Money and Happiness

They say money can’t buy happiness, but the situation might be more complex than that. It’s certainly true that wealthy people can be miserable and poor people can be extremely happy, but money can have some effect on your level of happiness. It might even make a huge impact in your life.

The popular saying about buying happiness is still relevant – even if it’s slightly inaccurate – for its important message: happiness is not about material possessions or accumulating stuff. Once we acknowledge that, we can take a closer look at how money affects you and can “buy” at least some improvement in your life.

Spending Money on Happiness

Psychologists have studied what makes us happy (and what doesn’t), and they’ve discovered a few interesting things.

Credit: devra under CC BY 2.0

Credit: devra under CC BY 2.0

Experiences are better than things. If you’ve got money to put towards your happiness, you’ll feel better about spending it on experiences. Sure, it’s nice to own a better-looking floor tiles, but the reality is that you’ll get used to most of your possessions, and you’ll continue to want better things. Experiences, on the other hand, last a lifetime and can even get better with age (yes, floor tiles and nice clothes can also last for a long time, but the satisfaction of acquiring them fades quickly). Even the anticipation of an upcoming experience adds to your happiness – and you get that part for free. Time is really all you have in this world, so you might as well make it count.

Sharing is caring. Spending money on (or with) others is another good way to get the best bang for your buck. It feels better to buy something for someone else compared to buying the same thing for yourself. Of course, you need to have your own basic needs met first. Studies by the Nobel Prize-winning psychologist Daniel Kahneman have shown that once your income is around $60,000 to $75,000 per year, additional income does very little to improve your happiness. That is a lot of money to some people, but it’s probably lower than what you’d guess for “the happiness number.”

That income level affects different types of happiness differently, as we’ve covered in the past.

What Money Buys

Everybody spends money differently, but it’s worth examining exactly what money can buy, and how that affects your happiness.

Better health. Simply put, if you can’t afford to take care of yourself, you’ll be less happy. Health is one of the most important aspects of your life. Staying healthy doesn’t need to be expensive (taking a walk every day and skipping desert – as hard as that is – doesn’t cost anything), but sometimes it is. When problems arise, it’s nice to be able to comfortably pay for professional healthcare. Copays and other expenses add up, even with insurance.

Exercising takes time, and it can also take money (we’ll get to the question of whether or not you have the time in a minute). Many activities are free, but you’re less likely to get the right variety of exercises if you’re working two shifts just to get by. Equipment for certain recreational pursuits also costs money. For example, a bike, helmet, and pump (or hiking boots, a waterproof jacket, and gas to get to the trailhead and back).

When it comes to food, healthy foods are sometimes more expensive. Again, this isn’t always the case – you’ll spend less if you make your own food at home (again, do you have the time?) than if you eat out all of the time, and you’ll probably eat better. But when you’re saving pennies at the grocery store, processed foods seem to be the most tempting.

Money buys time. When you’re short on money, you generally have to spend your time instead of spending money. That might involve anything from several weekends of home repairs to time waiting for public transportation every day. Plus, you have less choice about how you spend your time because you need to do whatever is most helpful for getting by. If you have a bit of extra money, you can spend your eight working hours every day doing something more tolerable for less money. Back to the issue of health: it takes time to be healthy, so money indirectly helps your health because it gives you the time to manage your health (whether that’s time to recreate or time to go to the doctor).

Safety first. When money is short, safety sometimes suffers. For example, maintenance on your home or automobile might go undone for slightly longer than is advisable when you’ve got other needs competing for your dollar. You might have to spend more time in relatively unsafe situations (whether for work or other reasons) when you’ve got fewer choices.

Flexibility. Hate your job? Just quit. But it’s not that easy is it. Some people are stuck spending eight hours a day being miserable because there’s no practical way to deal with the financial complications of change. The paycheck doesn’t hurt, and insurance isn’t cheap either. Flexibility doesn’t just apply to the workplace: there are countless examples of how you simply have more choices when you’ve got more money.

A Big Deal

When you think about it, these are some of the most important aspects of your life: time, your personal safety, and your health. Besides those things, what could be more important? Some would argue that the answer is your mental/spiritual/emotional health and satisfaction – and that’s more or less getting at your happiness.

Getting more money is difficult, and this page isn’t focused on how to do that. Hopefully, this discussion gives some food for thought about how money does matter in today’s world, and why it’s not necessarily shallow to want a little bit more of it.