Weekend Reading: Investing for Money vs. Investing for Happiness

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading investing for money vs happiness Weekend reading investing for money vs happiness
Weekend Reading

While you may think the concepts of investing for money and investing for happiness are the same, psychology says otherwise. Money can provide you certain comforts and opportunities, but it does not guarantee happiness.


The hedonic treadmill effect: Financial independence, which is often pursued as a goal, should be seen in the context of its purpose. While the idea of never having to work again may be appealing, your ultimate goal is often to achieve happiness. Research shows that after major life events, you often return to your baseline levels of happiness (the hedonic effect). As such, reaching financial independence may not result in as substantial an increase in happiness as you anticipated.

Measuring happiness: In order to understand the impact of small sacrifices on your journey to financial goals, it's helpful to assign a value to your Happiness Quotient (HQ). For instance, indulging in small pleasures, such as buying a fancy coffee, could provide a 10 percent HQ boost. This may contribute to a slightly improved day-to-day experience now, but it’s also important to gauge how your HQ could shift down the road.

Your path to becoming “Job Optional” should be one that allows you the most enjoyable journey, where sacrifices provide marginal utility without diminishing returns. The focus should not solely be on accumulating as much wealth as possible, but on maximizing your cumulative happiness.