Last week, I went on a fact-finding mission to figure out the relationship between money and happiness. Unless you’re living under a rock, you must have heard either of these two phrases, “Money cannot buy happiness.” or “Money can buy happiness.” Which of these do you agree with? Personally, I had always switched between either of the extremes but I wanted to be sure this time around.
At Cowrywise, we are invested in educating people on the concept of money. We write about how money works, how to make money, how to save the money you make, how to invest the money you save and ultimately how to build wealth. But the big question is this: does this have any direct relationship with happiness? How does your financial situation affect your emotional well-being? Can money actually buy happiness?
“Whoever said money can’t buy happiness isn’t spending it right.”
The quote above is a common one. According to the Killingsworth research, there is a direct correlation between your income and your level of happiness. In a detailed study that included millions of reports and tens of thousands of people, the research shows that the more money you have, the better your life satisfaction and well-being, all things being equal. So while saying money can “buy” happiness sounds a bit arrogant, we can confidently say that you stand a better chance at happiness if you are rich. The unanswered question is how. How does my pocket translate to my emotional state?
How does money “buy” happiness?
Your financial state can be directly proportional to your emotional well-being. Although, there are cases when this does not apply, and also cases where emotional satisfaction may peak even if income increases – on average, we can say that an increase in your income right now can make you happier, initially and in the long run. How does this happen? What does money do that triggers happiness?
1. Health is Wealth.
One of the most peaceful states anyone can be in is a state of good health. It’s hard to know this when you are hale and healthy because as humans, we tend to underestimate the things we have and pay more attention to the things we don’t have. But if you remember the times you had to deal with an illness, from a dangerous viral infection to common cold and catarrh, you’d acknowledge that being healthy is underrated. It’s hard to be happy when you are unhealthy. And it’s hard to be healthy when you don’t have money.
There’s a common quote that says: Health is wealth, but also, wealth is health. The World Health Organization reports that the poorest countries (people) have the lowest levels of health. The logic behind this is not that hard to figure out. Staying healthy costs money. Eating good food, taking fruits, exercising, frequenting the gym, and going for regular medical checkups; all these things cost money. And if you don’t have them, you may not be healthy. And good health is a catalyst for happiness
2. Prosocial Spending.
Having an abundance of money may not lead to more happiness. Sometimes, how you spend the money is what matters. This is where prosocial spending comes into play. The Oxford Bibliographies describe Prosocial Spending as “the act of using one’s money to benefit others as opposed to spending on oneself.” From both experimental and observational studies, we know that willingly spending money on others makes us feel good about ourselves and can sometimes lead to happiness.
However, it’s hard to spend money on others when you don’t have enough to spend on yourself. If you do have enough, accumulating it may not lead to happiness but spending it on others may. There are various avenues to do this such as charities, giving to a cause, etc.
3. Safety and Security.
There is a warm fuzzy feeling of security that comes with knowing you have money. It’s not hard to explain. We use money to purchase the things that make life easy and comfortable. Knowing you have the means to purchase these things puts you in a safe and happy place. You don’t even have to actually purchase these things but just knowing you could afford them if you wanted makes you feel secure.
Also, investments offer future security. One of the major reasons why we encourage people to save and invest or get life insurance is in preparation for tomorrow. For example, an emergency fund is not needed until there is an actual emergency. But even before then, you feel ‘safe and secure’ knowing that you have money stored up somewhere for the rainy day. All these contribute to your happiness.
4. A Debt-Free Life.
In this article, we said, “there’s a whole life out there that does not involve you avoiding phone calls from the people you owe, and having to block them from your WhatsApp status so they don’t see that you bought shawarma.”
Being a debtor comes with a lot of sadness and depression. From having to send embarrassing messages to your creditors promising to pay back, to feeling ashamed whenever they send you a message. It can be overwhelming having to deal with all these. However, when you have money, you feel light. You don’t feel guilty for spending and you know you’re not running away from anyone. Your confidence and happiness level increase.
5. Buying Experiences.
When last did you go on a road trip, an excursion, or toured a new city? Do you have those things on your bucket list – visit the Eiffel Tower, see the pyramids of Giza, explore Dubai, swim in the Thames? How would you feel if you finally had the money to do all these and you did them? Happy right?
That’s how we use money to buy happiness. Sarah Gervais, a psychology professor from the University of Nebraska, explains that ‘doing’ makes us happier than ‘having’. Hence, while accumulating possessions may not lead to happiness, going for that concert you’ve always tweeted about or that dream vacation can be what you need to unlock some joy. And according to psychologists, the happiness that comes from experiences increases over time and even when they are over, they translate into happy stories and memories that come back as nostalgia.
On the flip side…
We live in a world controlled by money. While it is true that with money, happiness is closer, it is essential that you don’t postpone your happiness, with or without money. Waiting to have an exorbitant amount of money before you experience joy may be the same reason you don’t experience joy even when money comes. Also, remember that without discipline, you won’t enjoy wealth as you should. Human wants are insatiable and Parkinson’s theory is real. Catherine Sanderson, a psychology professor at Amherst College, puts it rightly: “We always think if we just had a little bit more money, we’d be happier, but when we get there, we’re not.”
The best way you know whether or not money buys happiness is to have money, and then you can decide for yourself whether you’re happier or not. That’s why we have limitless resources to help you build wealth through savings and investments. When you plan, save and invest, you are not only investing in your financial well-being but as seen above, you’re also investing in your emotional well-being.