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1.8. Life-cycle of happiness

What is happiness? It is a state of being expressed in many ways, such as psychological well-being, life satisfaction, emotional well-being, subjective well-being, and so on.

Most adults regard "life" as a long and slow decline from birth to death. What they mean is that people are happy as carefree / responsibility-free toddlers and teenagers, and then their degree of happiness declines over time, reaching what is called a mid-life crisis between 40 and 50. The degree of happiness then declines further until it disappears entirely (= misery) as old age creeps up, and this is so because old age is accompanied by physical ailments such as painful joints, failing eyesight, memory-loss, etc., as well as the happiness-killing thought of dying soon.

This is not the case; rather, research indicates that the happiness life-cycle is U-shaped (see Box 1: happiness cycle superimposed on the four phases). According to research there are four factors that impact on happiness:

- Gender. Women are slightly happier than men, but are more susceptible to depression.

- Personality. There are many personality types, with the extremes being neuroticism and extroversion. The former tend to be unhappy, because they are prone to guilt, anxiety, and anger, and they tend to be gloomy, and alone. The extroverts are the most happy, because they form relationships easily, enjoy parties, and take pleasure in working in teams.

- Circumstances. This factor includes relationships (linking with the aforementioned), education, income, health and probably the major circumstantial factors: stress and associated worry.

- Age. As we will see, age is a major factor in happiness, and that stress and worry, the major happiness-inhibitors, are age-related.

In what follows an important assumption is made: people are emotionally secure, have a home, enough to eat, a good education, a career, good health, average income, and reach their FSG in their late fifties to early sixties. This leaves the main factors in happiness to be age and related stress and worry circumstances.

Certainly, babies, toddlers, and pre-teens are happy. This is because they have no responsibilities, except to pay attention later at school. Teenagers, however, have challenges and therefore stresses and worries: at school, at home, amongst peers, dating, at social events. Happiness declines under such pressures. This continues into early adulthood: at university or work.

Making a living can be rewarding emotionally, but it is usually associated with many stress and worry factors: competition for position, impacting on interpersonal relationships in and outside the work environment; postponing consumption to later (saving to reach the FSG); long working hours and associated tiredness; attending cocktail parties and entertaining (to remain part of the network); general anger at circumstances.

Happiness declines under these circumstances. However, there are events that give relief at the age of middle-to-late twenties: marriage, young children and friends. However, the children-factor pales after a while, as a result of the associated costs (largely unanticipated and therefore not planned for). This impacts heavily on savings. Children become teenagers, are generally angry, and challenge parents when they are at their most stressed-out stage: middle forties. Research indicates that the low point, sometimes called the mid-life crisis, is at median age 46.

Thereafter, stresses and worries remain constant for a while and ease later when the children grow up and leave home. This stage is associated with a higher disposable income and higher savings, bringing the FSG closer. The senior stage is reached thereafter.

As people move to senior years they lose vitality and mental sharpness, they have or will have ailments, and they lose their looks. They look grumpy, as a result of gravity which "pulls" the sides of the mouth down, and are therefore treated with disdain or are ignored by the young. Older workers are often placed in unventilated corners with their disregarded opinions. All these disadvantages are a recipe for unhappiness, but the reality is very different.

At this stage happiness rises sharply, a result of many factors, including:

- Financial security.

- Enhanced ability to control emotions and find solutions to conflict.

- Better at accepting misfortune.

- Less prone to anger and less inclined to pass judgment.

- A live-for-the-present attitude as a result of a limited lifespan, i.e. a determination to make the best of the remaining years.

- Acceptance of strengths and weaknesses.

- The absence of ambition and competition for position.

- Grandchildren, without the responsibility of good parenting.

As a result of these factors, stress and worry give way to general cheerfulness and happiness. This more than compensates for the physical disadvantages that accompany old age referred to above. The net result is more productive older people, just at the time when they leave the work force.

Is the average person able to buck the trend? The answer is no, but it is possible to alleviate stress and worry in middle-age by being aware of the life-cycle of happiness and its contributing factors. Stress and worry management is key, and sufficient sleep, regular exercise, adequate saving and sound money management are parts of the key.

1.9. The life-cycle and investing

As we said upfront, the above exposition is of little use if one does not have investments. Only a small percentage of people (some studies say 6-10%) reach their financial security goal (FSG), and are able to replace formal work with other activities.

Achieving your FSG at an appropriate age (i.e. whenever you wish to) is in your hands. The rules to be followed in the four phases of life are straightforward, but the majority of individual do not follow them. The reason is to be found in behavioral finance: people are innately optimistic, meaning that they subconsciously believe that will "somehow" achieve their FSG. The reality is that one has to consciously plan one's financial future. There are many hurdles (such as peer pressure and ill health) to achieving one's FSG, and these must be in one's consciousness and managed.

There is much pleasure in achievement, especially the achievement of one's FSG, and there is much unhappiness resulting from having to rely on one's children or the state for food and shelter. In general there are three assumptions to happiness in one's advanced-age period:

- Financial health.

- Physical health.

- One's children must be on the success treadmill (for this reason their education is paramount).

This section is followed by the sections:

- The financial system.

- Investment instruments.

- Investment principles.

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