Can Money Buy Happiness?

This is a guest post by Robert, who lives in Calgary and worked as a financial adviser before retiring at age 35. He is married, has three kids and has returned to school with the goal of eventually living and working overseas.

Can money buy happiness? The obvious answer is that no, it can’t. But I’ve recently seen a couple articles that argue. In fact, I remember a financial advisor once explaining that, while money doesn’t buy happiness, it’s one of those things that you’d rather have than not have. I must admit that I’ve never believed there’s honour in being poor.

It has been said that beyond about $70,000 per year of income, more money doesn’t make a person happier. This was first described as the Easterlin paradox, which found that within a country, people who had more income were happier. But between countries, the amount of income didn’t correlate to level of happiness. There are two likely explanations usually given to explain this counter-intuitive finding. One is that we have a satiation point where we have everything that makes us happy. That seems to be equivalent to saying that we run out of ideas on how to spend our money, which doesn’t seem particularly realistic. The other is that we are so busy comparing ourselves to others that we lose sight of how much we really need and we only feel happier in proportion to how much more we have compared to those around us. That’s why it’s interesting that a new study shows that happiness does tend to continue to rise with income.

Of course, that doesn’t prove that the income is the source of the happiness. It could just as easily be true that happy people earn more income, or that the income and the happiness are both the result of another cause. And that’s where Carl Richards suggests that happiness comes from spending money on other people. That’s an interesting idea, because it explains why money and happiness are sometimes related (you need to have money in order to spend it on others), but why people aren’t necessarily happy with more money (spending it on themselves). So it seems that money can buy happiness, but only indirectly, but using it to make other people happy.

Having just celebrated my daughter’s fourth birthday by spending money on a new pet fish, a horseback ride, presents and a family BBQ with her cousins, I’d agree that there’s nothing that would have been a better use of that (relatively small) amount of money. Do you get happiness from spending on yourself? On others? Or have you found a better way to find happiness in spending money?

 

10 thoughts on “Can Money Buy Happiness?”

  1. When I was with my ex husband, the household income was double what mine is now. I was miserable (actually, depressed for several years).

    Yes, I don’t have much of a life now, and when an unexpected expense, or even a justified luxury (such as a hair cut) comes up, I get stressed about paying for it without wreaking my budget, but I am incredibly happy.

    Having more money would make life easier, and possibly happier in the sense that I would have less stress, but that will happen when my debts are paid off.

    Happiness is extremely underrated.

  2. I used money to buy my way out of lousy things so I could retire early. Getting rid of negative things in your everyday life is just as good as obtaining positive things.

  3. If having money made people happy, all the movie, tv, and music stars would be great examples of happiness – except so many aren’t.

    Happiness definitely comes from inside you and I also think being able to spend money on others does make you feel good. Having said that, it’s still nice to know that you always have some extra stashed away for emergencies.

  4. I always say money may not buy happiness but it does buy piece of mind.

    I find this to be true because a few years ago I make a big change in my life and went from living pay check to pay check to now having money to save and invest. Have that extra sure takes a load off the mind.

  5. Money can’t buy happiness, but it can buy marshmallows, and that’s the same thing!

    Ok, despite the above silliness I don’t think money buys happiness. In fact the more you have the more you worry you’ll lose and worry takes away from your happiness.

  6. Money can’t buy happiness but lack of money can suck a lot of the joy out of your life. The foundation that having a decent income gives you takes away a lot of stresses and worry and allows you to find happiness.

    Pretty happy in my part of Canada even though I make less than 50K per year.

  7. I totally agree with “jane savers” above – one cannot buy happiness if framed in the notion of spending, but paying the cost of deferred gratification is definitely a boost.

    I know I’d be annoyed with making much less simply because it’d be longer before I’d be able to provide more easily for my basic necessities from passive income. But if money is to be spent? I might as well make almost nothing as it wouldn’t make much of a difference.

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