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3 Ways to Invest in Your Happiness

If happiness is your goal, if thriving on a day-to-day basis is what you desire most, then you must budget for and invest in the following areas.

Ask a room full of people what they want most out of life, and the overwhelming response will be "happiness." Ask a room full of parents what they most want for their children, and the overwhelming response will also be "happiness." Positive psychology — the science of happiness and well-being — teaches us that there are five measurable elements that contribute to our overall happiness or well-being: positive emotion, engagement, relationships, meaning or purpose, and accomplishments.

What about money?

Notice that money and material possessions are not on the list. That is because studies have found that once we achieve a certain threshold of financial stability — essentially, being able to meet our basic living needs— more money only slightly impacts our happiness, and more importantly, does so for only a very short period of time.

So, what is the value or purpose of having more money? Why invest and try to grow your financial assets if it will not bring you or your children happiness or increase your overall wellbeing? The answer is that money is a tool, a resource that can be used towards achieving your goals — it is not a goal itself. The value or purpose of money is what you make it out to be. What you do with your money determines its purpose and value.

The wealth management industry has caught onto this concept in recent years, as investment strategies have shifted to what is commonly referred to as "goals-oriented investing." That is, investing towards achieving your stated life goals and measuring the success of your investment strategy by whether or not it achieves those goals, as opposed to merely looking at the overall value of your portfolio.

The problem is that the goals which traditional wealth management is focused on achieving are measured purely by financial metrics (i.e., how much money you need to afford a nice house, car, quality schools for your children, vacations, etc., and to save for an early retirement). It also seems like traditional wealth management is focused on helping you get through your current life, so that you can get out of it as soon as possible. Instead, wealth management should be focused on helping you thrive in your current life and building a life that you never want to retire from.

How to invest in your happiness

In order to thrive or flourish in this lifetime, you must invest in things that will increase the five elements that science tells you will bring you happiness: positive emotion, engagement, relationships, meaning or purpose, and accomplishments. This requires understanding that your wealth (i.e., the assets you can acquire or invest in) consists of more than just financial assets, or capital.

In fact, there are four different types of capital you can invest in: financial capital, human capital, creative capital and social capital. Financial capital consists of everything you own or anything that can be purchased using money. Your human capital is who you are (i.e., your natural talents and abilities, learned skills and knowledge, passions, spiritual beliefs, values, etc.). Creative capital consists of your original ideas of value, your creativity and what you create or contribute to the world. Finally, there is your social capital (who you know, your relationships, family, social, professional, public audience, etc.).

As we have known for a long time, and as science has recently confirmed, increasing your financial capital does not lead to happiness. If happiness is your goal, if thriving on a day-to-day basis is what you desire most, then you must budget for and invest in the following:

Invest in yourself

Start spending money to cultivate your natural talents and abilities and transform them into masterful skills. Take courses and continue learning about subjects that interest you. Prioritize your physical and mental health, so that you have increased positive energy and feel your best. Seek out meaningful experiences when you travel. These are the things that will keep you most engaged and lead to accomplishments that generate positive emotions.

Invest in your creativity and bringing your ideas to life

Your creativity is the gateway to fulfilling your life purpose and leaving a lasting legacy. Spend the time and money (if necessary) needed to understand how you are creative. Then find ways to exercise your creativity on a regular basis. Look for opportunities that utilize your creativity, whether professionally or socially. Take classes, join groups — whatever it takes to ignite your creativity. The good news is that once you start investing in yourself, as described above, you will naturally start to channel your creativity by immersing yourself in your passions and using your natural talents.

Invest in cultivating relationships

A now-famous study conducted by Harvard over an 80 year period concludes that good relationships matter more than money, social class, IQ, and even genes when it comes to living a long, healthy and happy life. Unlike other forms of capital, relationships cost nothing financially to acquire or maintain, and the gains are exponential. With every relationship, you potentially tap into that individuals financial, creative and social capital.