a recent study that shows that people who use cash not only spend less but have a better relationship with the product they buy, treating it better and holding on it to for longer. “There’s more thought involved and it’s a much more painful process so you tend to value it more.”
BELIEVING THAT BUYING THINGS WILL MAKE YOU HAPPY
Thousands of research articles back up the cliché that more money doesn’t always mean more happiness and that buying material goods may not boost day-today joy. Take luxury cars, for example.
Researchers f rom t he University of Michigan and Peking University found no link between the enjoyment of driving and the model or year of car that people drove.
That is, unless the researchers prompted people first to think of their luxury cars: then those with more expensive cars felt happier driving their vehicles. All that junk we buy loses its lustre.
The novelty wears off, the shopping high from an endorphin and dopamine dump dissipates and then we just need more stuff. If you are looking to “buy” happiness, science suggests that you should spend your money on experiences and on other people, rather than on things.
FAILING TO STICK TO YOUR I NVESTMENT PLAN
“Investments are like a bar of soap,” Banerjee says. “The more you touch it, the smaller it gets.”
While taking an interest i n your finances and investing for the future are musts, trading too much and too often can reduce returns. That is not only because of transaction costs but because investors who pick investments based on recent returns often buy when prices are near their peak.
“Every disciplined investment strategy will have it’s own cycle and if you bail on yours after a period of poor performance only to switch to another strategy that has just had a period of good performance you’re essentially selling low and buying high,” he says. “Many investors would benefit from simply tuning out the short term market movements and corresponding noise from the media.”