While money is supposed to be a rational and practical tool designed to provide comfort, our relationship with money goes far beyond that. Most people have a wealth number that will satisfy them and make them happy, but when they reach that number, the target changes and becomes higher. Regardless of where people are on the wealth ladder, they believe what they have is not enough, and continue to sacrifice a large part of their lives to accumulate more wealth.
But will this endless quest for wealth make us happier? We live by a moral code that dictates that money does not buy happiness, but is that true? Should we continue to amass more wealth in our quest for happiness? Here are some overarching truths about money and happiness.
What We Know about Money and Happiness:
There is a positive relationship between money and happiness, at every wealth level. At the lower income levels, this relationship is particularly significant. Poverty leads to unhappiness, and people who bear a financial burden lead more stressful lives and are more prone to depression than others. Surveys show that people with less money are more dissatisfied with their lives than the rich and spend more time feeling unhappy in comparison to wealthy people.
But, contrary to what many believe, the relationship between wealth and happiness does not top out at a certain income or net worth level. As you climb up to the higher rungs of the wealth ladder, the positive relationship between wealth and happiness persists.
While money is positively correlated to life satisfaction and happiness, two principles strengthen the link between money and happiness. How you make your money is one of the principles that dictate how much you will enjoy your wealth, and how you spend money is the other. So, whether you are already successful financially or aspire to be wealthy someday, living by the two principles discussed below increases the odds of your wealth resulting in the happiness and life satisfaction you desire.
Earned Money Results in Higher Happiness:
A critical factor that links money and happiness is whether you have earned it through your talents and efforts or acquired it in another way. This factor exists at all income levels but is especially true for the highest earners. Coming into a windfall, such as an inheritance, quick stock-option wealth, or winning a lottery, is unlikely to give you the happiness that having affluence is supposed to bring.
Harvard University researchers conducted one of the rare studies linking extreme wealth and happiness. Their research confirmed what we have discussed above: people with extreme wealth were happier than those with moderately high wealth. Specifically, they showed that people with a net worth of more than $10 million are happier than people with a net worth of $1 million or $2 million. But this comes with one condition; the researchers discovered that extreme wealth made people happier only if they earned it themselves (as opposed to inheriting it or coming into a windfall).
While everyone wants more, the surest way to ensure that the wealth you generate translates to life satisfaction is to earn it honestly by reaching the top of your profession. The elite in most fields don’t just earn five times the average; they make fifty or a hundred times the average. Our society operates under a system where exceptional performance has disproportionately high rewards, and achieving wealth through extraordinary contributions is the best way to ensure that the wealth you generate buys you the happiness you desire.
When you earn money through your skills and hard work, you also gain other benefits. Such as confidence in yourself, pride in your work, and the incomparable feeling of knowing that you gave it your all and achieved something significant. And that is what drives up your happiness and life satisfaction.
How You Spend Money Also Influences Happiness:
How you earn wealth is not the only positive link between money and happiness. What you do with it plays a significant role. Research shows that spending money on others results in greater satisfaction and joy than spending it only on yourself.
Most people face countless daily spending choices, from whether to get that morning latte, go out for lunch, give in to the impulse of buying a new pair of shoes or spend on any of innumerable other things. Researchers have found that while we may believe that we will gain happiness from retail therapy, indulging, or rewarding ourselves, the reality is that our happiness increases when we spend money on others. And interestingly, we don’t need to give excessively to feel happy. Even spending small amounts of money on others, including strangers and people in need, increase our happiness and life satisfaction.
You can increase your happiness by using your wealth to support your favorite cause, giving to someone who needs help, or even offering a couple of dollars to a street musician. Not only will you make the recipient happy, but you will also feel happier than had you spent the same amount on yourself. So, the next time you have an opportunity, go ahead and share your wealth.
Money and happiness are inextricably related, though the relationship is complex. How you earn and spend your money can ensure it results in the happiness you deserve. So, if you want to “buy” happiness with money, earn it the right way, and be generous with it. Science says that these two behaviors will make you happier.