Does money buy you happiness? Yes, no, maybe, sometimes, it depends. The reality is, it’s complicated. The question has been tackled by some of the smartest brains from Socrates to recent Nobel prize winner Richard Thaler, and we still don’t have a clear-cut answer.
Words by Georgie Loxton, CFA, Founder, Liberty Wealth Partners
Yes, no, maybe, sometimes, it depends. The reality is, it’s complicated. The question has been tackled by some of the smartest brains from Socrates to recent Nobel prize winner Richard Thaler, and we still don’t have a clear-cut answer.
There is a link between money and happiness, but it’s weak and it holds only up to a certain point. A 2010 research paper by Daniel Kahneman and Angus Deaton (two Nobel prize winners) showed that beyond an annual income of $75,000 there is no improvement in emotional well-being. On the other hand, poverty does seem to be associated with emotional pain.
But if more money enables people to live longer and healthier lives, to have more control over their time and to spend less time worrying, then why aren’t wealthy people happier?
Society has taught us that happiness is related to how much we have and that more is better. Sadly, there is a basic lack of knowledge about what drives and sustains happiness. Elizabeth Dunn, author of ‘Happy Money, the Science of Happier Spending,’ wrote “money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t.”
Dr Thomas Gilovich, a psychology professor at Cornell University, has been studying the question of money and happiness for over two decades. He says “One of the enemies of happiness is adaptation. We buy things to make us happy, and we succeed. But only for a while. New things are exciting to us at first, but then we adapt to them.”
Research suggests that if we want to use our money to live a happier, more joyful and purposeful life then there are a few things we can do:
Buy experiences over things
This has been shown over and over again to boost our happiness. One reason is that our possessions are not part of us – they are separate from us. Our experiences form part of our identity; they shape us and they connect us with others.
Spend money on others
This has a powerful impact on social relationships. Harvard have conducted the longest study of happiness (it started in 1938) and they conclude that close relationships, more than money or fame, are what keep people happy (and healthy) throughout their lives.
Buy lots of small pleasures
Studies have shown that people who are able to enjoy the little things in daily life are happier than those who are not. The problem with wealth is that, by giving access to much greater experiences, it can undermine the ability to savour small pleasures.
Delay gratification when possible
Research has shown that anticipation is a source of ‘free’ happiness. The wait for something can bring more pleasure than the experience itself.
Spend money to buy free time
A 2017 research paper showed that using money to buy time can protect from the time famine of modern life, and therefore increase happiness.
The research seems to support the idea that you can increase the correlation between money and happiness by being more thoughtful about your spending. Just having it certainly doesn’t guarantee that you will be happier than someone with less. And as the old adage goes, the best things in life really are free.To learn more, contact: Georgie Loxton, Founder of Liberty Wealth Partners at: