Recently a reporter asked me for financial advice for new college graduates. What I came up with was nothing new: the best financial move a new grad can make is to continue living like a college student for as long as they can stand it.
That means Spartan housing, an old car (or no car), and lots of contact with friends as a substitute for more expensive entertainment. Put your salary toward paying off student loans and developing your career skills.
I’ve been thinking about this recently and I’d like to amend the recommendation: continue living like a college student for as long as you can stand it, preferably for the rest of your life.
What makes you happy?
My wife grew up in a family of eight — three sons, three daughters — in a three-bedroom house in Portland, Oregon. The girls shared one bedroom and the boys, another.
Oh, and there was only one bathroom, and presumably some kind of parliamentary procedure for determining whose turn it was in the morning.
Meanwhile, across town, my two brothers and I lived in a three-story Cape Cod. My brothers shared a room; I got the basement to myself, complete with a door to the outside, which I used for late-night Taco Bell runs.
And I could stay up and watch Letterman or MTV’s 120 Minutes anytime I wanted without disturbing anyone or having to fight over the remote.
I asked my wife this week whether her childhood was impoverished by the fact that she had to share a bedroom. She gave a dismissive laugh and a one-word answer: no.
In fact, I’m positive that if we had a happy childhood showdown, she would win. I was moodier and had fewer friends. Most of the time, the basement wasn’t an all-night party pad; it was just lonely.
This is exactly what psychologists who study happiness would predict: given that we both lived in housing that met a basic level of safety and comfort, other factors in our lives would so overwhelm our housing choices that housing would have almost no effect on our overall quality of life.
As The Guardian put it recently:
“among . . . generally well-housed populations, satisfaction with housing was less important to happiness overall than other factors including family life, marriage, financial situation, health, job, leisure time, friendships and community.”
In other words, everything in life you actually care about. But these things are largely invisible. Housing is tangible.
What makes you happy? Take two.
About a decade ago, Nobel prizewinning psychologist Daniel Kahneman asked 900 working women in Texas which day-to-day activities they most enjoyed and which made them miserable.
Unlike previous such surveys, Kahneman asked the women to keep a journal so they could record their mental state in the midst of each activity rather than recall an unrealistically rosy or bleak image later.
The results (on page 11 of the paper) have become famous and have been largely confirmed in other populations by other researchers; it’s not just professional Texas women.
The most universally enjoyed activity, by a large margin? Sex (duh). Among the five most-loathed activities, however, three of them are closely related to housing choice: housework, evening commute, and morning commute.
We choose large houses because we believe the interior of the house has a lot to do with our family’s happiness; there’s no evidence for that. Along with the square footage, we get more housework and usually a longer commute, which make us demonstrably miserable.
When you ask economists how people should deploy a financial windfall for maximum happiness, they tend to answer, “Give generously and shorten your commute.”
Now, to be fair: maybe bigger houses don’t do much for parents but they make kids happier and healthier. The evidence for this is slim: most research on children and housing looks, reasonably enough, at children in housing projects and what we can do to make their lives less miserable.
The idea that caring parents who choose to raise their children in a shared bedroom or an apartment are doing their kids present or future harm would make most reputable child psychologists and academics laugh.
So why do so many parents act as if it’s an established fact?
This question isn’t just about the psychology of happiness; it’s about personal finance. Living in a smaller space closer to your job may or may not be cheaper, on the whole, than a larger suburban house with a longer commute (although it certainly can be).
But it tends to insulate families from certain common financial shocks such as rising gas prices and dropping home values, which have hit distant suburbs particularly hard in most markets.
A tiny little experiment
My wife and daughter and I live in a 750 square foot two-bedroom apartment. By global standards, this is absolutely deluxe, and I have no complaints.
Last summer, however, we rented a 260 square foot apartment for a month. It had a small kitchen, one bathroom, and one bedroom with a sofa bed and an extra mattress; we converted that room into a living and dining room during the day.
We didn’t do it to save money; the tiny apartment actually cost more than our Seattle home. That’s because it was in central Tokyo.
To be clear, most Tokyo families don’t live in such small apartments; the average apartment for a family of three is comparable in size to our Seattle apartment. But this place was affordable and in a cool neighborhood.
Before our trip, I worried a lot about how we would adjust to such a tiny living space, whether I’d cringe every day on returning to our temporary home, and eventually go psycho like a rat in a cage.
It was fine, of course—nice, even. This proves nothing, because we were on vacation and it was all part of the adventure of living abroad. We had abundant time for socializing, relaxing, and eating lunch and dinner, all highly ranked on Kahneman’s survey.
When we got back to Seattle, we were all shocked at how much stuff awaited us in our apartment.
Since then, I’ve spent a lot of time daydreaming about what it would be like to live in that little apartment permanently, after the vacation euphoria wore off.
We’d have to go out into Japan, deal every day with real-life immigrant problems, and come home to a house with no privacy.
I think we’d gripe about it the way people complain about having to share a bedroom with their sibling: one of those little annoyances that doesn’t really matter.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.