Finding and Funding a Good Life

Is a higher paying job with longer hours worth it? How should you prioritize saving for the future against enjoying life today? Should you rent or own your home? Does it make sense to pay for a house cleaner? Is it better to live in a bigger home with a longer commute, or a small home close to the office? Is going out to dinner a waste of money? Is an expensive vehicle worth it?

The answers to these questions are often delivered to us on a platter by our System One brains; our fast, intuitive, impulsive, and emotional thought processes that run automatically with relatively little effort. Unfortunately, our automatic, intuitive perception of the right answer is often flawed. Our automatic system brain is designed to seek pleasure, avoid pain, engage in survival related behaviours, and impress other people; the automatic brain has its finger on the dopamine button and cares more about prestige than happiness.

The objective of this paper is to provide an overview of the non-financial considerations that deserve consideration in financial decisions – tools for System Two financial decision-making. Each consideration is paired with reflective questions that the decision-maker may ask themselves or the other parties involved in the decision-making process. Financial decisions are never objectively good or bad; each decision should be considered for its utilitarian, emotional, and expressive benefits, and its impact on living a good life.

There is a lot more to a good life than wealth accumulation and risk-adjusted returns. A good life is, of course, subjective, but research across economics and psychology provide a starting point. Framing financial decisions through the lens of living a good life, measured by life satisfaction, rather than dollars in your bank account or other material possessions, is likely to lead to better outcomes.