Think Money Can’t Buy Happiness? Think Again

By on

Once I saw a bumper sticker that read, “People who think money can’t buy happiness must not know where to shop.”

While I abhor the empty-headed entitlement of the statement, I have to say that its underpinnings are true. I’ve been broke and I’ve made a decent salary. Guess which is better?

In the strictest sense, money can buy happiness. Having enough cash means you don’t have to choose between heating and eating, or to beg the landlord to give you another week to come up with the rest of the rent. When your car breaks down you can fix it; if your kid gets strep throat you can pay for the antibiotic.

In an interview on National Public Radio, Harvard University’s Daniel Gilbert said that money can’t buy “a fixed amount of happiness.” But he also pointed out it’s “ridiculous” to believe that cash has nothing to do with contentment.

“All you have to do is go stand outside with no coat, no shoes, nowhere to go and hungry, and in about five minutes you go, ‘Wow, money would make me happier,’” said the psychology professor and author of “Stumbling On Happiness.”

“So money is obviously related to happiness, but its relationship is intricate and complex.”

How do you figure out that relationship? Money Talks News founder Stacy Johnson has some tips in the video below. Check it out, then read on for more detail.

You don’t necessarily need loads of lucre to be happy; in fact, there seems to be a point of diminishing returns. A Princeton University study indicates the magic number is $75,000.

The lower a person’s annual income falls below that benchmark, the more unhappy the person feels. Yet no matter how much more than $75,000 people earn, they do not report greater feelings of happiness.

To be clear: The study is not saying that higher salaries won’t improve your life. (See “heating and eating,” above.) Instead, it suggests that after $75k a person’s emotional equilibrium is more affected by factors such as “temperament and life circumstances.”

Rethinking how we spend

Back in 2007 I was a midlife college student living on approximately $12,000 per year. My budget was pretty bare-bones yet “charitable giving” was a non-negotiable line item, for two reasons:

  1. Need existed. (Duh.)
  2. It got me out of my own head, i.e., it reminded me that other people had it a lot worse than me.

It wasn’t much of a donation – just $20 per month. That double sawbuck could have bought me a nice bag of oranges plus something meatier than neck bones to flavor the pinto beans that made up the bulk of my diet. But giving the money away made me feel good.

That’s a pretty common reaction, according to Elizabeth Dunn and Michael Norton, co-authors of “Happy Money: The Science of Smarter Spending.” In a Harvard Business Review article, they wrote that even “modest forms of generosity can make us happy.”

A decade’s worth of research shows that “asking people to spend money on others … reliably makes them happier than spending that same money on themselves,” the authors note.

“By rethinking how we spend our money – even as little as $5 – we can reap more happiness for every dollar we spend.”

What can be gained?

The ways that money buys happiness are as individual as our desires. Some expenditures are purely physical: big houses, high-end automobiles, expensive furniture.

Sometimes we buy ourselves the gift of time or reduced stress. There’s a reason that people like my cousin Gertrude are cleaning up, so to speak, with their housekeeping businesses: If you have just three or four hours between getting home and collapsing into bed, would you rather spend that time relaxing or spend it scrubbing floors?

And there’s no denying that money can bring some pretty fabulous experiences. Travelers fly to Europe (and upgrade to first-class plane tickets). Hobbyists indulge themselves freely (ever try telling a quilter she has “enough” fabric?) and music fans buy box seats for the symphony or the opera.

But happiness can be bought only if you know what you’re seeking. Don’t just spend haphazardly, hoping that the next DVD or car accessory will bring lasting joy. Instead, try to determine what you want out of life: More time? More clothing? More collectible figurines?

Examine those choices. What do you expect to gain? Is that realistic? Think about other things you could do with the money — pay down debt, create a retirement plan, pay cash for your next car.

Oh, and look around you: Is your home and/or storage locker already filled with stuff you thought would be the answer? If your life is already replete with things you’ve stopped noticing, it’s probably time for a reality check. Maybe a garage sale, too.

Spending with intention

I’ve been fairly happy without money. But would I willingly go back to living on dried beans or to the time when I used a scrub board to do the laundry (including the baby’s cloth diapers)? Nope. I can buy more than one kind of food now, and I delight in tossing dirty clothes into a washing machine.

I can help people I love and people I don’t even know. I can go to a midnight movie with my best friend and get kettle corn if I want it. (Hint: I almost always want it.)

It’s OK to spend money. Buy that kettle corn three times a week if that’s what makes you happy. Just do it mindfully, vs. following the latest trends or flailing around with a credit card in the hopes that this time you’ll find true bliss.

To turn that bumper sticker motto on its head: Some people know that money can buy happiness – they’re just really careful about what they buy.

Sign up for our free newsletter

Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash. It doesn't cost a dime, so why wait? Click here to sign up now.

Check out our hottest deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,198 more deals!

Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • Johnny

    On the sugject of: “Think Money Can’t Buy Happiness? Think Again.” Money makes it easier to pay for things. Other than that it has no real value. I have seen some people that came into a windfall – then – get greedy for more, but, there was no more. as far as their happiness went – It went down the preverbial tube. As for myself I am comfortable. Years ago I learned one of the secrets to success was multiple streams of income. That way if one should be desolved there are the others.

  • Katie Collins

    I agree with the studies that show money buys happiness to an extent. After that point of all needs being met, a few nice things in the house (I *think* it was in the neighborhood of $70k per year?), money doesn’t increase happiness. That makes sense to me.

  • Draftdog

    Money buys me time, no stress and most of all freedom. Retired, make much less money, but never been as happy. I don’t always have money, but when I do I spend it wisely. Stay free my friends.

  • RoInSD

    When I was a youngster we were poor. Dinner at times consisted of USDA surplus canned chicken which was awful. When I was old enough to earn a living, eating well was, and still is a priority. Now that my husband and I earn a good living, and we are older with some physical issues, years of being really frugal have allowed us to afford the luxury of hiring a gardener and house cleaner when we need assistance. Money does buy time – when I have a house cleaner I am freed up to work on other projects around the house while they tackle the cleaning I can no longer comfortably do. I make donations to charitable organizations a priority – I like to think I can help others. I will never forget how it felt to be so poor to eat awful food. If I can make another person’s life a bit more comfortable, that leaves me with a great feeling of satisfaction, even if I just bought that stranger a sweet smelling bar of soap or some shampoo.

  • Practical Parsimony

    No matter how little I have had, I have always found a way to give to others. It always made my step lighter afterwards. As for money buying happiness, I think it buys peace of mind. Peace of mind makes me happy. I have known one person who had a very comfortable life who begrudged the poor the food they got from food pantries, saying he thought he deserved free food. I could never explain to him that he ate well and when he did not eat well, that was his choice.