It was Mr. Money Mustache who first taught me about hedonic adaptation, aka the hedonic treadmill. This is the phenomenon where no matter how our life circumstances change, whether for better or worse, we soon adapt and return to a baseline level of happiness. Along the same lines, there is a large body of scientific evidence pointing to the fact that more money, and more stuff, doesn’t make us happier in the long term (although there may be an initial spike). Last year, economist Angus Deaton won a Nobel Prize for his analysis of consumption, poverty, and welfare. It was Deaton who showed that there is a magical income, around $75,000, where your happiness plateaus and income over this only tends to make you more stressed out rather than happier.
I’ll admit, I have been one of those people who reads the stories about lottery winners and professional athletes going bankrupt and being chronically unhappy and thinks, “yeah, but if I suddenly had tons of money that wouldn’t happen to me!”. But, we only have to look around us to see that we too, are trapped on the hedonic treadmill.
By the most meaningful measures — how long we live, how healthy and happy we are, how much we know — life has never been better. – Angus Deaton
Take my iPhone for example. I bought a 4S in January of 2012. This was a huge step up over the 3GS I had had previously. The retina screen was amazing. After trading up I could barely even look at my old phone because it seemed so blurry. I kept the 4S for nearly four years until I couldn’t deal with the battery crapping out after half a day anymore, so in December we spent a crazy amount ($800!) to buy an unlocked 6S. The 4S was handed down to Mr. Paradise as an upgrade from his iPhone 4 where the lock/unlock button didn’t work and the loading time for most apps was 30-60 seconds.
I’ve had the 6S for a little over a month now and I love it. It is super fast and has more storage, so I don’t have to worry about taking photos or videos (not because I take a lot but because I am incredibly lazy at getting them off my phone). But a few days ago, Mr. Paradise asked me to look something up on his 4S, and when I picked it up I was horrified (ok, maybe horrified is a strong word…) at how tiny the screen was. I used to use this?! How could I see anything? And it is SO SLOW! Take it away! Take it away! The phone I used for four years and always had within an arms reach was now completely inadequate because I had gotten used to the new one. The 6S is my new “normal”.
Here’s an example going the other direction. We received a bunch of lovely bath towels for our wedding in 2013. I loved how soft and comfy they were. But over time and with many washings, they got less and less soft and more scratchy and uncomfortable. This was annoying but not a deal breaker. Yes, I’ll buy a new $800 phone but I won’t spend $10 for a softer towel since they are fulfilling their purpose just fine. Anyway, when we moved into our new house, we suddenly had enough room to start line drying our clothes. We had always wanted to try this but didn’t have anywhere to do it outside at our apartment. Well, if you haven’t line dried your towels before, you don’t know what scratchy is. Now all the towels are like sandpaper. But it’s fine, they dry just as well and hey, exfoliation. ANYWAY, once in a while we just don’t have time to wait for the towels to dry naturally, or the weather isn’t cooperating, so we go ahead and use the drier. And guess what, the towels feel like the softest towels on the planet. You can’t even understand how soft these towels are. These cannot be the same towels I said were scratchy!
Ok, those are small time examples. The real example comes when we look at the big picture of our lives. In graduate school I lived off a salary of about $20,000 / year for five years. My savings rate was a little over 25% at that time. When Mr. Paradise and I got married and combined our expenses, we saved a lot on housing and utilities and what-not, so at the same standard of living I certainly wouldn’t have expected our expenses to double. However, our spending last year was about $52,000. Sure, we can chalk a lot of that extra spending up to “grown-up” expenses, like property taxes, mortgage insurance, home and car insurance (for two cars), some medical expenses, significantly healthier food, etc., but the truth is we somehow didn’t need to spend that money before but we “need” to spend it now. Because we are grown-ups? Are we living the high-life now? Honestly, it doesn’t feel any different, but I know I don’t want to go back to living like a student!
So…what are we going to do about this inevitable march toward “more”?
Step 1: Admit that you, too, are susceptible
Understand that being able to adapt to the circumstances that surround us is what makes us human. We are remarkably adaptable creatures, yet at the same time can be remarkably resistant to change because it is difficult to believe in our ability to adapt and still be perfectly happy.
Articles about young couples or individuals who are retiring early frequently appear on news and finance websites. And what kind of comments do they get? I know you’ve seen them. Take this informative article about a Canadian couple who retired early. They worked hard and saved everything they could. They had some school help and down payment help from their parents (which they paid back with interest). Let’s take a quick look at this gem of a comment:
they were lucky that they had family to support them for some things and found secure jobs so quickly. Until you’re healthy and have a fixed job perhaps this is possible but still I call these people “cheapskates”. Extreme cheap skates.
I prefer to enjoy life and experience instead of counting every penny in my wallet before deciding to go out. I wonder how their social life is as I have been around people who are very cheap and when it comes to the bill they are the counting every penny. They usually order something small and start eating from your things. They usually do not tip. I worked in the service industry a very long time and saw many of these people push it sometimes as well.
When you are young, life should be experienced but do not over do it. Perhaps they saved money but I also believe they also experienced inconveniences as well. Money comes and goes. By the way they live if they want to become billionaires they should go live in the forest and become hermits. I wonder how their hygiene must be and what kind of food they consume.
They also have no pets, no kids, no real responsibilities. They are probably the type of people that don’t eat all week and visit their parents on the weekend and eat like there is no tomorrow and do their laundry there. I wonder if one of their parents would be sick, would they stick around to help. Their parents perhaps still give them pocket money. It is their life and we should not judge but when you go public about this be prepared to take some criticism.
Life should be about developing yourself and others if possible. The economy would also be better if more people spent instead of saved. Most millionaires are cheap and also many people with “old money” behave like this, not all but most.
The main story is save some money to the side and see the world from your car. The end.
I was trying to find some of that to cut, but it was all just too good. My favorite part about it is how frugal people steal other peoples’ food. The gall! Just one more:
That’s fine if it works for them, but not everyone enjoys life the same way. That’s an extreme lifestyle I’m not at all interested in. We enjoy our food (not necessarily restaurants), occasional travel and watching good TV, and we give to charity as well. We still manage to save most of our earnings. It’s a balancing act. Works for us. Their lifestyle? Eww. :))
These people have failed at Step 1. They believe that the only way to save most of your income is to sacrifice your happiness and “experience inconveniences”. Eww.
Step 2: Realize the power that you gain by simply understanding the principle of adaptation
Believing in this phenomenon gives you incredible power over your life. Where are the examples of hedonic adaptation in your own life? Maybe you have both big ones and small ones. Perhaps you are thinking about making a change like cutting cable or an expensive cell phone plan, but you think this will make you very unhappy. By seeking out other examples in your life where you were able to adapt, you may come to realize that the effect on your day-to-day will be much less than anticipated, while the effect on your bottom line could be huge.
This step helps the other way around too. If you are thinking about making a big purchase, be honest with yourself about just how much that purchase will improve your happiness. Will it be awesome at first but later just another normal?
I’d go so far as to say that you can even improve your quality of life by cutting back if you take advantage of adaptation. Switch from a daily $4 coffee to a two a month $4 coffee. All of a sudden that coffee becomes a special treat to look forward to, and at the same time you’ve got about $1300 saved per year.
Step 3: Be grateful for the special purchases you have made that make you truly happy
Being continuously grateful is your magical superpower against adaptation. The Paradise family has made some decidedly un-frugal purchasing decisions, but each one was precipitated by a significant amount of research as well as a decent amount of waiting around to see if we “really” wanted the thing that seemed so great. For example, both video game-playing members of the family had been hemming and hawing over buying a PS4 since it came out in 2013. We finally bought one over Black Friday last year for $235, scoring a major deal. We also limit most of our game buying to the very old titles that are $15 or less. ($60 for a game seems kind of absurd to me). So far I think we’ve managed to stay grateful for this added convenience and fun in our lives. Streaming is much easier and higher quality, and the games look awesome. We are happy with our $’s spent, and not taking it for granted helps us stay that way.
What about a more serious example? If you’ve read our other posts, you know that we bought our first home in 2015. This was the most money we’ve ever spent in our lives and it was mega-scary and exciting all at once. We did not need to buy a house. We could have stayed in our apartment, saving quite a bit of cash, and we both knew this. However, we felt at this point in our lives that purchasing a house was something we were willing to sacrifice other things for, and maybe even add a year or two to our FIRE plans. I didn’t hate living in all those different tiny apartments, but I am enormously grateful for this house. I am grateful that I can park my car inside a garage (this is still novel after six months) and not have to dig it out of a snowbank in winter. I am grateful to have a kitchen with counter space so we can easily cook at home. I am grateful to have more room to spread out which allows us to keep everything more organized. I am grateful to be able to host family and friends and provide them with an actual bedroom instead of the couch or floor. I am grateful for the fireplace which is keeping me warm right now. I hope we can maintain this sense of being thankful and not let this be just another step on the treadmill.
Step 4: There may be some cases where you fail at adaptation. Reevaluate when this occurs.
After giving it a fair shot, all of us will find lifestyle changes to which we fail to adapt. For example, I hate getting up early. It actually ruins my evening sometimes thinking about how I have to get up early the next day. In graduate school I could sleep until noon if I wanted, since it didn’t matter when you put in your hours, but my current position wouldn’t be too forgiving if I regularly strolled in at 1pm. Even though I get up early every day, and have for the last five years, I still haven’t adapted. When retirement comes, you can bet I’ll be ditching my alarm clock.
Step 5: Celebrate successes
If you make a lifestyle change with the goal of spending less and/or consuming less, make a mental note as to how you are feeling about it. If you make a change that saves you money and at the same time ends up not being a sacrifice at all, celebrate! This goes back to step 1 as well, to help reinforce the fact that adaptation is possible and in many cases much easier than we thought it would be.
And there you have it, the Frugal Paradise 5 Steps to Getting Off the Hedonic Treadmill! This was a long post, so thanks for sticking with it to the end. Feel free to share your own examples from any of the five steps!