Money and Happiness: An Enriching Relationship?
The belief that money cannot buy happiness is one of the most popular beliefs coming from research in psychology. Presently, new research has challenged these popular assumptions. Researchers concluded that having more money has a direct relationship with increased overall life satisfaction or happiness.
However, this money and happiness relationship is not a straight line. As income increases after a certain point, its impact on happiness tends to reduce. And those with little money felt the highest increase in happiness with increased income. Even after basic needs have been covered, an increase in income still improved life satisfaction.
Can money buy happiness?
Of course, income by itself is not the sole determinant of how happy people are. And excessive materialism has negative moral and psychological implications. But the influence of money on happiness cannot be neglected.
An often misunderstood 2010 study by Princeton University researchers agreed that increased income does add to “emotional well-being” up to a point. From a daily survey of 1,000 US residents, the study found an annual income of $75,000 to be the point at which further rise in income didn’t guarantee further emotional wellbeing.
This stands to reason because people who make far less than $75,000 tend to stress more over covering basic needs such as food, rent, and clothing. Problems that money can easily take care of. However, once the basic necessities are covered, the problems that come up are not what can be solved by simply throwing more money at it.
That is to say that wealthier people have issues that are not related to lack of cash.
But what exactly is “Happiness”?
For Deaton and Kahneman, the study authors, happiness can be defined in terms of “emotional well-being” and “life evaluation.” Emotional well-being can be defined as the day-to-day feelings a person experiences. These could be feelings of joy, sadness, stress or anger. While life evaluation is chiefly about the feelings people have about their life when reflecting on it.
The researchers concluded that only emotional well-being was the aspect of happiness that tops out at $75,000. Which is not the case for life evaluation which they found to increase with more money.
Therefore, they summarized that more money buys life satisfaction but not happiness while low income is linked to both low emotional well-being and low life evaluation.
In yet another research into the correlation between money and happiness, the average life satisfaction of people who live in wealthier nations are generally found to be higher than those in poorer countries. Then again, other researched has found that those in poorer nations tend to find meaning in life more than their wealthier counterparts. This is due to the fervent religiosity of poorer nations which is often absent in more affluent countries.
More findings concerning the link between money and happiness.
A study by Elizabeth W. Dunn, Lara B. Aknin, and Michael I. Norton, published in 2008 in Science, concluded that money does buy happiness, but only if spent on someone else. In the first study, the survey found a direct correlation with the amount of money people spent on gifts to others and charity and an increase in their feelings of happiness and fulfillment. This still holds true even when the income was controlled.
For their second study, the team surveyed employees at a company who had just been paid profit-sharing bonuses. The amount of this bonus the workers spent on others predicted happiness six to eight weeks down the line, while the portion of the bonus they spent on themselves didn’t have any effect on their happiness.
In their third study, the team gave research participants $5 or $20 and were directed to either spend the money either on themselves or on others. Then their happiness was determined. The study found out, unsurprisingly, that those who spent theirs on others were happier than those who didn’t. And the amount of money they gave away had no effect on their happiness.
Lastly, the study had additional participant to say what they believe could give them more happiness. Surprisingly, they erroneously believed that spending the whole $20 on themselves would. If only they knew…
If you put together all the results of these studies, is it safe to then say that the more expensive the gifts to others are, the happier the giver will be?
Well, Dunn et al. didn’t test that theory. Another pertinent question to ask is if the results will remain the same if participants were asked to make these donations with their own money as against a small amount of cash provided by researchers.
Can we then say that happiness can be bought with money? That is if you spend it right.
After all, a lot of wealthy people still battle with alcohol or drug addiction, depression, and some have even ended their own lives.
In your own experience, you must have noticed that getting a raise or bonus didn’t make you happier long-term. The initial euphoria quickly dissipates as you get used to the new pay. Again, buying a new smartphone, or the latest trending gadget didn’t do much for your happiness.
But don’t be in a hurry to discount money as an enabler of happiness. Here a some of ways you can spend money, backed by science, that is guaranteed to give you more lasting pleasure:
Buying more time
A UCLA study of 4,400 Americans showed that people who value time over money are generally happier than those who don’t think money is better. This is why you should get a virtual assistant to handle those mundane tasks that keep you bogged down.
You are better of spending on a housekeeper, a grocery delivery service or any other service that can free up your time for the things that really matter – like spending time with family and friends or just wandering outside and watching the sunset. Your quality of life is sure to improve.
Spending money on a fantastic experience
Come to think of it, buying a $400 game console which you will still have in the foreseeable future should make you happier than, say, buying a ticket to go see your favorite artist perform and your money is gone once the show is over. No. not really.
Researchers have found that the opposite is true. People erroneously believe that buying things which last longer and may even appreciate in value will keep them happy for much longer than experiences which are just one off.
The truth is that you quickly get used to the shiny new smartphone you have been obsessing over once you buy it. And even though you may still enjoy using it, that initial spurt of happiness you experience the first few weeks quickly fades away.
On the contrary, a great experience such as a vacation in an exotic island will stay in your memory for life. You will always remember those moments with a rush of pleasure.
Experiences may be fleeting, but the joy they produce will last for a very long time.
Spending with friends and family.
You will feel happier and more fulfilled when you spend time and money with people you genuinely care about.
We are all social animals and having healthy relationships with others is essential for our physical and mental health.
This is why spending money on experiences trumps buying things because we usually share such good times with a spouse, lover, friend or family. Therefore, ensure you buy more than one ticket and carry along someone whose company you enjoy. Even going to buy stuff together is more fun than winging it alone.
Spending on others.
Earlier in the article, I’ve already pointed out a study where researchers gave college students some money and directed one group to spend it on others and the other group to spend it on themselves. The first group reported being happier than the second.
Why does spending money on others make us happy? Psychologists say it is because it makes us feel good about ourselves. Giving to others enhances a loving and generous self-image which makes us happy.
Its also because giving to others helps us connect more with them and people with strong social ties a generally happier than the lone wolfs.
You also buy an experience when you spend on others. Even when you give them a physical gift, what you actually bought for yourself is that experience of assisting someone else.
You are buying the experience of their happiness and gratitude. Do you now see why it feels so good?
Money, they say, makes the world go round. But how does it affect your happiness?
Having money up to a certain point contributes considerably to your feelings of well-being. But beyond that point, more money doesn’t necessarily translate to more happiness. However, with mindful and right spending, money can buy a whole lot of happiness.