Tuesday, 9 September 2014

Smart Wallet Tip: The Happiness Formula Edition

“Annual income twenty pounds, 
annual expenditure nineteen nineteen six, 
result happiness.

Annual income twenty pounds, 
annual expenditure twenty pounds ought and six, 
result misery.”
– Wilkins Micawber (David Copperfield, by Charles Dickens)

Outdated literature? Not at all. You will find much happiness when you learn to live within your means. And we can do this by reducing our wants. What pushes a typical £30000 p/a income over the brink? A few extra evenings out or even a new car or some nice new designer handbags, a new laptop, tablet or a smartphone. Moments and experiences that we care not to remember shortly afterwards, items that lose their appeal after the initial wow, they soon need replacing with newer shinier items to wow us again momentarily. (This is the essence of consumerism).

The solution is not to do insurance fraud and register your car to some rural farmyard out of the city to save yourself a few bucks, claim fraudulent benefits or to lie to the taxman and earn cash on the side - immorality and sin money (and the tax-man) will eventually catch up with you. Cut your expenditure, cut the crap in your life and feel the burden lift off your shoulders. Give your credit card, your bank account and your wallet and ultimately yourself, a little room to breath.

Living within your means, is not a very appealing concept. I mean, personal finance and investment is about eventually rolling around in flashy clothes and fast cars, right? Expensive watches, sunglasses and convertible cars are what we expect, yet all we face are overdue bills and desirable items that we spent days scoping out and shopping for, but which no longer mean anything to us.

But in the long term, non of that matters if you spend more than you earn, ultimately you will have to cough up the money and still be in the red.

But, penny pinching is only for the tight-fisted and really poor. Why would a middle-class citizen or even a upper-class consider it? The rich want to keep their money so do the poor. The same rules apply. Earn £10 and spend £11, misery. Earn £10,000 and spend £10,001, result in.... misery.

After years of ultra top secret research in a urban high tech lifestyle, I can now reveal to you my ultra top secret formula for happiness:
Expenditure > Income = Misery
Expenditure < Income = Happiness
Stop being miserable.