Happiness Equals Reality Minus Expectations. Put another way, this means the lower your expectations, the happier you are. Some people view that as depressing and it’s easy to see why…
On the other hand, those that understand this and apply it in their lives, are just plain more likely to be happier people.
While we hope our expectations and reality will match up, they often don't. The difference in someone’s expectations vs. reality can lead to feelings of discontentment and unhappiness. Think about it this way, have you ever thought you were going to get something like a big bonus, a gift from someone, or an invitation… and then… didn’t? How’d that feel.
This is because of a little chemical in your brain called dopamine. It may not look like much when you see it as a chemical compound, but dopamine gives you feelings of pleasure, satisfaction, and motivation (amongst others). Dopamine signals come from the root of your brain where your spinal cord connects. The brain has approximately 100 billion neurons and well under one-thousandth of one percent (0.00001) produce dopamine, but that small amount has BIG power of you.
If your expectation was to receive something and you do receive it, then there’s no increase your dopamine.
Meanwhile, ALL unexpected gains have a big increase. When a reward comes as a surprise, the dopamine neurons fire longer and stronger than they do in response to a reward that was signaled ahead of time. Think back to any incredible surprise you’ve received. Again, maybe it was a big bonus from work, a lovely meal with someone, or a new friendship. It probably felt great.
If a reward is expected but it fails to materialize then dopamine dries right up.
This just all points to the same thing as before: having no expectations doesn’t hurt your happiness, but it can definitely increase it when there’s a positive surprise.
Think of it this way. This table shows what’s expected on the top, and what’s received on the left. Starting with when someone receives a gain. If they expect it, it’s not really anything, it’s more neutral, but if they expect nothing. Awesome.
On the bottom we have receiving nothing. If we expect to receive and don’t, that’s a bummer, but expecting nothing and receiving nothing is also neutral.
So the column on the right of expecting nothing is the only path that doesn’t have downsides, but does have upsides.
What you can do with this information is assess what your expectations are for different areas of life.
If you are planning on retirement and think it will be the best thing ever, understand that many retirees struggle to find purpose in life, structure for their day, meaning, friends and family to spend time with, and can end up directionless and bored.
If you think you are going to receive a large inheritance, know that often that doesn’t happen whether it’s due to the benefactor spending their wealth, the inheritance diminishing from costs and processing fees, or not having a discussion about when/how much it truly would be.
It’s easy to feel like bad things happen to other people that are unlucky, until… Remember that bad luck can strike anyone. You can become one of those ‘other people’.
A good financial adviser should be aware of what kinds of things to expect, like how often life-events take place, what affect it could have on a person, and how to best prepare for these things. This is where a financial adviser can be valuable – by using foresight to be a barrier at the top, instead of an ambulance at the bottom of the cliff.
The main Take Aways from this are simple:
The less you expect or lower your set your expectations, the better for your happiness.
The happier you are, the more likely you are to feel in control of your life.
Our goal at Irvine Wenborn is to help people live better lives by improving their decision-making, and we do that through a financial lens.
You can find us at our website, email, or on socials.
You can also share this video with anyone you’ve heard that has incredibly high standards, and get their take.
If you enjoyed this video, here’s a link to part 2, where we dive into this and how it affects a person’s investments and the choices they make with capital allocation.
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