Monday , February 26 2024
Can money buy happiness? People with money say "no." People with no money say "yes." The real determining factor is how you use the money you have.

Can Money Buy Happiness?

Money & HeartIt’s the age-old question: Can money buy happiness?

The answer depends upon whom you ask. People without money say “yes.” People with money say “no.”

If you don’t have enough money to make the rent, you’ll be anxious and worried. If you have a lot of money, you may also be anxious and worried: anxious about holding onto your money and worried that people only like you for your money.

New research confirms that people with higher incomes are generally happier than those who struggle to get by. While this may come as no surprise, the old research still holds up: Once you have enough money to cover your basic needs, buying a more expensive car or dining at fancier restaurants does not add to your happiness quotient.

Ask any rich person. They’ll tell you money does not buy happiness. How many rich kids crack under the pressure of their parents’ expectations? Or suffer from a lack of attention and affection? How many families splinter over fights about money? (I can think of at least three branches in my own family.)

If you want to be happy, having money is not enough. How you spend it is a more determining factor. If you use it to fill your home with more and better stuff, you will not be any happier after the initial excitement wears off. Because of something psychologists call “hedonic adaptation,” no matter how good something new makes you feel, you stop appreciating it over time. As it fades into the background and becomes part of your “new normal,” you drift back to where you started emotionally. Eventually your new couch and even your new house will stop nudging the needle on your happiness meter.

The same is true of experiences. One often-cited study famously showed that despite their initial euphoria, lottery winners were no happier than non-winners 18 months later. This tendency to return to “baseline” emotions also occurs after marriage, voluntary job changes, and promotions – the very things we think will bring lasting happiness and better well-being.

Nonetheless, when you use your money for experiences like concerts and travel you gain greater and longer-lasting pleasure than when you buy lawn furniture. Likewise, when you give your money away or use it to help others, you derive a lot more satisfaction than when you lavish it on yourself.

Why is that? Because activities like traveling and giving tap into your identity and reinforce the good feelings you have about yourself. They also tend to build and strengthen your connections with others through social interaction. According to Professor Cassie Mogilner, associate professor at the Wharton School of Business, having strong, stable connections with others is the single most important ingredient for well-being.

And, unlike things, which tend to deteriorate, memories generally sweeten over time. Even bad experiences become good stories, which we enjoy retelling as they provide juicy gist for the social mill. Though my uncle loves his new car, he’d much rather talk about the horrifying experience of falling and breaking his pelvis on a recent trip to Greece. After seven weeks of forced hospitalization, he flew home strapped to a stretcher flat on his back. Upon landing at O’Hare, everyone, including the flight crew, evacuated the plane, leaving him alone and helpless in the empty craft.

Trapped, my uncle had plenty of time to contemplate his future. While his situation was unnerving, under normal circumstances you can optimize your happiness – at no extra cost – by looking ahead and planning in advance. As you know from personal experience, the anticipation and excitement leading up to a vacation or a family outing can elevate your mood as much as the event itself.

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About Steve Lome

Steve Lome and Dave Kramer are the guys behind "The $500 Cup of Coffee, a Lifestyle Approach to Financial Independence, Especially for Millennials and the People Who Love Them". We are not professional financial advisors, but we have lots of money experience. As a mortgage broker, Dave reviewed the personal financial statements of thousands of customers. As a developer of affordable housing, Steve learned it was easier to build a house than a mortgage-ready customer, because so many of his prospects were wearing or driving their wealth. They both realized that no matter how little or how much people make, most do a lousy job of managing their personal finances. Dave first conceived of “The $500 Cup of Coffee” as a way to help his clients save their money. Working with Steve, he re-imagined it as a roadmap to financial independence that almost anyone can follow. The final result is a well-balanced blend of Dave’s straight forward thinking and Steve’s expansive worldview that encourages a commonsense, relatively low pain approach to wealth accumulation, emphasizing conscious consumerism, steady saving and regular investing.

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