The Connection Between Money and Happiness

In our ever-evolving quest to find happiness, one question seems to always linger in our minds: can money truly make me happy? It's a topic that has captivated the human mind for centuries and sparked countless debates among philosophers, economists, and psychologists alike. While some argue that wealth is a direct gateway to happiness, others suggest that there's more to it.

We live in a very consumer driven culture, which causes many to feel like they are on a merry go round chasing the relentless pursuit of financial success. But as individuals, we need to really think about our life goals to answer the question: are we genuinely happier when our bank account is full, or is there a point where chasing wealth becomes a fool's mission?

Can Money Really Make Us Happier?

Let's take a look at the connection between money and happiness as well as the psychological foundation that makes us believe that we will be happier once all the stars align and money comes pouring into our wallets. Ultimately, our goal is to help you strike a balance between your finances and your emotions. While a lot of times, emotions are what drive our financial decisions, being able to tame those emotions to make logical decisions about your money can help control your level of happiness.

We have always been firm believers that money itself cannot bring us happiness, but it can certainly be used as a tool to help enhance our lifestyle on a path to happiness. So what are the ways that money can make us happier? Well, money is freedom. Freedom with your time, freedom to work (or not) doing something you truly love, freedom to live the life of your dreams. Money can afford you the opportunity to discover new experiences. Whether you want to ski through the Swiss Alps or build a cabin on the side of a mountain with a babbling brook running along the front (yes, please), money can make it happen. Money can reduce stress, decrease anxiety and even allow us to give back to our community or to a cause we truly believe in. So then why is it that for many, once they find financial success, they are no happier than when they didn't have money?

The Hedonic Treadmill

In an attempt to answer the question, "Will money bring me happiness?" We first need to look at a psychological term called the hedonic treadmill. This theory suggests that humans who experience major positive or negative events will quickly return to a relative state of happiness despite changes in their circumstances. This means that people who acquire more material wealth, leading to an increase in their standard of living, adapt to these changes and therefore experience a temporary boost in happiness. In other words, pursuing wealth to increase your happiness can feel like running on a treadmill, a lot of work for short term results.

Our society places heavy emphasis on material possessions to show others our status, or at least how we want people to think of our status. We are constantly bombarded by ads convincing us that if we buy a particular product, we will be happy. We immediately hop online to purchase the latest and greatest thing, convinced that it will make us happy, only to discover that shortly after, the happiness high fades away.

Take a minute to think about what is enough. Will I have enough when I hit X dollars? Will it be enough once I reach the financial success of those around me? Finding, for you, what is "enough" is a critical part of your path to happiness.

Morgan Housel, in his book The Psychology of Money writes,

"Freedom and Independence are invaluable.

Family and friends are invaluable.

Being loved by those who you want to love you is invaluable.

Happiness is invaluable.

And your best shot at keeping these things is knowing when it's time to stop taking risks that might harm them. Knowing when you have enough"

The Role Money Plays in Supplying Our Basic Needs

Money plays a pivotal role in fulfilling our basic needs and ensuring financial stability, which is linked to our ability to meet those needs. These influences significantly affect a person's overall well-being. When the funds are available to cover all your basic needs, you inevitably experience reduced stress and anxiety, which leads to an improved sense of happiness.

On the flip side, insufficient funds can cause that "all is right in the world" bubble to quickly burst. Living paycheck to paycheck puts a strain on your mental and physical health. The inability to afford necessary healthcare, education, or healthy food options can limit opportunities and create a cycle of poverty that's difficult to escape. It's important to recognize how financial stability can directly affect your pursuit of happiness.

Your Threshold

While there is no denying the demand for money to supply our basic needs, the pursuit of wealth often takes us beyond the point where increasing our income directly translates into increased happiness. Studies have shown that there is a financial threshold where, after making a certain amount of money, happiness is no better or worse than before.

According to a recent Purdue University study, income can correlate with a person's well-being and overall happiness. This study stated, “Globally, we find that satiation occurs at $95,000 for life evaluation and $60,000 to $75,000 for emotional well-being.” While this number represents a global scale, the study found that the ideal income for satisfaction in North America was $105,000 annually.

The feeling of happiness is subjective, and this threshold varies from person to person. However, many people put tremendous time and energy into achieving mass amounts of wealth, far beyond what is necessary for their comfort, which in turn puts them chasing a diminishing return on the hedonic treadmill.

Another level of the diminishing returns of wealth is the concept of relative income. This idea proposes that an individual's satisfaction with their income is influenced not just by the amount they earn but also by how their income compares to others. When we engage in social comparison and perceive that our income is lower than those around us, it can lead to feelings of inadequacy and decreased happiness, despite having a substantial income. The constant urge to compete with those around us puts us in an aggressive training mindset, which can lead us to always think that what we have is never enough.

Money is NOT the Only Way to Achieve Happiness

One of my favorite piano songs I teach my students is called "Money Can't Buy Everything". I like this song for two reasons. First, it’s a fun, upbeat song that kids actually want to practice. Two, I always have them read the lyrics to get their thoughts on the topic. Here are the words so you can get an idea of what the song is about.

Money can't buy everything.

Money can't make you a king.

Money may not bring success.

Money can't buy happiness.

But of one thing, I am sure.

Money doesn't make you poor.

Money doesn't make you sad.

Money can't be all that bad.

Generally, when students first read the title, they remark things like, "That is so true! Money really can't buy EVERYTHING." After they read the lyrics, they say things like, "Well, money may not be able to buy everything, but it can buy a lot of really cool things, and it certainly doesn't make you poor or sad, so I agree that money is definitely not bad!"

I love to see the wheels turning in their heads as they think about the words of the song, but I also like to challenge them at a young age to think about the effect money has on their lives.

While money can undoubtedly play a role in enhancing our lives, it's essential to recognize that true happiness often extends beyond material possessions and financial success. The true path to happiness can be found in things like strong relationships or finding a sense of purpose for your life.

Supportive relationships with friends and loved ones almost always lead to higher levels of happiness, and finding meaning in the work that you do or your daily activities can provide a deep sense of fulfillment.

I'll give you an example. My days generally consist of whining children, nose picking (not by me), and constant repeating of phrases like "let's try our best to be good listeners" or "I'm going to need you to stop rolling on the floor and hitting the people beside you". This leads to me coming home every night thinking, Wow! I'm exhausted! Being a teacher is definitely not a profession you go into because you like to make money. Yet, every time a student hugs me and says, "You're my favorite teacher," or "I just LOVE music," or upon entering my room, they say, "I can't wait to see what fun things you're going to teach us today!" I know in my heart that I am right where I am supposed to be. Seeing the excitement on a child's face as they whale away on a drum or dance like no one is watching during a program gives me a sense of fulfillment I know I will not be able to find anywhere else.

True happiness can also come from taking time to reflect with an attitude of gratitude. Enjoying the simple pleasures in life, like a beautiful day or when your morning coffee tastes extra delicious, can be all it takes for a happiness boost. Take time to be in the moment and accept it without judgment. Practice positivity, even if on those especially difficult days you need to remind yourself every five minutes to just stay positive. You will be amazed at how much you can improve your mood simply by reminding yourself to stay positive.

Give yourself time during the day to breathe. A few deep breaths during the day can help relieve stress and increase self-awareness. Especially when you are dealing with everyday stresses like being stuck in traffic or telling a kid for the umpteenth time to stop running in the hallway.

Finding the Balance Between Money and Emotions

The truth is, your emotions as they relate to money can be a balancing act. The trick is determining financial goals that align with your personal values. Start by taking time to figure out your financial goals. Once you have a clear picture of what this is, assess your priorities and eliminate anything that does not fall in line with your goals. Then, develop a budget that reflects your goals and values in order to see what truly matters in your purpose driven life.

When developing your budget, allocate a portion for mishaps because, without a doubt, they will happen. Life's little unexpected blunders are a main cause of financial setbacks. Make sure to set aside even a small amount each month, just in case. Think of it as a CYA (cover your a$$) insurance policy.

Use financial challenges as an opportunity for growth and learning. There are no failures, only lessons. Instead of dwelling on these mistakes, use them as lessons to teach yourself strength and resilience. It's like a child who touches a hot stove; they'll only do it once.

While money does play a big role in most of our lives, I want to encourage you to seek out alternative paths to happiness with an emphasis on non-material possessions. Ultimately, the journey to happiness is a deeply personal one. It is about recognizing the values that truly matter to you and making choices that reflect those values. It's about finding contentment in life's simple pleasures and forging meaningful connections with others. It's about realizing that, in the end, happiness is not measured by the size of our bank accounts, but by the richness of our experiences.