Can Money Buy Happiness?

We know how we are SUPPOSED to answer that question: “Of course, money does not buy happiness. The most precious things in life can not be bought.”

But then, there’s a little check in our spirit that whispers in a timid voice, “But I sure would be happier if I just had a little more money.”

And therein lies the rub. We know money is just a tool, that it doesn’t carry any real power over us, or at least it shouldn’t. We know people can be happy without it. But if we are talking about our own lives, the reality is: it sure seems like more money would bring with it an incremental amount of additional happiness.

My line of work has given me a front row seat into the financial lives of both the haves and the have-nots. Each client has taught me something about contentment, either because she had it, was pursuing it, or was eluded by it. I have been fascinated to find that many of my clients held the same fear, regardless of how much money each woman had. I heard, “Will I run out of money before I run out of years?” from a 70 year-old, still working woman who had a $3 million portfolio. The same question rattled a newly divorced 50 year-old woman looking for her first job in 30 years with very little in retirement savings. If both women were plagued by this fear of not having financial security, then there must be some other factor at play besides the amount of money they had.

I admit, I have been stymied by this topic through the years. In my library of financial books I’ve collected is one by Jean Chatzky, You Don’t Have to Be Rich. Years ago, while I was out on maternity leave from my job in wealth management, a colleague thoughtfully asked Chatzky to inscribe her book for me, so the inside cover carries her message: “You Don’t Have to Be Rich… but it helps when you have a new baby.” Whether it’s for comedic effect or not, this topic is confusing.

I have long been convinced that financial satisfaction requires both productive behaviors (which most financial professionals espouse) and productive beliefs (your attitudes will be a greater determining factor in your financial happiness than your wealth). Then I began to study with Olivia Mellan, a financial psychotherapist whose work on Money Personalities has been lauded since the 1980s. Mellan’s work on the psychology of finance has opened doors to further research on how I can provide my clients a truly effective approach to greater financial freedom.

Numerous researchers have applied academic testing to the concept of more money leading to greater happiness with salient conclusions explaining the confusing nature of this topic. In the same book she inscribed for me, Chatzky commissioned a study and determined: [box]”It’s not about how much you have You don’t have to be a Rockefeller … Whether you pull in $50,000 or $500,000 a year, you have the same shot at achieving … financial satisfaction.” [/box]  Chatzky’s book makes additional salient points:

• “Even when it’s working in your favor, money can’t make you completely happy. But it can – without a doubt – make you miserable.” In other words, money’s effect on your overall happiness tends to be more negative than positive. But if that’s the case, why are we still so confused?
• “Once you’ve achieved life’s basic comforts, money doesn’t necessarily buy more happiness. In part, that’s because … we make poor choices about how to spend that extra $100 or $1000. All too often we spend $5 here and $10 there rather than do something significant with it.” The lesson here is when EXTRA money comes to you, don’t fritter it away on things you won’t value later. Be intentional when spending the additional funds so you truly appreciate it. You might even take it one step further. In The Happiness Advantage, Shawn Achor writes, “Money can buy happiness, but only if used to do things as apposed to simply have.” A 2009 study showed – in the long run – using money to pay for experiences makes people happier than using it to buy possessions.
• Chatzky compared the relative happiness of college vs. high school grads over their lifetime with surprising results. College grads were happier just after graduation, and their income increased faster and farther than that of high school grads. But over the years, the two groups were equal in happiness regardless of their income. So money is not necessarily a determining factor of happiness.
• Money psychologist Olivia Mellan has identified our society’s most popular money myth: Money = Happiness. Chatzky did some testing on this population who believed money resulted in happiness and found that they also believed money had the power to do some pretty incredible things. “Almost all people who believe money represents happiness also think it represents independence, security, comfort and enjoyment. Three-quarters say money represents control, while two-thirds say it equals achievement and power… The irony is that the financial habits of people who believe money equals happiness stand in the way of achieving that happiness.”

Lest you think having more money would make you a better, more generous person, there is academic evidence to suggest the opposite might be true. In a TEDx Talk, social psychologist Paul Piff discussed the results of several academic studies: ” … wealthier individuals are more likely to moralize greed and self-interest as favorable, less likely to be prosocial, and more likely to cheat and break laws if it behooves them.” While these may be the primary tendencies of those who acquire wealth, Piff provides good news that the same people can restore their sense of egalitarianism and empathy when they are nudged in the right direction from an outside source.

So to answer the question, “Can money buy happiness?”, we need to acknowledge there is no single answer. It can, but it won’t necessarily. To really become financially satisfied, we may need to change both our behaviors (this increases the power of the money we do have) AND our beliefs (eliminating negative outlooks and putting money in its proper place in our minds).

Wherever you are in your answer to this complex question, I have several coaching packages to help you find the right mix of knowledge, behavior change and beliefs to lead you to financial freedom.

Click here to read Chatzky’s list of 10 Commandments of Financial Happiness, She suggests you will increase your financial happiness with each habit you adopt.