Can money make us happier? Studies reveal that happiness may not depend simply on how much wealth you have, but on how you spend it…
Throughout our lives it is ingrained into our mentality that if we wish to be happy, we need more money. How many times have we wished we might win the lottery and how much of our focus lies in trying to improve our material finances? At Serenity Financial Planning however, we understand that the single minded pursuit of increasing wealth is not in itself, the road to happiness.
The truth is we do need money and resources to meet a base level of happiness. Many studies have shown that having enough money to provide sufficient food, shelter and comfort will make us happier.
In the past some studies have also concluded that over a base level of money (typically £50,000 income per year) we don’t actually feel much happier. But, interestingly, a series of well-respected social experiments have shown this isn’t true and that actually the more money you have, the happier you are.
In 2015, analysis of data from the Office for National Statistics’ Wealth and Assets Survey showed that for Britons aged 16 and over there is a clear link between household wealth and happiness, life satisfaction and personal sense of worth. This supported a similar 2013 study at the University of Michigan, where researchers Betsey Stevenson and Justin Wolfers concluded: “The relationship between wellbeing and income … does not diminish as income rises. If there is a satiation point, we are yet to reach it.”
So why is it that we hear stories of billionaires who are deeply unhappy and lottery winners who claim their lives are ruined by sudden wealth?
When you look a little deeper, it’s not how much money you have which is the key to happiness, but how you spend it.
According to Sonja Lyubomirsky, author of The How of Happiness, about 50% is down to genetics which determines our baseline happiness level — the level that we eventually return to after big events temporarily alter our mood. Life circumstances – including our financial situation – account for just 10% of our total reported happiness.
The final 40% is about “intentional activities” i.e. things we choose to do to make ourselves happier.
One of the most effective things we can do to make ourselves happier is to actually give money away. Helping others is revealed in study after study to be a means of making yourself happy too.
The other most effective thing you can do with your money is to connect with others. Friendships, or building new relationships, make us as human beings feel more positive and uplifted than anything else.
To illustrate this, a Harvard study gave people a £10 voucher each and split them into three groups – the first group had to spend it on themselves, the second on someone else and the third had to use it to take someone out for coffee. No surprise that the third group was the happiest.
So yes, the pursuit of money can make you happy, if your end goal is to spend that newly gained wealth on activities which you’ve chosen wisely. Perhaps, ironically, there is some truth to the classic quip by actress Bo Derek: “Anyone who says money can’t buy you happiness just doesn’t know where to shop!”