Wellbeing and Positive Psychology

In recent months it has been common to hear people say, after careful consideration, we should cancel 2020 and start afresh with 2021 on Monday. Whilst it has been a difficult time, it is remarkable how well the general population adapted to the dramatic changes to our everyday ways of life while maintaining a resilient attitude.

The Hedonic Treadmill is the observed tendency of humans to quickly adapt to a relatively stable level of happiness despite major positive or negative life changes.  Studies have shown how major events are rather quickly absorbed into a new baseline against which further events are judged.  In one study, accident victims who were paraplegics or quadriplegics actually recorded higher ratings for everyday happiness than lottery winners. Even Adam Smith, the philosopher and father of modern economics, noted adaptability goes both ways:

“In every permanent situation, where there is no expectation of change, the mind of every man, in a longer of shorter time, returns to its usual state of tranquility. In prosperity, after a certain time, it falls back to that state; in adversity, after a certain time, it rises up to it”.

The pursuit of “happiness” has clearly long been considered.  Aristotle argued that happiness is not just about feeling good but about feeling “right”. He suggested that a happy life involves experiencing the right emotions based on your values and beliefs.  Therefore, happiness is not simply about a hedonistic pursuit of pleasure, but a meaningful engagement with life. At times it may be appropriate to be sad or angry as well as being optimistic and hopeful that things can change.

These days, the pursuit of “wellbeing” seems to be a better objective than “happiness”.  Part of our role at Stewart Partners is to try and help clients articulate what goals and objectives they want to achieve in life, with the implied understanding the achievement of these goals will deliver wellbeing.

As shown above, the Hedonic Treadmill means, quite literally, our goalposts are always moving. Once we achieve a goal, we typically aren’t satisfied for long before we set new goals. One study showed a very low correlation of 0.13 between income and life satisfaction.  To help our clients live their best possible life, we need to help them think beyond only the dollars and cents, as the research shows achieving a certain portfolio value is not by itself a meaningful end goal for many people.

Dr Martin Seligman describes five conditions that will lead to wellbeing and happiness at any age.  His P.E.R.M.A . formula describes the values we need to pursue to achieve a happy life during our working lives and in retirement.

Positive Emotions

We know that optimists do better in life than pessimists, and self-starters tend to be more optimistic about life in general.  However, probably due to evolution, humans tend to have a negativity bias.  Things that are bad have twice the impact on our emotional state compared to good things.  On any given matter, each person knows less than they think, but we extrapolate off what we know and often come to worrying conclusions.  As Mark Twain said. “I’ve lived through some terrible things in my life, some of which actually happened”.

We have shown the graph below many times, but it remains an important reminder that despite so many bad news stories in the world, humans are resilient and continue to move forward - as do investment markets.

You can improve your Positive Emotion by being grateful and being kind.  Holding a door open for someone is actually more in your best interest than for the person following you as it makes you feel good. Gratitude is also getting a great deal of attention as a facet of positive psychology. Studies show we can deliberately cultivate gratitude and increase our happiness and wellbeing by doing so.

Professor Laurie Santos of Yale University has made her course “The Science of Well-Being” available for free to everyone during this COVID-19 period.  The course is designed to help build productive habits which lead to greater happiness and wellbeing.  You can enrol in the course here: https://www.coursera.org/learn/the-science-of-well-being#enroll or listen to her podcasts here https://www.happinesslab.fm/

Engagement

It has been shown that those who interact regularly with people, undertake activities and remain mentally active tend to have a more successful retirement, as they do not retire from something, they retire to something.

Research has shown there are 24-character strengths, and when you know which ones come most naturally to you, you can deploy them to increase engagement.  People who focus on their strengths are 18 times more likely to flourish.  On this website you can take a free survey to understand what strengths come naturally to you:  https://www.viacharacter.org/

Relationships

People need authentic connections with others we can care for and have fun with.  Positive relationships with one’s parents, siblings, peers, co-workers, and friends are a key ingredient to overall joy. Strong relationships also provide support in difficult times that require resilience.  One study showed loneliness is the equivalent of smoking 15 cigarettes per day!

Meaningful activities

There is a big difference between fulfilling and time filling activities.  Having an answer to “why are we on this earth” is a key ingredient that can drive us towards fulfillment. 

For example, understanding the impact of your work and why you chose to “show up at the office” may help you enjoy the tasks and become more satisfied with what you do.  For us at Stewart Partners, our purpose is to help our clients live their best possible lives by helping them feel more positive about their present and future.  That is what gets us out of bed from Monday to Friday.

Achievement

Having goals and ambition in life can help us achieve things that give us a sense of accomplishment.   Accomplishing something does not have to be large – small achievements are just as great. Self-image has a significant impact on our outlook and mental health.

Whilst helping our clients “get their financial house in order” is an important step to living a great life, being financially independent provides no guarantee that you will achieve happiness and wellbeing. COVID-19 has already caused many people to reassess what is most important to them.  Hopefully, this article provides some additional structure to help you live your best possible life.

If you would like to watch a 20 minute video by Dr Seligman talking about positive psychology, here is a link to a Ted talk he gave - Talk by Dr Seligman.

Author – Rick Walker

We acknowledge a presentation on Positive Psychology by Brad Steiman , Head of Wealth Management, Dimensional , Canada as the inspiration for this article