Investopedia defined it as “The tendency of a person to remain at a relatively stable level of happiness despite a change in fortune or the achievement of major goals. According to the hedonic treadmill, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness”

The theory behind Hedonic Treadmill is not all that hard to understand. Human beings adapt to changes in the surrounding environment. So when your financial environment change, we quickly adapt. For example, if you are making say $ 5,000 a month and you can pay all your bill with some left over, if your income doubles to $ 10,000 overnight, you will be happy initially. After sometime, you get used the the $ 10,000 income per month lifestyle and the level of your happiness reverts back to the level when you are making $ 5,000.

Another way this works is if you have upgraded to a Mercedes Benz. You feel rich when you still frequent the place you used to frequent in your Honda. However once you park next to someone with a Ferrari, your Mercedes won’t give you the same prestige it gave you!

The Hedonic Treadmill theory is related to the Easterlin Paradox. Easterlin, an economist researched and found that international comparisons that the average reported level of happiness does not vary much with national income per person, at least for countries with income sufficient to meet basic needs.

So if more money doesn’t make you happier in the long run, then happiness is not something to be pursued. It is something the ensued from something else. The alternative is to be contented with what you have. Now, this can be a frightening thought.

While the plan was to have at least a day and a half on the island, and that plan we messed up, I made the best of the time available. Which is how life is, right? Not everything will go according to plan. If they don’t go according to plan, great. We meant getting to bed a bit later and getting up earlier to enjoy the beach and pool. So even with the limited time, I still had a great time.

What surprised me though were prices though. Malaysia used to be quite affordable for us locals. As a student years ago, I saved up enough money to go for budget trips with my friends. We call them “economy trip” then. On such trips even though we can afford a bit nicer food and drinks, we try to get as low a bargain as possible. We had a lot of fun and got a real kick out of such trips. We even bragged how little we spent back in those days.

Fast forward to today. I found that the locals are perhaps pricing things for foreigners. Those with larger purchasing power, who might not bat an eyelid to be charged US$ 80 – 100 for a room. As a result, the locals like me find things a bit steep. At such a time like this, I wish that I have more money to spend on holidays. Not that we can’t afford it but the thought of paying steep prices turns me off.

This brings me back to the point about planning and having mentally prepared to spend money. If you read back to a post I wrote titled Rich, Yet Poor, some time ago, a lady by the name of Hetty Green, a millionaire several times over but choose to life like a pauper. That is no way to live. If the sole purpose is to accumulate money without spending it, why do it in the first place. Perhaps money give people a sense of security. The more money you have in the bank means you are more secure. This argument might be true to some degree but I think it give only a false sense of security. I think most of us place our security in the wrong things and I’m guilty of it to some extent. By the way, Hetty Green is not the only one. There are quite a few of such people around.

One reason I think it happens for me is that perhaps have not drawn up this years budget. Yeah, yeah, I’m guilty of that one too. With a budget, I reckon it will alleviate such thinking as to spend as little as possible. With a budget set for things in the future, it would be easier to spend money you have. Not money you don’t have. See this article about the Rich and Stupid. Perhaps stupid is too strong. Silly would be more appropriate.

So, in closing, 2 tips here:-

1. make the best of what you have in any situation
2. make a budget and spend some fun money once a while

While the book is great in many areas, there are some areas you need to be careful about. I almost got sucked in.

I’ve written about using your time effectively and about whether you should do something just because everyone is doing it. So back to the book, the great thing about the 4HWW is there are some tips everyone can use to be more effective.

Tips that are worth reminders as we start 2010 include:-

• the 80 20 principle which is more that proven, that says “80% of any outcome comes from 20% of the effect” or also know as the Pareto principle
• Parkinson’s law (no not Parkinson’s disease) which says any task expends to fill the time allocated to complete it (this is a great one)
• to how to reduce time interruptions from co worker
• getting on a low info diet

plus many more. One of my favorite is the tip on avoiding or reducing meetings. That alone would be worth the price of the book. I’ve applied some of what I read to my own life albeit not zapping bad habits like multitasking and I would say it helps. I would certainly recommend you get a copy of this book.

On the other hand, here comes the “con” part. If you are not careful, you can get sucked into thinking you want to live like Tim Ferriss. Maybe that’s just me. I have a tendency to very quickly get convinced of ideas that moves against the popular grain.

Anyhoo, if you have found your purpose for your life, I found that the book can distract a person from that goal if applied incorrectly. Applied correctly, it will help you a ton.

One last word and I believe this is crucial point as made in the book as well as my own observation. The present believes about retirement. Even before I read the book, I already noticed that people live quite long after retirement. And if you want to do something, why not do something productive and you can still earn money after you retire. Perhaps be an advisor or consultants of sorts from your previous working experience. There are plenty of opportunities.

Personally, I can’t imagine sitting at home all day and do nothing but watch TV and surf the net. In the book, Tim talks about breaking up retirements into smaller chucks spread out over the years instead of working the best years of your life and then, when you are too old to walk, then only to visit places and see the world. I think this point is very valid. It also affects how you save money for your retirement.

I would suggest that while you want to put aside money for retirement IF you really can’t or don’t want to work (and just want to watch TV all day), you should also develop some skills and hobbies now that help you pay some bills later on.

If you are an avid gardener, how about have a class on teaching city dwellers how to garden up above in their condominiums. If you are good at photography, you can teach beginners. There are those who really don’t know basic stuff like shutter speed and f-stop. You need not be that great expert to teach the basics. Think about it and see if you can do this over the course of 2010.

Here is another article I wrote about lateral thinking for income.

At the same time, the radio in my car broke. I choose to let be remain broken since spending money of the car stereo is not likely to generate income for me. Anyway, I still have my pda if I want to listen to podcast on the road. People make choices everyday. It depends on what you want to achieve. I usually choose tools to help me create than to consume. What about you?

Panasonic Lumix DMC-FZ28K 10MP Digital Camera with 18x

By the way, this is the camera I got. It is our first digital camera. Yes, we are late adopters.

I wrote on my previous post about doing things a bit differently this year. Deciding and setting appropriate goals are one of them. I came across this post written by Tim OReilly which I found very interesting and thought I’d share it with you. It is worth taking time to read through but I summarize the key points here.

Work of stuff that matters. This does not mean doing non profit, “do good” charity work. It does mean building a business and economy (a financial life) that is sustainable long term. You have to decide what stuff matters to you.

Ed’s take on a personal financial level: Your effort should focus to build up a sound financial plan that is sustainable. Not a few fat years of lavish living followed by depravity a few years later.

1. Work on something that matters to you more than money

Although you should having financial goals, have a goals that is more than just making money for yourself. Think of money as fuel for what you really want to do, not as a goal in and of itself. Money is like gas in the car you need to pay attention or you’ll end up on the side of the road but a well-lived life is not a tour of gas stations!

Have a big goal. Google’s motto, “access to all the world’s information” is an example of such a goal.

2. Create more value than you capture

Ideally, your goals should create more value than it captures. Example, micro finance lifts people out of poverty. As more jobs get’s create, more people borrow more and everyone benefits.

Wall Street and Bernie Madoff did the opposite and everyone knows what happened. If your goals and what you do create a circle of value, the impact it create start to perpetuate and you create an ever larger spiral effect.

3. Take the long view

See the big picture. While it is good and a must to have short term goals, it is important to see the long term as well. Tim goes on to say, the economy has many elements of a ponzi scheme. While his last point is kind of short without much explanation (or I can’t understand where he is taking it), I agree that financially, your life goals should have in view the long term view.

With such a view, your financial decisions are not just focused on the here and now which tend to fluctuate a lot depending on the state of the economy. Such fluctuations are here to stay if anything.

The whole article is here .

What are the things you’ll do differently this year? It is all too common to begin the new year with new resolutions and forget them by the end of January, if not sooner. Habits die hard and bad habits dies hardest.

So while we are still at the beginning of January and before you hit the office running, I think it would be good to do some self reflection for the past 12 months, if you have not done so. If you have done so, congratulations. The next questions would be what’s next? Have you made plans or set goals for 2009?

I’ve been setting goals for over 10 years. Some I accomplished and many I didn’t reach. Most of the goals are business and as a result are financially related. At the same time, I threw in some goals like exercise, family time and others. Off course, no doubt, the business goals got the most attention throughout the whole year.

Over the years, even when I achieve my goals, after working hard for a year, I found myself thinking, “is this all there is?” I wasn’t satisfied. It lead me do look at goals differently. Not having goals is not an option and I think it is rather having the right goals to aim for.

I’ve read in the book of Ecclesiastes (that’s in the bible) this phrase

Then I thought about all that I had done and how hard I had worked doing it, and I realized that it didn’t mean a thing. It was like chasing the wind, of no use at all.

and I truly felt that I’m chasing the wind.

Last year I decided to do the goals differently. I wanted to have goals that are done in a biblical manner. If you have been reading my blog, you’d know that I’m a Christian by now. I made some progress to retune my way of thinking. It’s not easy having trained the brain to think in a certain way but I made progress.

I happen to pick up this book, titled “God is my CEO” by Larry Julian just around Christmas. The tag line on the front cover is Following God’s Principles in a Bottom Lie World. I’ve had this book for awhile. Just that I haven’t gotten down to reading it. It is quite light reading for most of the chapters which tells of successful business people choosing to do things according to what they learn on Sunday i.e. in the church versus what’s the normal business practice. So, instead of the usual “follow me and get what you want” book, this is quite different.

At the end there is a small section when you really get down to work. To figure out values, God’s direction and purpose, that requires time. The questions and guides also helps you to combine what is taught in the bible and at the same time, being practical about doing business or career, rather than one or the other.

I firmly believe that God has given each of us certain gift and when we make use of the gifts (be in running a business, being a handyman, a musician), we are most satisfied, and most productive. This is quite different from the current thinking especially in modelling behavior which is taught through NLP and others. The current thinking is if you want to be good doing something, then you model the behavior and thinking of an expert in the field. That’s okay if you want to play golf or some other game better but if you are technically inclined and want to be great in situations which requires a lot of people contact most of the time, no matter how much you model someone, you’ll never be as good as someone wired to be a social animal.

Anyway, check out the book and hope you dance to a different tune in 2009.

Well, watch the short video below. It is a compilation of appearances by Euro Pacific Capital president Peter Schiff, between 2006-2007 period. He is frequently disrespected by his peers. Every time he says something sensible, the pundits surrounding berated him and treated him with undisguised contempt. Possibly a case of over confidence bravado lulled by a sense of everything is doing well.

The amazing thing is not only the accuracy of his predictions but the sheer arrogance of others appearing on these programs.

What I’m disappointed is that there are those who knew such a problem existed but choose not to do anything about it, hoping it will go away. Truly, there is something out there.

I’m seriously thinking of a career move lately. This is somewhat due to changes in the business trends but more so due to the many disadvantages of being an intermediary. As an intermediary, I’m dependant on a or several principal corporations for products and services. Having being in such a position for many years have slowly opened my eyes to see things I’ve not noticed. If you are an agent, a franchisee, independant contractor or any such relationship, you are in the same boat as I am, and perhaps can relate to this.

Now, I not naive to think that corporations will stay the same forever. If they did, you better steer clear of them, since they are going the way of the dinosaur. It is no surprise to me that CEOs and board of directors will push for growth in market share, increase in profitability, ROI or shareholder value, or all the above!

And most companies, will need to restructure every few years making sometimes drastic actions to face changes in the markets. This is not surprising. They have to take makes these changes either to take advantage of opportunities coming to the market or to survive the changing business environment.

The sad thing is, when corporations that depend on intermediary wants market share, they tend to treat them well. However, once that goal has been reach, they tend to switch to profitability. And reduced compensation to intermediaries is one of the easiest ways these companies take to increase profitability.

Worst of all, management of these corporations, from my experience anyway, tend to blame the environment or regulators telling half truths to the reps. Eventually, these half truths begin to reveal themselves. I think, when management don’t have integrity and be transparent, it is time to say goodbye.

I’ve experience the same problem as an employee. Long story short, management tells the staff to cut cost, including mileage claims, yet the top level management went on to purchase new luxury cars on the company’s account.

Don’t fall into the trap when corporations wants market share and promises a lot only to disappoint when that growth has been achieve. I’d also like to hear is from other who have experienced something like this. That others might have the right expectations on principal-intermediary relations. What did you do when it happened to you?

I went to a sales convention today. Well, it wasn’t exactly a convention since there were briefings and updates and they only brought in a speaker who has done well from within the company. The thing about sales meeting is I often wondered about the effectiveness of such meetings. Sure the updates and company strategy is good. Knowing that your principal company has a direction to deal with current issues and challenges that’s coming allows us to prepare.

What truly got on my nerves was the guy they brought on to speak towards the later part. Let’s call him Joe Flashy. Depending on how you would measure success, Joe Flashy is “successful” in the sense of him bringing in the sales and even to build a team. No doubt about that and I have to hand it to him. But there is something disturbing about Joe.

You see, Joe bragged about his nice cars. It started quite innocently enough. Speakers have to connect with the audience and normally they give a bit of background information how they started and where they are today. But then half way through the speech, this guy started to talk more about his nice wheels instead of sharing crucial information. Now, I used to like cars. I still do but not as much. Especially the craziness of paying the amount of money in this country to have that type of car, I’d rather use a low maintenance, trouble free car. But that’s me. Check out my earlier article about what I learned from a car loan.

I’ve got nothing against cars but to have 4 cars, 2 expensive Porsches to boot, I’m thinking Joe is on the super highway to financial ruin. But who am I to say Joe Flashy can’t keep up paying for the cars, right? After all one man’s meat is another man’s poison. The thing that disgust me was they put this guy up on the stage. Influencing several hundred people to start the Get Rich Dream! Okay, perhaps not everyone in the audience will follow suit, but enough. And, just before that, the CEO of the company just spoke about managing our money properly for retirement! What the ……? For a moment there, I thought he was a car salesperson!

One of Joe Flashy advice, “If you can’t decide which to buy, buy both!” Man, talk about time down the drain listening to crap. Enough said. Be careful about who you hang out, who you listen to, what your read.

I came to notice this because I hang around 3 groups of people with very diverse values and focus. One of the groups of people I hang out with often is in the place of work. The other is the social non profit group and lastly a leadership training class I’m attending. Within these major groups of people, are off course subgroups.

For instance, in the work place group, there are those who believes there is a need to keep on climbing higher, regardless whether the ladder is leaning on the right wall or not. There are those who while knowing the work in a place to earn major amounts of money, think they like to develop other business on the side.

The interesting thing I noticed for myself is when I’m with a certain group of people, my thinking pattern is affected. Not matter how hard I tried not to be influenced, I found I’m influenced whether I like it or not. The choices and decision I tend to make is very much oriented towards those values.

Another place that affects my thinking is a group of online friends. Now they are not really friends that I meet and have a drink with. In fact I’ve not met even one of them, but their writing and blogs influence my perspective. This group forces me to think a lot about the delivery of information today. A bit on the cutting edge but more so about the huge and wide opportunity for people to make money today that was not available just a few years ago.

Now, who you hang out with have a huge influence on what you do financially. Whether you like it or not, you do roughly the same things with who you hang out with regularly. You might be different and I can’t say it for you, but that’s true for me at least.

So if your life or your financial life isn’t heading the way you want it to be, after you have gotten down doing your budget, saving money and all the other necessary stuff, one area to look at a is the buddies you hang around with. Choose carefully who you hang around with. It has a major impact on the bottom line. Your bottom line!