Can Money Buy Happiness?

Women's Financial Learning Centre

You’d be reasonable to think money can buy happiness.

After all, a lot of things that make us happy can be bought with money. An ice-cream cone on a perfect summer day. New red shoes for your daughter on her first day of preschool. A beautiful home. A trip to New Zealand.

These moments made you happy. Money, therefore, buys happiness. Or at least, money makes our lives happier.

Makes sense, right?

But there’s a simple reason why money doesn’t always buy happiness, and it’s this: If money was the only contributor to happiness, there would be no unhappy rich people. Yet there many of them – and in fact, wealthy people report being more unhappy, on average, than those who make a moderate income.

How can that be?

Where Money Makes a Difference

First, let’s look at the elephant in the room: In a country where you need money to buy goods and services, you do have to have a certain amount of money to prevent you from being downright miserable.

You’d be very unhappy if you didn’t have enough money to buy food or keep a roof over your head, for example. Studies show that (of course) people who earn less than a poverty-level wage are unhappier than those who make an average income.

Once the baseline needs are met, though, there’s a noticeable increase in happiness as you earn enough to pay for more than the bare minimum of needs.

But after a certain point – studies vary, but the point seems to hover around $100,000/year – increases in happiness taper off.

There are limits to how much money can improve your quality of life once you’ve reached “enough”.

“Enough” isn’t even defined by that $100,000/year. That’s simply how much the average person needs to earn before they have sufficient funds to cover all the usual stressors of life.

For those who manage their finances more responsibly than average, the limits of money to improve life can be reached much earlier – simply because life is already pretty great.

Your happiness, then, isn’t dependent on how much money you earn.

It’s about whether your income is sufficient to the needs of your life.

What Do You Need to Be Happy?

Many of us have never really asked ourselves this question in a serious way. We’ll give flippant answers like “a million dollars” or “a cruise around the world” but we don’t actually ask ourselves what would make us happy.

A million dollars would certainly be enough to pay off most people’s debts and have plenty left over for fun and frolic, but after all that money is spent … then what?

Would you be happy then?

It’s a question worth asking yourself, because if you don’t know the answer, it’s very difficult to know whether you’re using your income to achieve your personal happiness goals.

Happiness isn’t easy to define, but it’s plain that the kind of happiness acquired from a short-term gain isn’t a lasting kind of happiness. Let’s test it out:

In the morning, your spouse asks if you’re feeling okay. You’ve seemed a little down lately. You reply, “You know, I’m not sure why, but I’ve been really dissatisfied lately. I feel like it’s been a long time since I felt really happy.” Your spouse gives you a hug but has to go to work and heads out the door.

Feeling a bit glum, you head to the mall, where you decide a Bluetooth stereo system would be just the thing to cheer you up. A little indulgence, something just for you. You’ve been working hard. You deserve it.

You buy your stereo system, bring it home, and set it up. You put on some of your favorite music.

What do you think? Do you think your overall sense of unhappiness will be cured because you made this purchase?

Probably not. You’ll enjoy your stereo system. You like hearing your favorite songs. But if you’re unhappy with your life, you’re not going to banish that feeling with a mere purchase.

What would shift it, then? What would actually change your sense of happiness?

What Really Matters

You have things in life that really matter to you. Your family probably matters to you. Maybe you have a skill or a craft or an artistic talent that matters to you. Maybe you believe in doing volunteer work or protecting the environment or helping with community events.

Pick something that matters deeply to you. Imagine the same scenario: You wake up feeling discontented and dissatisfied. This time, instead of heading to the mall, you decide to spend the day engaging in what matters most to you.

What do you think? Would your sense of unhappiness shift? Would you feel happier after doing what matters most to you?

It’s likely that you would. When we pursue what really matters to us, our happiness increases… without even spending a penny.

But Wait …

This part might surprise you:

Money can’t buy happiness, at least not in the long term. But improving your relationship with money would.

Here’s why:

You need financial freedom to be able to engage in the activities that matter most to you.

Let’s say that what matters most to you is protecting wildlife in your area. You’re going to have a hard time doing that often, unless you can afford to quit your job, work less hours, or take a pay cut to work for an organization that helps protect the wildlife.

However, if you understand your relationship with money, set the right goals, and work towards making room for what you find most meaningful, you really can buy more happiness for yourself.

Financial security and financial knowledge are the keys. Master those, and you’ll find you have room to make choices that truly bring more happiness into your life.


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