Last week’s post started the transition from looking at the financial cost of decisions (housing, education, supplements) to considering a deeper question of how to “manufacture” satisfaction and happiness.

We often hear that money can’t buy happiness but that ignores the reality that money CAN be used to increase personal freedom as well as purchase unique experiences – both of which link strongly to personal satisfaction.

If you’ve read Kahneman’s book then you’ll find his explanation why the following seem to work well for creating personal satisfaction. I’m going to share practical techniques that I’ve used to change my life – usually for the better but also to mitigate when life shifts against me.

+++

Take pain in large doses and quickly because the direction of movement, not the size of the movement, is what dominates how we feel. 

My best example of this tip is to downsize every few years.

Voluntary downsizing — In 2001, I moved to New Zealand and managed to live on 5% (five percent) of my 2000 cost of living in Hong Kong. My life satisfaction went way up due to an increase in fresh air, exercise, personal freedom and fitness.

Surprise downsizing — In 2009, my family was facing a 95% reduction in our income. I cut 90% from my personal expenditure and 50% of my family’s expenditure. That time my satisfaction went down (the cuts were painful). However, we quickly adapted to our lower expenditure and our satisfaction fell much less than our expenditure.

Setbacks, both planned and unplanned, can give us a new appreciation for things we take for granted: nature, spare time, personal health, friends and family.

+++ 

Be aware that the attraction of remote possibilities and an aversion of certain losses will skew your decisions. Take pain decisively and eliminate your underperformers.

I touched on this last week with regard to relationships. However, it applies in all areas of our lives. A good test for whether you should cut losses is “how does this situation/person/job/choice make me feel about myself?”

We have a tendency to hold onto under performing situations because we will favor a remote chance of success over the certainty of crystallizing an existing loss. We also anchor on past investments of time, money and emotion that are already gone within a situation.

In my life, the most dangerous under performers come with high fixed costs and emotional attachment. Examples include prestige assets (boats, cars, homes) and investments that can cost you money if they underperform.

Within investments I’ve been caught by: high fixed costs; unexpected cash calls; and leverage. You’ll find these risks in: early stage companies, capital intensive businesses, cyclical industries, vacancy rates, and businesses with inventory that loses value quickly over time.

It goes against human nature to take pain quickly but it is a useful habit to reinforce, especially when investments, or relationships, are off target early.

+++

Because happiness is relative, make incremental positive gains visible.

Athletes: get out of shape each year but not out of health! Build fitness slowly and make your gradual progress visible to yourself.

Finances: each month increase your core capital (low risk, low volatility, visible). I built a habit in my teens of saving 10% of everything I earned. The habit served me well and I grew accustomed to watching a small, incremental increase each month. Even with a stable net worth, you can reallocate capital (say, towards a college fund for your kids) and achieve satisfaction.

Benchmarks: choose targets that you can hit every single day. Create a habit of keeping small promises to yourself. Every day that I get up before 7am scores me a “win”. Every day that I do some form of exercise scores me another “win”. Daily wins reinforce my self-esteem and strengthen my will, when required.

Motivation: frequent smaller gifts are far more valuable than infrequent larger gifts. Small gifts are particularly effective when not expected. I’m most generous on the 364 days a year that aren’t Christmas.

+++

Priming and Framing – each of these gets a chapter in Kahneman’s book, so I won’t repeat his findings but I will tell you how I use my automatic mind to shape my life:

I use cues:

• As an elite athlete, I had a sign that said “The Best” on my car’s speedometer.
• The door to my bedroom had the splits to a 8:29 Ironman visible for more than a year before I got it done, perhaps I should have written down 8:24!
• When my daughter is difficult I ask myself what the Dalai Lama would do. The reference to Buddhism confuses me a little bit, makes me less aggressive and I pause before following my automatic response to follow aggression with aggression. Break the chain, break the chain!

I seek, and spend time with, people that are relentlessly positive and unreasonably loyal. The flipside is avoiding liars, gossips and those with confused minds.

I buy photos and paintings that remind me of my favorite places and hang them where I see them often. You can tell a lot about someone by what’s stuck on their fridge, or printed on their t-shirts. It doesn’t need to be a Monet to have a positive impact.

All of these tips can work against us when inverted. Stress priming and framing for failure are extremely common – most prevalently through the news media and advertising, which feed on fear and lowering our self-esteem.

Look around where you spend your time, what do you see?

Choose wisely.