The phrase “money can’t buy you happiness.” is something you’d be hard-pressed to avoid hearing. In recent years it’s perhaps becoming more common to hear variations like “whoever said money can’t buy you happiness has never had to choose between paying the bills and buying food” or indeed “whoever said money can’t buy happiness simply didn’t know where to go shopping.” There’s some truth in both of these points of view. To somebody struggling to pay the bills, the idea that money can’t buy happiness is tone-deaf at best. To somebody about to put down several years worth of savings on a brand new Aston Martin, it sounds like platitude for people with less money. The truth is, money can buy you happiness, but not in the way that you probably think.
The Relationship Between Money and Happiness
A study carried out by psychologists at Princeton University concluded that more money does make us happier – but only to a certain extent. Financial security, disposable income, and peace of mind are all bolstered by money in the bank and a stable income. However, this feeling of financial wellbeing maxes out at about £50,000 per annum. Beyond this point, while more money is certainly able to buy us more material things, simply spending more of it will not buy us happiness.
Evidence suggests that most people believe there is a perpetual link between wealth and happiness. Data from the Office for National Statistics suggest that people in the UK over the age of 16 believed there was a clear link between one’s personal wealth and one’s happiness. However, data from people who have actually attained great wealth does not back this up. Feelings of isolation and unfulfillment are common even amongst the wealthy. They may not lie awake at night worrying about the rent, but neither are they guaranteed a sound night’s sleep. Money’s capacity to buy you minimal financial security should not be played down. When we talk about money buying happiness, we’re usually talking about whether high incomes and considerable personal wealth can translate directly into personal happiness – and it can’t.
It is clear there is something that drives us to work overtime and motivates us to save money. However, buying more and more stuff with that money does not make us happier. Indeed, a big promotion or end-of-year bonus often doesn’t make us as happy as you might’ve imagined. As a species, we’re far too adaptable to not rapidly adjust to a new norm, even when that new norm used to feel spectacular and took years to achieve.
This is a process called “hedonic adaptation.” We can’t bask in the happiness of major positive events for too long because of how quickly we stabilise. While we may think a little more money, a new wardrobe, or an expensive watch might be enough to make us happy, the reality is the more money we earn, the more money we want. No matter how many new things we buy, we’ll always want new things on top of them. Attempting to seek happiness through this sort of spending is a non-starter.
Nevertheless, we wouldn’t want to suggest that as soon as you’re earning over £50,000, you should put your career into neutral and ride the wave to retirement. No, happiness can still be derived from your money, but what matters is not how much we earn – but in how we spend what we have.
The conventional wisdom is that the most sensible investments are in things that will last. In things once bought will hold their value, or even appreciate in value. This line of thinking would suggest a lavish holiday would be a waste of money. Since, after a few days, all you’re left with is the bill. This can lead to feelings of guilt and a desire to put money somewhere it’ll last in the hopes that this will make us happy.
This conventional wisdom is, in reality, rather unwise. While it may be sound advice for holding onto your money, it is not a way to buy happiness. In fact, holding out on booking a real holiday may increase our feelings of stress and anxiety. A long holiday, a weekend getaway, or even a quick catch-up with an old friend can bring us far more happiness than a Christmas-bonus or big promotion.
The reason is that experiences do not just make us happy in the moment, they make us happy in recollection. The concept of spending money on memories may sound like a travel agent’s sales pitch, but there’s research behind it. The experience of remembering good times fills us with a sense of nostalgia, warmth and happiness that we often cannot seem to fully appreciate in the moment. Indeed, the rush of euphoria that buying a new car might bring us – what may feel like “buying happiness” – doesn’t last. We adapt.
It may bring us more happiness to remember the moment we picked up the new car than it would to go and sit in it. A brand-new pair of shoes may make us feel amazing when we walk out with them, but after a while, they’re just another pair of shoes. In short, things themselves do not make us happy, the experiences associated with them do.
Expensive holidays aren’t the only ways to use our money to make us happy. Indeed, “prosocial spending” – spending money on others, makes us happy. There is a demonstrable link between altruistic or generous actions and the brain releasing endorphins. Paying for a meal, donating to charity, or helping out a friend in hard times actually makes us feel happy. Being able to pay for a co-worker’s lunch builds on the social relationship you have with that co-worker, which increases happiness.
In other words, using money in this way is us “buying” happiness – but in a healthy, responsible way. Meanwhile, if you’re not in a position to “buy” happiness in this way, it’ll tend to make you feel unhappy. Therefore, when we use money to help people and build relationships, it significantly increases our happiness and sense of financial wellbeing. When we combine this prosocial spending with spending quality time with the people we care about, we are often at our happiest.
Of course, the conclusion here is not to spend money you don’t have in big acts of generosity. Living within our means is still critical. Ensuring that we maintain financial security and enough disposable income to meet our day to day needs is still the bedrock of financial wellbeing and associated happiness. However, what we do with the rest of the money we earn can truly change our lives. Happiness has long been described as something we’re born with a finite amount of.
The consumer culture that saturates our lives may like us to think that constantly buying new stuff will make us happier. The truth is that happiness is if nothing else, a skill. Like most things in life, you can use your money to hone and enhance that skill, but not to manufacture it out of thin air. That is the healthy, sustainable way for your money to buy happiness.
Using your money to make you happy is a skill, and like any skill, it can always be improved. Consider investing in financial coaching, where you can learn the financial wellbeing secrets to make your money go further, and find ways for your money to buy you happiness.