We have all heard the old adage that “money can’t buy happiness,” but oftentimes it feels like a little bit more money would really make things easier. The fact is that both of these concepts are wrong … and right. It’s complicated.
Let’s start with “happiness.” As described by the ever-wise folks over at Merriam-Webster, happiness is a “state of well-being and contentment.” Years of research show that, in order to have a sense of well-being and contentment, basic physiological needs of clean air, water, food, clothing and shelter must met. In addition, we have needs for personal and financial security/safety and good health. In the sense that money is needed to provide all of these things (to a certain extent) money does indeed buy some happiness. However, research also shows that beyond a certain point — that at which our needs are met — additional money does not contribute to a greater sense of well-being.
Interestingly, a recent Gallup poll of 1,000 United States residents showed that emotional well-being rises proportionally to income only up until an average annual household income of $75,000. Beyond that point, no additional increase is shown. Additionally, researchers found that low income was associated with more intense negative emotions related to hardships such as poor health and divorce.
Now let’s look at the second point that leaves people wondering if money can buy happiness: would having a little more money make life easier? My personal experience in financial education/counseling, paired with a whole lot of research, has revealed that the more money we make, the more money we spend. Additionally, if we are not properly managing the money that we already have, we are not going to properly manage more money. In other words, making more money is not going to make your life easier (or increase your well-being) if you don’t know how to properly manage it. Oftentimes, when our income increases, our debt increases right along with it. Instead of saving or paying off existing debt when we get a pay raise, we keep spending and dig ourselves even deeper into debt, always living paycheck to paycheck without any back-up plan. This type of lifestyle causes a whole lot of stress, which, in turn, reduces our sense of well-being or happiness.
So what does all of this mean? If your family makes less than $75,000 annually, are you doomed to a life of unhappiness? If your family makes more than $75,000 annually, have you reached your limit, with no additional happiness in sight? If you don’t know how to manage the money you have, are you doomed to a life of financial despair? NO! While having enough money to cover your needs and learning how to manage it properly is obviously important to well-being, our financial status is certainly not the end-all be-all of happiness.
When we focus totally on well-being, we miss out on the other side of happiness: contentment. Instead of focusing on more money, more stuff, a bigger house, a nicer car, look at what you already have and be thankful for it. Cut back on the excess. Find something that you are passionate about and do it. Spend time with your family and friends. Enjoy new experiences instead of piling up new things. Look at your income as a vehicle to meet your needs, not the means for making you happy.