Money and Happiness: Research and Implications for Your Life

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Money and Happiness: Research and Implications for Your Life

Money and happiness have a strange relationship.

In short, more money brings more happiness, but only to a point. After that point, research shows more money has no effect on happiness.

So, where is that point? Where's the line to stop worrying about making more money and start focusing on other things to become happy?

Research on Money and Happiness
To help frame our discussion, let's check out a few statistics. I cite these statistics verbatim from Dr. Martin Seligman's fabulous book Authentic Happiness, which overviews the field of positive psychology. Dr. Seligman makes these conclusions after reviewing numerous studies on happiness:

"Wealth, which surely brings more possessions in its wake, has a surprisingly low correlation with happiness level" (p. 49).

"Rich people are, on average, only slightly happier than poor people" (p. 49).

"Recent changes in an individual's pay predict satisfaction, but average levels of pay do not" (p. 49).

"Even the fabulously rich - the Forbes 100, with an average net worth of over 125 million dollars - are only slightly happier than the average American" (p. 53).

"Materialism seems to be counterproductive: at all levels of real income, people who value money more than other goals are less satisfied with their income and with their lives as a whole, although precisely why is a mystery" (p. 62).

Seligman also identifies a concept called the "Hedonic Treadmill," which essentially means that as you accumulate more stuff you experience a temporary boost in satisfaction. And, then your expectations rise. After time, you become accustomed to these new circumstances and you need more stuff to get another boost.

Sound familiar? I know I get sucked into it from time to time.

Seligman concludes "How important money is to you, more than money itself, influences your happiness" (p. 55).

Implications for Your Life
The research above on the relationship between money and happiness has several important implications for our lives:

Get Your Finances Straight: Make enough money so that you can cover your basic needs comfortably. Get out of debt so that money worries do not plague you. Then, each month, live so that you make more than you spend. Save 10% of everything you make. I know this is easier said than done, and the issue of financial well-being is an expansive subject. A few resources I really like are:

The Soul of Money, by Lynn Twist: Examines the relationship of money and happiness and challenges us to choose sufficiency, not excess. A thought provoking book.

The Total Money Makeover, by Dave Ramsey: 7 step plan for getting out of debt and becoming financially independent. There's a lot of quick fix financial junk out there, but these principles are rock solid and crystal clear.

The Richest Man in Babylon, by George Clason: An inspiring little book written in the early 1900s. A parable whose lesson is pay yourself first by saving 10% of everything you earn.

Don't Fool Yourself; Buying Stuff Will Not Make You Happy: Once you have met basic needs, have gotten out of debt, and make more than you spend, don't buy crap - and I mean crap - to make you happy. If you buy items for other reasons, fine. But don't delude yourself that this thing "I have to get" will make you happy. In a few days, there will be something new "I have to get." (I'm not preaching here; I fall into this trap too. I'm just pointing out a pattern.)

Focus Your Attention on Things that Do Bring Happiness: On my recipe for happiness page, I discuss the key ingredients for happiness according to many studies of Western, empirically based positive psychologists.

Socializing and building strong relationships
Connecting with a higher purpose (spirituality, religion)
Finding meaningful work
Cultivating positive emotions
Engaging in activities that call upon your signature strengths
Exercising and building feelings of well-being

Most of us on some level intuitively know the relationship between money and happiness: money for basic needs brings happiness, but after that money really can't buy happiness.

Yet, we often spend our time chasing money to the detriment of other things that really could bring true happiness.

So, that's the theory of money and happiness. The more important issue, however, is:

What are you going to do about it? Where in your life are you out of alignment? What could you change to bring you true happiness?

For more resources, be sure to check out the other pages in this section on happiness, including positive psychology, the recipe for happiness, quality of life research, character strengths, and gratitude journaling as well as the other resources on this site.

Good luck.

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