You are building toward a major life event a major financial purchase. What feelings/thoughts did you have? This stage is often characterized by anticipation and excitement. First, think about the period of time leading up to when you purchased your home.Got it? Now, I want you to reflect on the following: If you are like me and struggle to remember what you had for breakfast and you can’t remember back to when you purchased your first home, try thinking back to when you purchased your most recent home. I want you to think back to when you purchased your first home. In order to do so, I wanted to dive into a couple of areas where the hedonic treadmill is commonly seen, especially with HENRYs.
![according to the hedonic principle we are likely to according to the hedonic principle we are likely to](https://i0.wp.com/uberconvince.com/wp-content/uploads/2018/01/rule-of-3.png)
I suspect one day I will write a post on the topic more broadly, but today I wanted to focus on the hedonic treadmill in terms of personal and behavioral finance. The hedonic treadmill is a very interesting concept when examined through the lens of life rather than solely through the lens of personal finance. You realize you have become a HENRY (High Earner, Not Rich Yet).
![according to the hedonic principle we are likely to according to the hedonic principle we are likely to](https://image.slidesharecdn.com/websofinfluence-131014141744-phpapp02/95/webs-of-influence-nathalie-nahai-7-638.jpg)
If you are like me, you then wake up one day and realize that you are living paycheck-to-paycheck and not actually building wealth. You become a victim of the hedonic treadmill. As a result, your spending grows along with your income. As you get that next promotion and/or your income grows, so too does your financial expectations and desires. When applied to personal finance, this concept drives the old adage that more money does not equate to more happiness. Even when there is a happiness boost, it does not last as long or is not as intense as we would have expected prior to the event. Our return to our happiness baseline is driven by a simultaneous rise in expectations and desires which ultimately results in no tangible improvement in happiness. The hedonic treadmill, also known as hedonic adaptation, is the concept that we tend to have a happiness baseline that we return to despite major events in our life, both positive and negative. Why is it that someone with an above average income is more likely to carry credit card debt? How can someone live paycheck-to-paycheck with an above average income? The answer is simple… the hedonic treadmill. I think this survey is very telling about not only physicians but high income professionals in general. I included III and IV simply as examples to highlight how high income individuals do not necessarily equate to high net worth individuals. Since two of the four above are based on surveys of physicians, I do want to point out that I am in fact not a physician. The figure below was lifted from the study and outlines net worth by age.
![according to the hedonic principle we are likely to according to the hedonic principle we are likely to](https://opentextbc.ca/socialpsychology/wp-content/uploads/sites/21/2014/10/a0ad1dd9aa7f4a997769cae08ce80fd3.jpg)
![according to the hedonic principle we are likely to according to the hedonic principle we are likely to](https://www.c-q-l.org/wp-content/uploads/2020/02/CQL-PORTAL-Data-Fair-Treatment-Organizational-Supports-768x605.jpg)