How much money do you need to be happy?

Think Money Can’t Buy Happiness? Think Again

Once I saw a bumper sticker that read, “People who think money can’t buy happiness must not know where to shop.”

While I abhor the empty-headed entitlement of the statement, I have to say that its underpinnings are true. I’ve been broke and I’ve made a decent salary. Guess which is better?

In the strictest sense, money can buy happiness. Having enough cash means you don’t have to choose between heating and eating, or beg the landlord to give you another week to come up with the rest of the rent. When your car breaks down you can fix it; if your kid gets strep throat you can pay for the antibiotics.

Money can’t buy “a fixed amount of happiness,” said Harvard University’s Daniel Gilbert, in an interview on National Public Radio. But he also pointed out it’s ridiculous to believe that cash has nothing to do with contentment.

“All you have to do is go stand outside with no coat, no shoes, nowhere to go and hungry, and in about five minutes you go, ‘Wow, money would make me happier,’” said the psychology professor and author of “Stumbling On Happiness.”

“So money is obviously related to happiness, but its relationship is intricate and complex.”

You don’t necessarily need loads of lucre to be happy; in fact, there seems to be a point of diminishing returns. A Princeton University study from a few years back indicates the magic number is $75,000.

The lower a person’s annual income falls below that benchmark, the more unhappy the person feels. Yet no matter how much more than $75,000 people earn, they do not report greater feelings of happiness.

To be clear: The study is not saying that higher salaries won’t improve your life. Instead, it suggests that after $75,000 a person’s emotional equilibrium is more affected by factors such as “temperament and life circumstances.”

Rethinking how we spend

Recent studies also show that people get more bang for their buck by investing in memorable experiences rather than more stuff. The Wall Street Journal cites two researchers making this point in a recent article. However, many people get it backward, often cutting back on experiences instead of material goods when they are in a money-conscious mode. According to Ryan Howell, associate professor of psychology at San Francisco State University:

“People think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value.”

Experiences meet more of our psychological needs, according to the article:

They’re often shared with other people, giving us a greater sense of connection, and they form a bigger part of our sense of identity. If you’ve climbed in the Himalayas, that’s something you’ll always remember and talk about, long after all your favorite gadgets have gone to the landfill.

Giving our money makes us happier

Once we have our own needs met, being generous with others also makes us happy, research shows.

Back in 2007 I was a midlife college student living on about $12,000 per year. My budget was pretty bare-bones, yet charitable giving was a nonnegotiable line item, for two reasons:

  1. Need existed. (Duh.)
  2. It got me out of my own head, i.e., it reminded me that other people had it a lot worse than me.

It wasn’t much of a donation, just $20 per month. That double sawbuck could have bought me a nice bag of oranges plus something meatier than neck bones to flavor the pinto beans that made up the bulk of my diet. But giving the money away made me feel good.

That’s a pretty common reaction, according to Elizabeth Dunn and Michael Norton, co-authors of “Happy Money: The Science of Smarter Spending.” Even “modest forms of generosity can make us happy,” they wrote in a Harvard Business Review article.

A decade’s worth of research shows that “asking people to spend money on others … reliably makes them happier than spending that same money on themselves,” the authors note. “By rethinking how we spend our money – even as little as $5 – we can reap more happiness for every dollar we spend.”

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What can be gained?

The ways that money buys happiness are as individual as our desires. Some expenditures are purely physical: big houses, high-end automobiles, expensive furniture.

Sometimes we buy ourselves the gift of time, comfort or reduced stress — paying for massage, manicures or house-cleaning help, for instance.

But happiness can be bought only if you know what you’re seeking. Instead of spending haphazardly, try to determine what you want out of life: More time? More clothing? More collectible figurines?

Examine those choices. What do you expect to gain? Is that realistic? Think about other things you could do with the money — pay down debt, create a retirement plan, pay cash for your next car.

And look around you: If your home and/or storage locker are filled with stuff you’ve stopped noticing, it’s probably time for a reality check. Maybe a garage sale, too.

Spending with intention

I’ve been fairly happy without money. But would I willingly go back to living on dried beans or washing clothes with a scrub board? Nope. I can buy more than one kind of food now, and I delight in tossing dirty clothes into a washing machine.

I can help people I love and people I don’t even know. I can go to a midnight movie with my best friend and get kettle corn if I want it. (And I almost always want it.)

It’s OK to spend money. Buy that kettle corn three times a week if that’s what makes you happy. Just do it mindfully, instead of chasing trends or making random credit card purchases.

To turn that bumper sticker motto on its head: Some people know that money can buy happiness – they’re just really careful about what they buy.

What little expenditures bring you the most delight? Share with us in comments below or on our Facebook page.

This post courtesy of Money Talks News and Donna Freedman.

 

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