Can money buy happiness?
That is a question that’s been around as long as money, and it’s still of interest today. Now we have the luxury of multiple studies that explore the topic and provide some insights we can use.
I found an interesting article about the science behind money and happiness in an article in The Wall Street Journal* late last year. It made a lot of sense to me based on my own experience of money and what I’ve observed over the years with friends, family and others when it comes to money and happiness.
The article points out that while those who live in the stress of struggling to get by are less happy than those with higher incomes, overall, the amount of one’s income has less effect on happiness than [itals] the way [itals] the income is spent.
Two key findings were:
- Giving money away makes us a lot happier than spending it on ourselves.
- When spending on ourselves, we are a lot happier if we use it for experiences—like travel—than for material goods.
The article points out that the second finding has come up over and over in the last decade, so Ryan Howell, associate professor of psychology at San Francisco State University, went about trying to find out why people continue to spend more on material goods than experiences. His research published in early 2014 suggests there is what he calls a “huge mis-forecast” in which people think experiences will only provide temporary happiness when, in fact, when they look back, they describe more happiness and more lasting value from experiences than from material goods!
I’ve found this to be true in my own life. And, of material goods I have purchased, those associated with experiences—like our grill—tend to provide more happiness than, say, matching chairs. Going to the theatre, boating, skiing, travelling, golfing and entertaining gives our family long-lasting memories, much more than one more piece of clothing. Or, as I have occasionally said to my husband, Mark, “Exactly what value does that 52nd golf shirt in the closet bring you?” (Sorry Mark).
Life is definitely a tradeoff and how we spend money is no different. I remember explaining this to our daughter when she was in middle school. I was used to buying her inexpensive shampoo and we went to the store for her to pick some out. On the way home she asked me about more expensive shampoo as her cousin uses a higher quality and why we could not get that same brand. I told her that we could but if we did we would do less of other things she likes to do. We can’t have the highest quality of everything, do all the things we like to do and save money for the future. She decided the cheaper brand was just fine for her.
For us it was shampoo and for others it is other things. Pause and make sure the discretionary money you are spending is bringing you happiness. Being mindful of this and asking the question may shift what you buy and what you decide not to buy.
While research has found a consistent rise in overall life satisfaction with increased income, the experience of positive emotions like joy, affection and tranquility over negative ones did not rise after a household reached an annual income of approximately $75,000. So, to answer the question, yes and no. A little extra money can go a long way to buying happiness if you don’t have much money because you have more essential needs to fulfill. As you accumulate more wealth, buying happiness becomes more difficult.
*The Wall Street Journal, Nov. 10, 2014, “Can Money Buy You Happiness?” by Andrew Blackman, http://online.wsj.com/articles/can-money-buy-happiness-heres-what-science-has-to-say-1415569538
Kim Sponem is CEO/President of Summit Credit Union, a $2.1 billion, member-owned financial cooperative with more than 142,000 members. Kim has a passion for empowering women to improve their financial well-being for a richer life. Ask Kim your money questions at SavvyMoney@SummitCreditUnion.com.