14 Dec 2023 Expectation Economics

My maternal grandfather was born in south Alabama in May of 1924, and I remember him telling a story from his childhood of a Christmas morning during the Great Depression when he woke up to find an orange in his stocking. Such was the extent of the gift giving that year. But the real point of the story was that, in his mind, this fact—the finding of an orange in his stocking—made him feel like things were really looking up, like that Christmas was one to be especially memorialized.

So much of life—and certainly so much of money and the decisions we make with it and the emotions we feel around those decisions—so much of all of it boils down to expectations: whether they are met or not, how they change over time, and how they compare to the expectations of those around us. 

My kids get magazines with puzzles and interesting nature facts in them, and sometimes the puzzles involve looking at a picture and circling the things that don’t belong. You can play a similar game with the following picture:

That comes from a recent Wall Street Journal article entitled “The Pay Raise People Say They Need to Be Happy.”

If you haven’t spotted the thing that doesn’t belong in the picture above, I’ll spoil it for you: It’s that every income group says they need more, and those who have that more say they need more, and those who have that more say they need even more. And so on.

Money can and would solve some basic problems, for folks in the lower four income brackets especially. But, as the picture above makes plain, those of us in the higher income brackets appear to have problems that money cannot solve. And those problems often revolve around expectations.

I like to think of the most important financial behaviors as “super-powers,” because if we cultivate them, they can lead to amazing change over the course of our lives. And one of those super-powers for those of us who have more than enough is to be able to step back from our lifestyle, to hold it loosely and disinterestedly, and to notice that it doesn’t need to grow for us to be happy. We might even notice that it could shrink and we’d be just as happy, or possibly even more happy. 

Cultivating the ability to bound our expectations in this manner leads to a profound freedom in the ways we spend, save, and give our money, the ways we approach our careers, the ways we think about time and stress, and even the ways we approach relationships. 

It’s not an easy pursuit, but unlike investment returns, the economy, the Fed, our boss, geopolitical unrest, our genes, or any number of other things we pretend to have any control over, our expectations are actually manageable. And we’re the only ones who can manage them.

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