When Money Can Buy Happiness

Can money buy happiness? It would be nice to give a definite “yes” or “no” making the issue black and white instead of shades of gray. The truth is, however, that it really depends on a number of factors on whether money can buy happiness. Still, there are some indicators which point to areas where money can help with happiness.

When it comes to basic living standards, studies show that money has a great influence on happiness. Harvard psychologist Daniel Gilbert, who works on questions such as the relationship between money and happiness, says studies show that all we need for happiness is to have enough money for the basic necessities of life. If we have enough for food, clothing and shelter – which he estimates to be roughly $40,000 a year – we have enough money to be happy.

In this sense, for people living on salaries that don’t meet their basic needs, money can buy happiness. A increase in wealth from $10,000 to $40,000 a year will make a tremendous difference in the quality of their life. Simply stated, money makes a significant contribution in the lives and happiness of people who have little of it.

Once these basic necessities are met, however, money doesn’t seem to help a whole lot when it comes to happiness. After the basic needs are met, the next $50,000, $100,000, $1,000,000 or $10 million has little effect on your happiness.

What the additional money can do is buy time. That is, the more money you have, the less time you have to spend earning it. If you make $50,000 a year but have no savings, you still have to work. If you have $1 million in savings earning 5%, you will earn $50,000 a year from interest giving you the same income with no work. In this instance, you have a choice of how you want to spend your time.

Thus the results of the question of whether money can buy happiness quickly shift from the money itself to how you spend the time which the money allows. If you have a lot of money and are able to spend your time any way you want, you’re not going to be happy if you haven’t developed relationships or activities that make you happy. You will simply spend the time wondering how to spend the time — and why you aren’t happy even though you have money. If it were only money that mattered, a person with $10 million would be 10 times happier than someone with $1 million. We all know that this is not the case.

This is all pretty straightforward and people would be a lot happier knowing these facts about happiness and money. Once having the knowledge, it would seem easy to take the steps necessary to make yourself happier in relation to money except that society throws a curve ball into the equation. While we as individuals want to be happy, society wants us to spend and consume. If our main concern is happiness and we know happiness after a certain income level isn’t dependent on money, this causes a lot of problems for society as a whole. Society therefore has cleverly replaced the truth by suggesting that consumption will bring us happiness.

The societal message is clear in the advertisements you see all around you: the way to be happy is to keep up with the Jones’. Spend money to get the latest and greatest gadget and you will be happy. If it doesn’t make you so, then something else you purchase will surely do so. With all the advertising constantly bombarding you telling you that your happiness is linked to spending more, it’s difficult to step back to find that it just isn’t true.

The challenge is to take this new information and use it to your advantage. Knowing this places you in control to take the steps you need to increase your happiness no matter where your income level falls. Those that aren’t earning enough to meet their basic needs need to concentrate their efforts on earning more money to meet those basic necessities. Those who are earning enough should make sure to take the time to nurture relationships and activities that make them happy and not focus solely on increasing their wealth.

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6 Responses to When Money Can Buy Happiness

  1. mapgirl says:

    Thank you. That is a much more nuanced discussion about money and happiness. It separates out the direct relationship and properly associates money, happiness and time, or rather freedom to spend our time as we wish to actually create happiness.

  2. samerwriter says:

    The trick is to avoid commensurate increases in your spending as your salary increases. Increasing spending causes two related problems:

    First, it makes it difficult to save. So you never get the opportunity to buy time.

    Second, when you do want to retire, your cost of living has increased so that you need a significantly larger nestegg to afford retirement.

    To echo the sentiments in your post, I’ve found that the things I buy rarely buy me happiness. However having very little debt does buy me peace of mind, which certainly contributes to happiness.

    I do think, however, that too much of this “peace of mind” can result in lack of motivation, and that may ultimately lead to unhappiness. I’m not sure where the balance is…

  3. Mike says:

    “If you have a lot of money and are able to spend your time any way you want, you’re not going to be happy if you haven’t developed relationships or activities that make you happy. You will simply spend the time wondering how to spend the time — and why you aren’t happy even though you have money.”

    I cannot agree more with this statement. Not that I have a lot of money, but I am single and do OK for my day-job, so I have enough to choose where to spend and have the time. However, I woke-up one weekend morning, relieved that I was not going to work, however I was depressed that I had no ideas for what I was going to spend my precious two weekend days doing.

    I have come to realize that, despite having the “golden handcuffs” at my current job, living here is really a waste of my life as I don’t have access to things I want to do in this town/area. I spend all of my week waiting for the weekend only to arrive at the weekend and have nothing to do.

    It was at that point that I really understood the “money doesn’t buy happiness” thing. Of course, I would not be happy living in a cardboard box in the street, but I also would be willing to make half what I make now as long as I could move to Orlando, cover living expenses, a new computer every 1.5 years or so, and afford annual passes to amusement parks. This vision is driving me to make changes, but it’s tough to give-up a decently-paying, not-very-strenuous job for the “unknown” of a whole new town and life.

  4. Michelle says:

    Also note that, according to psychological research, relative deprivation/upward social comparisons are a major reason why people in the richest countries are not happier than those in other well-off countries. In other words: we don’t compare ourselves with those who have less than we do. We compare ourselves with those with flashier electronics and more expensive clothing, and in the midst of plenty we think we don’t have enough, contributing to dissatisfaction. Cultivating “enoughness” and seeing the big picture are more important to happiness than any absolute amount of money.

  5. Pingback: Money and Happiness: A “Little” Paycheck Perspective « PR PRep

  6. Nick1254367 says:

    Interesting thoughts! I believe it

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