The joy of anticipation: How financial planning generates wellbeing

This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.

Thinking about the future can be a source of both wellbeing and anxiety. One response to this could be to concentrate on the now. Mindfulness is a popular way of achieving this, teaching us how to be in the moment. This can provide real peace of mind.

Sometimes, we do need to address the future. It is coming whether we like it or not, so surely it is better to make plans! Taking a positive approach to our future can increase our wellbeing in the present, and in several ways. Financial planning can play an important role in achieving this.

Anticipation in financial planning

Anticipating a positive future event has been shown to reduce stress and bring about positive emotions¹. The Germans even have a name for it: “Vorfreude”.

Financial planning is the process of creating a clear path to future events.

Just having a financial plan can bring peace of mind. That “clear path” provides us with a degree of certainty that, for most of us, increases wellbeing. The extent of this will depend on the nature of those future events. For example, whether they are achievable.

It will also depend on whether the plan takes us towards events that will actually bring joy.

Once your financial plan has been carefully constructed, there is one other way in which it will increase your wellbeing – anticipation.

The wellbeing of anticipation

One study² measured the wellbeing of two groups of people with other wise similar circumstances. One group had booked a forthcoming holiday, the other group had not.

The group who had booked the holiday reported higher levels of wellbeing than the group who had not. Just as interesting, however, was that both groups reported the same level of wellbeing after the holiday had taken place.

Most of us will have experienced the wellbeing of having something to look forward to. A financial plan that is regularly reviewed is a way of keeping those things in mind and, hopefully, seeing them come closer.

There are ways by which we can maximise this source of wellbeing. For example, suppose you are putting money away for a holiday of a lifetime to the ancient Inca ruins of Machu Picchu. Why not create a dedicated fund or account, and call it the “Machu Picchu pot”? If possible, put a picture of Machu Picchu on the account, or maybe even on your fridge, to remind you of why you are saving.

The power of positivity

Some prefer not to anticipate nice things. They might give the following explanation: “I always expect the worst, because then if something good happens, I will be pleasantly surprised”.

The trouble with this negative form of anticipation is that this person will spend the majority of their time in a negative mindset, with brief moments of joy. The person who hopes for good things will experience positive anticipation and thereby spend the majority of their time in a positive mindset, with brief moments of disappointment.

Not just bucket list

It might be worth reviewing the objectives of your financial plan. For example, if they are goals, this might not create the same level of joy from anticipation as doing something purposeful.

Let’s take that trip to Machu Picchu, for instance. It could be the trip of a lifetime, something you have always wanted to do. However, once you have completed the trip, it will be ticked off, and you’ll need to find the next place to visit. As the survey mentioned above showed us, after the trip, your wellbeing will be no higher.

In comparison, perhaps you have always wanted to be an artist, coach a football team, or spend time helping a charity. Perhaps it can only be achieved after a certain financial goal, such as paying off your mortgage, which reduces outgoings and then allows you to change your working hours to four days a week.

Having this to look forward to is more purposeful than a holiday, and so increases the joy from anticipation. Having a photograph of your favourite painting, football team, or logo of the charity to remind you of your saving purpose will consequently generate wellbeing.

¹ The Impact of Anticipating Positive Events on Responses to Stress, Monfort et al, 2014

² Vacationers Happier, but Mostnot Happier After a Holiday, Nawijn et al, 2010  

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

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