… common and UNcommon viewpoints about money

I came across the phrase Hedonic Treadmill today. It seem quite alien to me and I looked up the meaning.

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.

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I’m looking to splash some cash! Okay, what I meant is to buy an investment property. I looked at some of the fund returns over 5 years, the better funds gave returns of around 50%, which means an average of 10% per annum or about 8.44% compounded, it seems ok returns for me.

But then, fund returns usually do not equal to investor returns. Fund returns are measured between 2 points in time usually 1 Jan to 31 Dec. If you invested an any other time, them you need to measure your investment to know your returns.

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