Can Money Buy Happiness?
It’s a question that is as old as the “chicken or the egg” quandary. Maybe even older.
Ever since ancient man determined that a shiny rock or a seashell could be traded for something that he desired, that nagging question “Can money buy happiness?” keeps hanging around.
Now, none other than The Wall Street Journal has weighed in on the subject, this time getting science involved. The Journal asked economists and scientists to delve into the connection between money and happiness. Here’s what they said.
Their first finding was a bit of a no-brainer: People with higher incomes are happier than those who earn less. But having a few extra zeros in the paycheck is not the sole determiner of a happy life. It’s not so much about having income as it is how that money is spent. And the researchers found that spending money on objects does not make people happier. Spending money on helping others and spending money on creating experiences leads to happiness far more frequently than buying the latest “toys.”
In other words, it’s nice to have the big swimming pool in the backyard. But happiness doesn’t come from looking out the window and admiring it. Happiness comes from cooling off in it on a hot day or watching the kids splash around in it or entertaining your friends around it.
Ryan Howell, an associate professor of psychology at San Francisco State University, studied the relationship between buying things and buying experiences. He found that people often attach greater value to buying objects because they believe the objects will stay around with them for a while, as opposed to an experience that is over and done with.
But when the participants in his study looked back on the things they had spent their money on, it was the experiences – the vacation trip, the meal in the classy restaurant, the concert or theater performance – that they looked back on with pleasure, not the fancy car or the designer clothes.
And in a world that is constantly focused on the next newest thing, buying luxury items can lead to anxiety. You spend big bucks on the latest and greatest electronic item, for example, only to learn that it became obsolete almost the minute you carried it out of the store. Where’s the happiness in that?
Another path to financial happiness comes from giving money to help others. The adage, “Don’t give until it hurts; give until it feels good,” seems to play out in what the researchers found. Researchers learned that those at all income levels who gave some of their money to help others reported higher levels of happiness than those who kept all their funds to themselves. This proved to be true even among those at lower income levels.
What does this have to do with financial planning? Financial advisors are the folks who can help clients unlock that door that leads to the mystic and elusive location called Happiness.
When you ask your clients about their vision for the future, does it include a new car or a 60-inch TV? My guess is that it probably does not. Their vision likely includes things such as sending children to college, giving money to a cause they are passionate about, maybe doing some traveling. Experiences and helping others. That’s what happiness is about. This is what you help them to achieve.