Lesson 3: The Happiness Equation: Lowering Expectations & Ditching the ‘Keeping Up’

Introduction: Are You Constantly Striving for More, Only to Feel… Not Quite There?

Picture this: You get a promotion, a pay rise, or finally buy that thing you’ve been wanting for months. You feel great for a while, but then, somehow, you’re back to feeling like you need just a bit more to be truly happy. Sound familiar? You’re not alone. In fact, you’re experiencing one of the most pervasive psychological traps of modern life. Today, we’re going to talk about the sneaky thief of joy and how to outsmart it.

This lesson is about understanding the happiness equation – not the one society sells us, but the real one. We’ll explore why constantly striving for more can actually make us less happy, and how a simple shift in perspective can unlock contentment that doesn’t depend on your bank balance. This isn’t about settling for less; it’s about appreciating more of what you already have and freeing yourself from the exhausting treadmill of comparison.

Core Concept: The Expectation Trap and the Comparison Game

Here’s a sobering statistic: the average household in America today, adjusted for inflation, makes twice as much money as they did in the 1950s. Yet, studies suggest we’re less happy now than we were back then [1]. How is that possible? The answer lies in understanding the relationship between expectations, comparison, and happiness.

The Expectation Trap: Happiness isn’t just about what you have; it’s about the gap between what you have and what you expect to have. If your expectations rise faster than your income, you’ll never be happy with your money, no matter how much you make [1]. You could earn a billion pounds a year, but if you needed and wanted 1.1 billion, you’d feel broke. Conversely, if you make £50,000 a year but only need £40,000 to be happy, you’re rich in the truest sense.

“If your expectations rise faster than your income you’re never going to be happy with your money that’s the problem… there are people who make $50,000 a year but if they only need 40 to be happy they’re rich they feel great.” - Morgan Housel [1]

The Comparison Game: We don’t live in a vacuum. We constantly compare ourselves to others – our neighbours, colleagues, friends on social media. When everyone around us is also getting richer, our own increased wealth doesn’t feel special. It becomes the new baseline. This is why lottery winners often return to their baseline happiness levels after the initial excitement wears off, and why people in wealthy societies aren’t necessarily happier than those in less affluent ones.

Consider the story Morgan Housel shares about working as a valet in Los Angeles [1]. He was surrounded by people driving Ferraris and Lamborghinis, but he realised something profound: he never looked at the driver and thought, ‘That guy is cool.’ Instead, he imagined himself as the driver and thought, ‘If I were driving that, people would think I’m cool.’ The disconnect was clear – nobody cares about the driver, but everyone wants to be the driver because they think people will care about them. It’s a game where the rules are made up and the points don’t matter.

The Social Media Amplifier: This comparison trap has been supercharged by social media. We’re constantly exposed to curated highlights of other people’s lives, making it seem like everyone else is living better than we are. But remember, you’re comparing your behind-the-scenes to everyone else’s highlight reel.

Key Takeaway: Happiness Isn’t About Having More; It’s About Wanting Less

The most valuable financial skill you can develop isn’t picking stocks or negotiating salaries (though those can be useful). It’s not needing to impress other people [1]. When you stop trying to show off, when you stop caring about what others think of your possessions, you free up enormous amounts of mental and financial energy. You can focus on what truly matters to you, rather than what you think will impress others.

This doesn’t mean you can’t enjoy nice things. It means being intentional about your purchases and understanding the difference between buying something because you genuinely want it versus buying it to signal status to others.

Interactive Element: The Impression Audit

Let’s get honest for a moment. Think about a recent purchase you made – perhaps clothing, a gadget, or even a meal at an expensive restaurant. Ask yourself: What percentage of this purchase was for your own genuine enjoyment, and what percentage was to impress others or to fit in? There’s no judgment here; we’ve all done it. The goal is awareness.

(In a group setting, this could be a brief, anonymous discussion where people share examples without judgment. The focus is on recognising the pattern, not shaming anyone for it.)

Activity: The Expectation Reset

This is a practical exercise in managing your expectations. Identify one area of your life where your expectations might be unnecessarily high. It could be your living situation, your car, your wardrobe, or even your social life. Now, consciously lower that expectation. If you’ve been dreaming of a £500,000 house, what if you aimed for a £300,000 one that still meets your needs? If you’ve been wanting the latest iPhone every year, what if you kept your current one for an extra year?

The goal isn’t to settle for less quality of life, but to find contentment in what’s genuinely sufficient for your needs and happiness.

Conclusion:

Today, we’ve tackled one of the biggest obstacles to financial and personal happiness: the expectation trap. By learning to manage your expectations and resist the urge to constantly compare and impress, you’re taking a massive step towards contentment that doesn’t depend on your next pay rise or purchase. In our next lesson, we’ll explore how to protect the wealth and happiness you’re building by preparing for life’s inevitable surprises.

References:

[1] Podcast Transcript: The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel - YouTube, https://www.youtube.com/watch?v=vOvLFT4v4LQ