Are you choosing happiness?
If not, you’re probably unaware of the choices you make that lead you there. I’m talking about the concept of cause-effect. It sets the stage for future unhappiness.
How this works can be illustrated in many different ways. Take the beach body you desire. If you want a beach body you need to skip junk food and take your lazy ass to the gym. And you gotta stick to it for a long time. Those 2 sacrifices are required to reach your goal. If you’re not willing to commit to both you can’t cry about it later.
This cause-effect relationship shows up in a more common desire we have.
Let’s look at the desire of buying a house and its relation to debt. And especially the effects it can have on our future happiness.
To pay for the desire of owning a house, we borrow money. There is nothing strange about it. The other day I’ve heard a friend say that she never before felt so wealthy. Because now she owned a house.
What she doesn’t understand is that she isn’t wealthier. She doesn’t own a house. She owns debt, which paid for a house. And as long as her monthly income allows her to pay back the debt and interest, all is good.
The first effect on happiness to consider
Commuting to debt only becomes a problem when we lose our source of income to pay for it. It sets a vicious circle in motion. When we buy a house we assume that it always goes up in price. And if we zoom out far enough this is true. But if we zoom in it’s not the case. Prices rise and fall. There is a complex system behind it. I won’t go deep into this subject right now. If you want to dig deep I recommend you read Ray Dalio’s book “The Changing World Order”.
When interest rates are low it allows many people to borrow money. More money available means that more money flows into the market. This makes prices rise thus houses more expensive. If interest rates go up, there is less money available, setting a downward spiral in motion.
Ray Dalio says: one man’s expense is another man’s income.
In other words. If less money is available, less is spent, so less is earned. If we earn less we spend less, which means that the next person earns less. And so it goes on. This affects the market and prices start to decline.
If you can’t grasp this concept I recommend you watch Ray Dalio’s 30-minute video below. It does a great job of explaining the basic economy.
If you read between the lines of this article you can see how this concept could affect your situation. As long as you can pay for your debt all is good. But if someone else has less to spend, it’s just a matter of time before it will affect you. Since someone else spending less means that you will earn less. People cut back their spending, and so will companies. You could lose your job. Now the debt you took on becomes a burden. You can no longer pay for your mortgage.
Learn from Mistakes.
“But I can sell my house”
Yes, but less money flowing into the market makes prices decline. So your house is dropping in value. After all, you’re not the only one looking to sell. If you’re lucky you’ll get your money back. But in a lot of cases, you’ll end up selling with a loss. Now you find yourself without a house but with a leftover debt.
I know that the picture I paint is very dark. But it’s a simplification of the cause-effect system at work. Don’t think it couldn’t happen to you. History has proven that it happens over and over again.
Choose to Be Happy.
Even if the previous dark scenario doesn’t hit you. You can still get stuck in your situation. Your debt enslaves you to keep up with the life you’re living.
Said otherwise, if you have a job needed to pay off your debt, you can’t easily escape it. You can’t switch to a different job that pays less but feels like a better fit. If you don’t have to switch it’s fine. But what if you’re unhappy? After all, we’re not talking about 12 months here, we are talking about paying off a burden for 20 years or more. If this scenario plays out, then you enslaved yourself to your own desires and choices.
Back to my friend. Is she really wealthier?
No, she enslaved herself, and it’s very hard to escape. And for what? For the “wanting” of a house. She is unhappy at her current job, but quitting is hard, since she needs the money.
“But it’s cheaper than renting”
It is. And over a long time, you build wealth. But this only works if you play the long-term game. But let’s be honest. Few people think long term. And what wealth are you actually building if you’re not planning to yield on it?
What I mean by that is better explained with a story about my aunt.
My aunt owns a house. It’s debt free. It’s hers. In the Netherlands, we’ve got a saying that anyone who retires “can eat their house”. It’s their wealth at an older age.
Her costs are very low. But can she actually eat her house? Even ketchup cant help you swallow a brick. Just saying. You can only eat it if you sell it. So basically you got jack. You got a roof over your head, but a trailer provides the same.
So she worked for a looong time to end up with a cheap house. But then a new phenomenon presents itself. I won’t dive into the complex system of taxes that appear as soon as a house is fully paid for. But in short, it comes down to a point where you pay more if you could earn money from an asset. So when the house is paid for, it is considered an asset that could earn you money. And over this fictional money, you pay taxes. 🤡
Do you see how you’re not really building wealth? You’re enslaving yourself for a very long time and end up paying taxes over your assets.
I’ve only talked about housing so far. But there are many forms of debt that create a similar effect. Think about a car not paid for in cash. Or a lease. Or the phone you’re holding. (Most of the money you pay is a downpayment for your new iPhone, only a small part of your monthly bill is for the contract.)
Take Responsibility for Your Actions.
All these examples illustrate the cause-effect relationship of your decisions.
If you decide to buy a house and get into debt. Consider what you need to sacrifice for the following 20 or 30 years. Is that a sacrifice you are willing to make? Are you sure you are going to be working at your current job long enough? Are you sure you’ll get a new job easily? Are you sure you’re together with your partner for another 20 years? Are you sure that your partner is going to be happy in his or her current job for another 20 years?
If yes, then go for it. Buying a house is a good investment as long as you don’t have to sell it. But you have to make sure that you want to keep living the exact same life that you’re living today. Because if not, you’re gonna face a lot of obstacles in the future.
This is the point where we connect happiness to our choices.
As soon as you get stuck you set the stage for your unhappiness.
If all is good you’ll notice nothing. If things start to go south you’ll encounter more and more uncomfortable situations. Decisions are going to be made for you, you’re no longer left with choices of your own. You’re forced to sell or forced to stay in a toxic workplace.
You can start blaming society, the government and your employer for this. But if you look back, it’s really you who is to blame. It was you who made the choices that led here. Own them.
So if your choices can lead to unhappiness, then it’s also true if you switch the equation. Then you can also choose to be happy. It just requires sacrifice. Let go of desires and you’ll find happiness.
Back to my aunt.
She has the age of 71 as of this writing. She retired 5 years ago and lost her husband 3 years ago. Ever since she got in a downward spiral. She only notices the wrongs in life. She is unhappy.
She is at the age where she starts to think about her inheritance. She has no kids and her only brother (my father) is her heir. I’m an only child and my parents decided that I would inherit everything they own. It’s an enormous luxury that I’m aware of.
As a side note, if I could give it all up to buy their eternal lives I would do so without a doubt. But reality differs.
Let’s do some cold math.
The average live expectancy of my family is around 85. So I could conclude that my aunt has 15 max 20 years left to live. Let’s say 10 years in good health where she doesn’t depend on care.
She receives a pension, but the amount didn’t rise in the last 10 years. So we could assume that her income won’t rise in the following decades either, but expenses will. Thanks to inflation.
Then there are taxes when inheriting. I made a calculation using her current will. If it would follow the path she picked. Via my father to me. We would end up paying 49% of it in taxes.
In the end, it doesn’t matter to me. I still end up with new wealth. I find that paying taxes is a luxury made possible only if you earn a lot of money. But it’s a crime considering that it’s her money. She should be allowed to spend it as she pleases. To “eat” her house.
I tried to explain this to her. I proposed to buy her house, and have her rent it back from me. A construction that wouldn’t change her living situation. She would not only help me but would also get instant access to her own money. It would enable her to distribute her wealth any way she feels fit. On her own terms. It would help me because she would basically pay for my house. My expenses wouldn’t rise, but I would end up with mortgage-free real estate in 20 years. All it required was for her to make a choice.
She refused. She chose unhappiness.
She chooses to see the negative in life. She feels guilt. Like she would betray her deceased husband if she enjoyed life. She often rambles on about the injustice done to her. How the world is cold, harsh and unfair. She fails to see what opportunities are all around her.
She worked all her life. And what did it give her? Bricks with a roof. In the end, half of her wealth goes to her nephew and the other half goes to the government.
So the next time you’re about to make a big decision, take a minute to think about the consequences. Because they all form a potential source of unhappiness in the future. Make sure you’re not forfeiting your current happiness. You live today.
All our choices have future consequences. Whether it’s giving up on junk food and hitting the gym for a beach body or taking on a big loan to pay for a house.
Before you make any of these decisions I urge you to think about them. Decide if you’re willing to make the sacrifices required.
For me, I always look at the added value my sacrifices bring. I’m not looking to buy a house to live in. I’m looking to buy assets that pay for themselves. Whether it’s a rental or a traffic source that contributes to future revenue.
If I think I want something, I try to approach it in a realistic way. Do I want this car because I like it, or do I need it to travel somewhere I need to be? If it’s the latter, are there different ways to travel there? If not, do I really need that expensive car to get there?
Do I need the new iPhone 14 or will my current phone do and would a new sim card be enough?
If you’re struggling with this concept. I wrote more about it in the following articles:
Do you ever wonder why some people seem to have more fun than others? Why do they laugh so much or smile so often? What does it take to be happy?
Does money really make us happier? Read on to discover the truth about money, happiness and your relationship with it!
A hands-on approach to creating a happier life.
I’ve mentioned Ray Dalio throughout this article, his book explains the concepts in great depth. If something triggered you after reading this I highly recommend you dive into his works next.
Footnotes. Just to be clear.
- Don’t confuse my viewpoints with the discouragement of buying a house. I’m not saying that it’s bad. I’m saying that you should think about the consequences. I am also buying a house. But it’s meant for rental, it is supposed to make me money, not cost me. I’m looking to get the best possible ROI (rate on investment).
- I can’t talk about tax laws in different countries. I don’t know how it works around the world. Please read this article between the lines. This story is meant to illustrate how people choose unhappiness. Its purpose is to show a different way of approaching choices we face in life. It’s not meant as financial or investing advice. Every situation is different.