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In the pandemic, tens of billions of dollars are sitting in savings accounts, houses have soared in value and all kinds of investments have jumped in value. For some advice on how to put this money to use in making you happier, consult the new book by Andrew Hallam.

Mr. Hallam is a former high school English and personal finance teacher who wrote Millionaire Teacher, an international bestseller. His new book is Balance: How to Invest and Spend for Happiness, Health and Wealth. Some households have been financially mauled in the pandemic, while others have been fortunate enough to be in a stronger position than ever.

Mr. Hallam’s new book offers some thoughts on how to build a happier life based not just on financial matters, but also on living according to your values. To hear more about this, I invited him to do an e-mail Q&A. Here’s our exchange:

Q: In your new book, you list four quadrants of a successful life: Having enough money, strong relationships, maximizing physical and mental health and living with a sense of purpose. How does money rank in this group?

A: In the book, I didn’t prioritize money over the other factors. I actually believe relationships and health are far more important. Once we have enough money for our basic needs (enough food, a safe place to live, health care) then having more money only offers a marginal boost to life satisfaction. In fact, it might not offer a boost at all, according to research, if we focus too much on material things. That typically reduces life satisfaction. If we have money, and we want to increase our overall happiness, we should use it to buy experiences and help others.

Q: I’m starting to hear the word balance used a lot more in discussions of managing saving and spending over a lifetime – why do you think that is?

A: We simply buy too much stuff … far more than any previous generation. But research says we aren’t happier as a result. And if we borrow money, that increases stress levels which can harm our health and happiness. I think an increasing number of people are beginning to understand that. They’re recognizing the importance of living simply. Not only does that cost less, but it’s better for the environment and it allows us to focus on what’s important: our health, our relationships, our helpfulness and saving for our future.

Q: Canada’s real estate market has taken off like a rocket in the pandemic. How do you achieve balance when saving for a home and then making mortgage payments are such a heavy burden?

A: We can’t control real estate prices. But if we’re saving for a home down payment, we should reject unhealthy norms. For example, such people should only own low-cost used cars or use public transportation. Unfortunately, we’ve normalized new car payments and automobile leasing. While saving for a home down payment or if we’re struggling with mortgage payments, we should rarely eat out or go to coffee shops. This won’t make us less happy. Research suggests we enjoy experiences more if we make them a treat. And if that increases our financial wiggle room, that can reduce stress, making us happier, healthier and wealthier. Balance isn’t about “deferring gratification” because behavioural science suggests that much of what we buy isn’t gratifying at all.

Q: Economists are pretty sure interest rates are going up. Might higher rates help bring some balance to our financial lives by curbing the appeal of debt and making saving more appealing?

A: Low interest rates remind me of the fable of the live frog in a soon-to-be boiling pot of water. The frog jumps in, as if it’s a hot tub. But the frog enjoys it too much, even as the temperature (think interest rates) rise. Before long, the water is boiling and the frog is cooked. I think increasing interest rates will deter people from jumping into that pot. But for those who are already basking in the warming water, it’s going to be a lot tougher for them to make the lifestyle switch.

Q: You’ve been a strong advocate of low-cost index investing, and in the book you highlight some “set it and forget it” options for long-term investing. What’s your take on the wave of speculative investing that has taken shape since the pandemic began – meme stocks, crypto, zero-commission trading apps and more?

A: Mark Twain said, “History never repeats itself, but it does often rhyme.” At least once a generation, something new and exciting captures investors’ attention. People, especially new investors, pour money in. Demand increases and prices soar. Zero-commission trading apps make that even easier. People are making fast, easy money. They’re saying, “This works, to heck with diversification. I can build a fast fortune.” But history teaches us that if investing is exciting, we’re likely doing it wrong and we’ll pay a painful price. Diversified portfolios of index funds or exchange-traded funds aren’t sexy. But they provide the highest statistical odds of long-term success. And our lives, if we’re lucky, are going to be long.

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Rob’s personal finance reading list

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I recently heard an interview on the radio with the surviving members of The Tragically Hip and one of them told an anecdote about a great 1992 song by Skydiggers called A Penny More. I got a huge nostalgia rush listening to it. Now for a live version of A Penny More from a 2018 concert at Toronto’s Massey Hall.

Tweet of the week

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In case you missed these Globe and Mail stories
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More Rob Carrick and money coverage

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