Hedonic Adaptation – Are You the Hamster in the Wheel?

When I first heard of ‘hedonic adaptation’ I wondered what it was, perhaps it was some kind of cool new band that I had not yet listened to? Nope, it is instead a term whose meaning I suggest should be taught to every citizen in the US, or perhaps every citizen in this rapidly developing world of ours.

Got your attention? I hope so, because for me, learning about hedonic adaptation made me changed my entire views on money, savings and investments, and my focus on what really makes me happy.

OK, so what is hedonic adaptation?  A quick warning, science sounding phrases coming up – The term hedonic adaptation, also known as the hedonic treadmill, comes from the theory that humans will return to their usual happiness levels (a happiness set point) relatively quickly, in spite of major positive or negative impacts in their lives.

What this means in practice is that as you earn more money, your expectations (and desires) when living at this increased salary also increase in step, making no overall increase in happiness! Wow, in my naivety I originally thought that increasing my salary would make me much happier! However, I found out, as I posted early, it seems that it is the amount you save and invest that can make a difference, i.e. that limiting your desires and expectations and not spending seems to be the key.

Putting it another way, being on the hedonic treadmill means that you work harder and harder, getting increased salary and at the same time get increased desires, so buy more and more stuff (and like most Americans, probably not increasing your savings and investments). However, this doesn’t make you any happier than you were before!! Probably just more tired, stressed and less fit. It can be quite a difficult concept to grasp, as most of us naturally think more money = more happiness. Instead, more money = more desires = same net happiness! (Yes, the scientist in me is coming out!).

Clearly, living at or close to the poverty line is going to make you unhappy, but once you get above a certain level (I’ve heard around 75K salary in current terms) your happiness levels don’t actually increase. I’ll ask if getting that new cell phone every one year instead of two years make you actually happier? Does the new shinny car every three years instead of five actually make you a lot happier? (I’m assuming you are out of your teenage years in reading this blog, and if you are still in your teens, you have my complete respect for wanting to learn about frugality decades before most people).

Are you the hamster running in the wheel? I was, now I am on a much more enjoyable downhill cruise on my bike, that is moving me stress free to the land of the financially free. What I am doing is actively not trying to raise my expectations as I earn more, living as I did before. When it comes down to it, I am already living a very comfortable lifestyle in an ideal location, with lots of international travel thanks to work.

Overall, the phrase ‘being grateful for what you have’ has now taken on an entirely new meaning for me and is perhaps is one of the keys to financial freedom, now that I understand the concept of hedonic adaptation and ever increasing desires and hence ever increasing spending. I’ll instead limit those desires and save and invest, as I know that can make me much happier, as well as bring me increased freedom in life.