Money… Can Buy Happiness?
Photo by Stan B on Unsplash
We've all heard the age-old adage that money can't buy happiness. And overall, we would probably all agree with the intent behind the saying, that we should not be consumed with the never-ending quest to acquire more money. That buying more or better possessions will not satisfy us the way that relationships, connection, personal growth, etc., can.
But I think we can also all agree that we might be just a smidgen happier if we had more money, am I right or am I right?
You may have heard the joke that money can't buy happiness, but it can buy me a boat. I hear that. But in all seriousness, what is the correlation between happiness and money? Are they totally separate things, are they intrinsically related, or is the correlation maybe somewhere in between?
Well, today's menu features an entree of a few ways that I encourage my clients to pursue happiness with their spending. And for dessert, an interesting study that shows perhaps money can sometimes buy happiness. Yum.
Entrees
Dish #1:
Early on when working with a new client, we develop and document their values and goals. We have a table that we update once a year, and refer to in other meetings throughout the year, that shows the following:
Financial Priorities
One-Year Financial Goals
What's Important to You / Who Are You?
Your Goals/Direction
Your Interests
The top two are the specific financial goals and priorities that are the basis for a lot of the work we do together. They keep us on track.
The last three are the more personal ones, and really, the foundation for not only the financial priorities and goals but for most of the decisions we make, financial or not.
Who you are and what's important to you are naturally going to be foundational for how you make decisions, including about finances. It is so helpful as an advisor to have an understanding of how a client thinks about money, what makes them tick, and their priorities and values in life. This helps me encourage clients to make decisions that align with their values, their hobbies, or in other words, the things that make them happy.
Dish #2:
Another general framework I use with clients is to organize outgoing money into the following categories:
GROW: savings & investments
OWE: paying taxes & debts
GIVE: giving to others, organizations, etc.
LIVE: the costs for general living, everyday expenses
Obviously, these are fairly general categories, but they can help people understand the basics of where their money is going or should be going. This alone can provide peace of mind and happiness, knowing how much is going where and that you have a plan.
It can often be eye-opening to see the percentage the GIVE category gets in comparison to the other three. This can sometimes prompt people into wanting to increase the portion they are allocating to the GIVE bucket. And in my experience, people often feel a great sense of happiness and peace when they give to family/friends, organizations they're passionate about, strangers, or whatever it may be.
Dish #3:
And finally, when someone gets a bonus or an unexpected amount of money, they have to decide what to do with that money. A portion may be set aside for future expenses, a portion saved, and, as I like to encourage, a portion spent. This could feel like a splurge to some, but it is so important to spend money on things, people, and experiences that bring you happiness. (See my blog posts about bonuses: Part 1 and Part 2.)
Dessert
A study was done with this question in mind by Nature Portfolio, where they gave $10,000 USD to 200 people from seven countries and across varying socioeconomic backgrounds with the instruction that they must spend all the money within three months. They then measured how happy the participants felt after making certain types of purchases with the money. Their findings were interesting to be sure.
The top five “spending types” that offered the most happiness were as follows:
Donating to a charitable organization
Buying an experience
Spending on personal care (e.g., gym memberships)
Spending on education (e.g., writing course, driving school)
Gift to an individual
Wow. Let's talk about how three out of the five have to do with spending time or money on/with others, and the other two have to do with personal development.
First of all, pretty cool little insight that spending on others and self-development can bring so much happiness. How many of us consider that when contemplating spending our money?
Secondly, this study points to a bigger question of how our spending efforts might shift, in order to maximize the amount of happiness per dollar spent. This probably won't be the main thing anyone can or should focus on when it comes to spending (or saving) our hard-earned money, but it's an interesting consideration to take into account.
Framed a different way, “How much more happiness might we experience if we reorganized our budgets to allocate more toward giving to others, having more memorable experiences, and improving ourselves?” A powerful and slightly scary question to ask ourselves, and one we may not know the answer to realistically unless we run some kind of experiment in our own lives. But a good starting point may be asking ourselves a few questions, perhaps like the following:
What are some organizations with missions that you hold near and dear to your heart that you could consider donating to or donating more to?
What experiences might you pursue that pay the dividends of anticipation, enjoyment in the moment, memories for a lifetime, and connection with others?
How could you spend money on yourself to improve your health, well-being, or skills?
Who are some people that you could give to (or more to) so that you could fill an immediate need or help them be more established?
Money may not be able to explicitly buy us happiness, but it can definitely contribute to it, especially if we are diligently using our money to enhance and improve our quality of life and those around us.