Can Money Make You Happy?
The common wisdom is that money can’t buy happiness, but in reality it isn’t that simple. Money can in fact buy you things that make you happier, but there is no guarantee that making an extra $1 million a year is going to increase your life satisfaction. The real question is how are you using money to build a meaningful life based on your values.
How Money Makes You Happier
Maybe the better question is: can money free you from unhappiness? In certain ways, it can.
A 2010 study by Princeton professors Angus Deaton and Daniel Kahneman showed that the amount of positive emotion experienced each day rises steadily with increased income, but only up to a yearly income of $75,000.
This shouldn’t come as a surprise.
When you don’t have enough money to cover basic needs, life is stressful. You constantly worry about paying for basics like housing and food. You take whatever jobs you can get because you desperately need money instead of having the luxury of choosing an occupation based on your strengths and interests.
As you make more money, fears of survival gradually decrease and your mind is freed to start making decisions about how you live your life. More money creates more freedom.
Money can also buy you things that make you happier. I really dislike cleaning the dirt out of the window tracks and would really love to pay someone to do that for me. Many people pay to have their house cleaned so they can spend their weekends hiking or doing activities with their children.
When you have money, you can pay people to do all the tasks that slow you down and prevent you from spending your time in a more satisfying way.
In addition to things that give you more time, money can buy you things that are just plain enjoyable. Maybe it is your daily coffee or a milk frother so you can have a really enjoyable cup of coffee at home. Or it could be tickets to athletic events, streaming services, zoo memberships, vacations or any other thing that brings you joy.
So if you’re making more than $75,000, why aren’t you happier?
You’re not in control of your money.
You don’t know where your money is going and you know you need to do better but you don’t even know where to start. Maybe you have debts to pay off, but it is too overwhelming to come up with a plan. Or you want to save for retirement, but you can’t figure out all those complicated numbers and acronyms like 401(k) or Roth IRA.
What you can do instead: Make a decision today to get your finances under control. There are plenty of books and online resources that can help you learn about basic money management. Or hire a financial coach or advisor. The important thing is that you make the decision to just do it and set aside the time to make it happen.
You spend money on things that don’t create meaning for you.
It is easy to fall into the trap of thinking “I’ll be happier once I have…” At a certain point, however, there are only so many things that you can buy to create a more meaningful and enjoyable life. This is why after about $75,000 per year, happiness doesn’t increase significantly.
What you can do instead: Figure out what is important to you and splurge on those things (within your means), and cut out anything that doesn’t create meaning for you. A bigger house, for example, could make your life better because it reduces fighting or gives you space to work at home without distractions. On the other hand, it might just be a big suck of your time and money and what you really want to do is live in a smaller house and spend more time traveling.
Your money isn’t being used in a way that supports your values.
Instead of being intentional with your money, you’re in survival mode, paying for things as they come up instead of actively deciding how each dollar that comes in will be spent.
What you can do instead: Start by thinking about why money is important to you. George Kinder, who advocates for life planning rather than just financial planning, is famous for asking clients three questions to help them figure out what is really important:
Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don't hold back on your dreams. Describe a life that is complete and richly yours.
Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won't ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it? (Note that this question does not assume unlimited funds.)
Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?
Ultimately, money is only going to make you happier to the extent that you put it to work creating a more meaningful life. The great news is that you get to decide what that looks like.
