“Money can’t buy happiness” or so the saying goes. In my experience, it certainly seems to be true. Those with much and those with little are still afflicted with the ‘stuff’ of life: health issues, conflict with friends, conflict with family, want, and well, just unhappiness. Happiness seems to be what so many are seeking, but so few find. And yet, there is a growing body of research that suggests that there is a link between money and happiness – it is just not the one we think. Happiness doesn’t come from how much money we earn, but how we spend the money that we have.
How many times have we all thought, “if I only made another $500 per month then everything would be ok”. The problem with this line of thinking is that as our income changes our aspirations change. As our incomes rise, we are always “$500” away from contentment. We’ve stepped onto the treadmill and can never quite seem to reach the goal. The truth is that stepping off the treadmill means changing our thinking rather than our incomes.
The first change in our thinking is to focus on giving rather than getting. There is a growing body of evidence that people who give to charity and give gifts to others are happier than those who spend on themselves. This statement seems like a paradox since the more we give the less we have. But study after study reveals the same result. In one study, randomly assigned people were put into groups and asked to spend $5 on themselves and $20 on others or $20 on themselves and $5 on others. Surprisingly, those who spent more on others were consistently more ‘happy’ with the experience than those who spent more on themselves.
The second change in our thinking is to spend less than we earn. Quite simply stated, the road to unhappiness is paved with debt. Unfortunately, even giving cannot overcome the stress and anxiety caused by spending too much. Perhaps this an obvious statement, but we all too often forget. The new car, the new stereo, the Hawaiian vacation all seem like they should bring happiness, and the advertising is good at convincing us that it will. Yet the credit card bill at the end of the month will cause far more unhappiness. Those who have the discipline to live well within what they earn are clearly shown to be happier those who have more stuff, but also the debt to show for it. In one study, participants found an increase in well-being by simply tracking their spending.
In my work as a financial advisor, I have had the pleasure of working with hundreds of individuals and I have seen how these principles play out. While the focus is so often on earning more, the truth is that we can all benefit from focusing more on our spending. I have seen first-hand the joy that comes from giving. And I have seen first-hand the stress caused by too much spending. Money can’t buy happiness, but managed well, it can certainly make a difference.