April 14, 2010

Money Can Buy You Happiness

"Money can't buy happiness"

I'm not sure who originally said it but that quote is pretty widely known.   It is presented and accepted like a straight forward truth.  In many ways it is.  Money alone certainly can't ensure your happiness and you can't go to the happiness store and purchase a box of joy with your cash.   Money can complicate your life and leave you less happy.   There are a lot of very rich and unhappy people in the world and many happy people with little money.  But if you have more money and are less happy because of it then thats not really money doing this to you its due to your reaction to and use of money.  Money is purely a tool which can be used for both positive and negative results.

Lets look at some more quotes that also seem like straight forward simple common sense.

Money can’t buy happiness, but neither can poverty.”
-- Leo Rosten

In response to money can't buy happiness: "Well, sure it can. That's just a lie we tell poor people to keep 'em from rioting."

-- Eva Longoria Parker as Gabrielle on Desperate Housewives

"Whoever said money can't buy happiness simply didn't know where to go shopping."
- Bo Derek

I can quite honestly say that if I had an extra million dollars today that I'm confident that this would lead to more happiness.  If anyone with a million dollars thinks money doesn't make them happy then I'd happily take the burden off their hands and test out my theory.    To me, money is about what you do with it.  

If I handed you $1,000 today how would that make you feel? :
A)  angry
B) no emotional reaction
C) happy

Most of us would answer C to this question right?   Extra money itself won't make you unhappy.   Doesn't it seem straight forward that extra money will increase your happiness?

If you are homeless and having trouble feeding yourself then you are undoubtedly going to be more happy if you had a $1,000,000 windfall.   If you are a working middle class family barely making ends meet in a cramped home you can barely afford with credit card debts then a $1,000,000 windfall should bring you increased happiness.    But both of these scenarios really depend on what you do with the money.   If the homeless person blows all their money on drugs or then they may not improve their happiness.   If the middle class family buys a big house and fancy cars and ends up simply increasing their lifestyle, working harder to maintain it and ultimately ending up in debt then this may not improve their overall happiness level.    The difference is all about what you do with your money.   If you make poor decisions with your money then this will not improve your life.   If you make good decisions with money then it should lead to higher quality of life and therefore higher happiness level.

If used properly, more money can buy you happiness.   The homeless person can buy himself food and get them a home to live in.   In that situation money when properly used will directly result in higher happiness.   Fed and sheltered people are happier than hungry people exposed to the elements.  Properly used the middle class family should be happier with more money.   They can pay off debts and afford a larger home.   A family without debt should be happier than a family with debt.   Large amounts of money can improve your happiness if you don't waste it.

Smaller incremental increases of money can also improve your happiness if used right.   An extra $100 a month could be used to buy you lawn maintenance service which will free an extra hour a week that can be used in the pursuit of something fun or relaxing.   You could use that $100 a month for a massage that might reduce your stress level and undoubtedly leave you more happy. 

I'm confident that money can bring increased happiness in a variety of ways as long as the money is used properly.   However the happiness from money is not permanent, is not guaranteed, depends on your individual priorities and has diminishing returns.   The amount of happiness you can buy is limited.

Happiness improvements aren't permanent.   Once you are used to having something it gets taken for granted.  If you never get massages then having an extra $100 for a monthly massage will make you happy, but after 20 years of monthly massages it will start to feel mundane.  

Money has diminishing returns.   The more money you get the less it matters.    Once you get past a certain standard of living then piling extra money on top of that really won't improve your happiness level much.  Giving $1,000,000 to a homeless person will impact their happiness significantly more than giving $1,000,000 to someone who is already a millionaire.  

Its what you DO with money that matters.   Simply having a pile of money in the bank won't automatically make you happy.  If all you do is sit on your money or use it to buy things you think you should buy cause your neighbors have them then this will not lead to happiness.  Wasting your money or spending it on the wrong things will not bring you happiness.

What makes YOU happy matters.   Simply having a pile of money in the bank actually might make you happy if thats the kind of thing that makes you happy.    A $16 soccer ball might make you happier than $16,000,000 in the bank if you really enjoy kicking around a soccer ball.    What makes YOU happy really matters.   Various things make people happy.  Some people might will a million dollar lottery and quit their job only to end up unhappy because they actually derived much joy in their life from working.  Other people may work 60 hours a week to get lots of money and end up very unhappy because the 60 hours of work is making them miserable.

Your expectations determine what you'll be happy with. If you're the spoiled child of a billionaire then your expectations are great, but if you spend your life in a mud hut in the jungle of a third world country then you will expect very little.   Your happiness level will be related to your expectations.

More money (or what you did to get it) can come with negative side effects.   We may make poor choices with extra money that cause us more headache than joy.   Often when we have more money it is due to working harder.   The extra  money won't make our life better enough to compensate for the extra work.   If a kid grows up only carrying about soccer and becomes a professional athlete with a multi-million dollar annual pay contract then that extra money may complicate their life and cause all sorts of hassle.  Having large sums of money can lead to lifestyle inflation which perpetuates over spending which returns someone to having the same financial problems due to lack of money they had in the first place.

If you aren't happy with what you have then having more likely won't make you happier.   If someone is not content or happy then having more won't make them happier.  It is possible that no amount of money will make some people any happier.   If you are never content with what you have then no matter what you have you'll never be content.

Many of our money mistakes are self inflicted.   More money won't magically make you good at handling your money.   Many lottery winners end up bankrupt.   This is not because the money itself caused them problems but because they make poor choices with the money.  If we keep making mistakes with money then extra money won't change anything.

Our expectations from money may be too high.   Most of our happiness is not about money or things.   For most people our happiness is from basic experiences like spending time with loved ones or accomplishing positive things in our lives.    If you are to list the top 5 things that make you happy in your life then I'd bet that most of those things are not particularly expensive.   If you focus your life on those 5 things then it is unlikely to cost a considerable amount of money.

Money can buy you happiness.   But happiness does not automatically come with money.  Improperly applied money, money wasted on things of little value to you, extra complications with money, mistakes made with money, and unrealistic expectations from money can all lead to decreased happiness.

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