Voluntary Simplicity

M.P. Dunleavey

Originally published by The New York Times, June 16, 2007

Remember the fable about the ant and the grasshopper? The ant works hard all summer, socking away provisions for the winter; the grasshopper frolics away each day. The ant warns the grasshopper that he’s being hedonistic and short-sighted. The grasshopper ignores the ant, and continues on his merry way — only to perish when winter sets in.

It’s a rather stern lesson about financial prudence, but there is a reason this tale has survived through the ages — and still preoccupies many researchers who study the eccentricities of human economic behavior. Why do the grasshoppers of the world have such a hard time emulating the ants?

The rewards of the ant’s strategy are obvious: by working hard, planning ahead and saving your resources, you end up healthy, wealthy and warm. The pleasures of the grasshopper’s life are short-lived — and ultimately lead to great stress and suffering (if not a dire end).

Yet economic research has demonstrated that most people find it hard to resist the siren song of “seize the day and spend what you have now” — even though a lifestyle based on constant consumption doesn’t enhance anyone’s long-term store of happiness and often puts people on shaky financial ground.

This conundrum also bedevils those who work in the field of personal finance. Why do millions of Americans resist saving for their retirements? Why do so many carry thousands of dollars in credit card debt?

The standard advice for those caught on the treadmill of “getting and spending” could come straight from the mouth of the ant: material kicks don’t pay off in the end, so mend your ways, plan ahead and financial prudence eventually will be its own reward. But this sort of finger-wagging makes few converts in the grasshopper world.

A more compelling approach may be to focus more on what makes you happier — because investing in your own well-being and quality of life may turn out to be more prudent and more profitable than you thought.

Tim Kasser, an associate professor of psychology at Knox College in Galesburg, Ill., studied 200 people who embraced Voluntary Simplicity, a movement focused “less on materialistic values — like wanting money and possessions and status — and more on what we called intrinsic values or goals,” Professor Kasser said. The three main intrinsic values were being connected to family and friends, exploring one’s interests or skills and “making the world a better place,” he said.

He conducted the study in 2005 with Kirk Brown, an assistant professor of psychology at Virginia Commonwealth University in Richmond. The researchers compared the attitudes and behaviors of this group with a matched sample of 200 mainstream Americans.

Although the mainstream group’s income was much higher, an average of about $41,000 a year compared with $26,000 for those aiming to live more simply, “we found the people in the Voluntary Simplicity group were much happier and more satisfied with life,” Professor Kasser said.

THAT doesn’t mean frugal people are happier, said Professor Kasser, adding that research findings on this topic are mixed. But the study found that when people invested more in intrinsic values, like relationships and quality of life, and less in consumption, it seemed to increase their happiness. And, the study suggested, there may be a financial gain to doing so. Those in the simplicity group were far more likely than the control group to say that they were careful about their spending, Professor Kasser said.

Christopher K. Hsee, a professor of behavioral science at the University of Chicago Graduate School of Business, has observed a similar pattern. He points out that when people use their purchases as a semaphore of status, there is “no natural stopping point;” there will always be a bigger house, a fancier car, a more expensive watch to go after.

When it comes to more basic needs, like food or sleep or friendship, most people naturally reach a point of satisfaction. “Consequently, people who value these types of goods may be financially better off,” Professor Hsee said.

As someone who struggles against her own grasshopper nature, wishing she had the foresight and impulse control of the ant, I like the idea that there’s another path to fiscal prudence. Working hard and being practical are ideal skills to have in life, but if those aren’t your bag, investing in a happier way of life may offer the same financial dividend. Too bad the ant didn’t know about that.

M. P. Dunleavey is the author of “Money Can Buy Happiness” (Broadway Books, 2007).

Or, what the retirement industry doesn’t want you to know

By Robert Powell

Originally published by MarketWatch, June 13, 2007

Some call it hogwash. Others call it B.S. No matter what it’s called, those on the verge or already in retirement need to be on the lookout for it. Older Americans must have their “detector” up when it comes to the products and services being hawked by those in the so-called retirement industry.

According to John E. Nelson, the co-author of “What Color Is Your Parachute? for Retirement: Practical Planning for Money, Health, and Happiness“, older Americans must be able to tell the difference between the products and services they really need and want vs. those that firms — especially in the investment, insurance, real estate, travel, retail and anti-aging industries — want them to be buy.

Otherwise, the retirement industry will get what it wants — more sales — instead of Americans getting what they want.

And to that end, Nelson has created what he calls the retirement hogwash detector. It’s a detector that he says can help Americans sort through the retirement lifestyle they want and need versus the one that Madison Ave. wants to sell them.

“The retirement industry wants to define your retirement for you,” said Nelson. “Instead of choosing a way to live, they want you to buy a lifestyle. Instead of reflecting on your values, they want you to value consuming the right investments, the right insurance, the right real estate, the right travel, the right retail goods and the right anti-aging products. Instead of discovering your identity, they want you to simply identify yourself as a consumer. They want images of products and services dancing in your head so that you make acquiring them the goal and the purpose of your retirement. They want consuming to be your highest purpose.”

Americans may truly want and need some of the products and services being marketed by the retirement industry. But at the moment, more Americans than not are basing their decision to purchase on emotion. And that’s because retirement industry firms are increasingly using sophisticated techniques to persuade Americans to buy this or that retirement “lifestyle.”

According to Nelson, these firms are selling experiences — visions of what the ideal retirement looks like — and they are using something called lifestyle marketing to separate older Americans from their money. Nelson says the retirement industry wants consumer to believe they will be in pain if they don’t buy into its definition of what retirement should be.

Outfoxing the marketers

So what’s the best way for older Americans to get what they want instead of what the retirement industry wants them to get?

Nelson says part of the answer lies in older Americans completing his version of the “Ways to Live” exercise that was originally developed by Charles Morris at the University of Chicago in the 1940s. That exercise, and another which can be found in the book, can help older Americans figure their idea of the good life, as well as what they value, their identity and their priorities. Learn more at this Web site.

But even if you don’t complete the “ways to live” exercises, it’s still possible to protect yourself against Madison Avenue, Nelson says. And that’s by taking each and every advertisement through his retirement hogwash detector. It’s a series of questions you can use to evaluate pitches and decide whether to buy a product or service or not.

Here’s his list:

• Pitch. What are the facts and actual features? What are the greater implied benefits, as suggested by the pictures, music, style or tone? What emotions are these designed to trigger? In the case of advertisements by luxury automakers, the desired emotion is to make the customer want more social status.
• Underwriter. Who’s behind the pitch? What’s the marketer’s motive? Does the marketer want an ongoing relationship or just a one-time transaction? Does the marketer really have any interest in your well-being? Those marketing romantic getaway cruises likely don’t care about their patrons.
• Assumptions. What are the underlying messages about you or the world? What are the hidden values or beliefs? In your experience, are these really true for you in your own life? With cosmetic surgeons, for instance, the hidden belief is that old is less desirable and valuable and young is more desirable and valuable.
• Ideal outcome. What’s the most you can realistically expect? Could you actually get the implied benefits? What can this do for you and what can’t it do for you? In the case of advertisements by the plus-50 residential real estate industry, the implied benefit is that your neighbors will be beautiful people. The reality is that your neighbors will be real people, not professional models.
• Needs. Why might you really need it? Why might you not need it? What are the alternatives? Finally, what higher need can you identify that the pitch hints at, but could never fulfill? How might you really fill this need? Consumers who are being sold investments, for instance, need to learn more about the investment or get advice from a trustworthy source.

For Nelson, the need to detect hogwash is among the keys to a fulfilling retirement. In fact, it could represent the difference between having a life of “voluntary simplicity” versus a life of “involuntary poverty.”