Money Can't Buy Me...What?
- PotpourriIt’s holiday time in my slice of the world, and it got me thinking about the relationship between money and happiness. Everyone knows the old saying that money can’t buy happiness, but is that true?
To summarize the research on this topic, earning up to about $75k in annual income (in 2020; in 2022 dollars it’s about $97k) is correlated with higher life satisfaction in the US. After that point, an increase in income doesn’t lead to higher satisfaction with life. The implication is that once certain needs are met, like healthcare access, stable housing, and a nourishing food supply, our happiness stagnates if we start making more money.
Researchers also conducted this study around the world and discovered a similar relationship between money and happiness. The $75k threshold varied a bit, but at a certain point additional money didn’t bring more happiness. Culture, of course, impacted the threshold because different cultures find happiness at different levels of income. So, yes, money can buy us happiness until our fundamental needs are met, and then more money doesn’t lead to more happiness.
If you haven’t reached this threshold, I see you. I wish you a fabulously prosperous 2023 and I hope you blast through that threshold soon! If you HAVE reached this threshold, you may be wondering why the heck you bother if people aren’t any happier when they reach it. Sometimes more money just leads to more headaches, more stuff to manage, more things to insure and spend money to keep up, and more pressure to keep up with the neighbors…but not more happiness. Is there some way to avoid this trap?
The short answer is “yes.” You’ve probably heard of the vast body of research which suggests that HOW we spend our money is an important driver of happiness. That research is summarized here. The authors suggest eight ways we can spend our money to get more happiness out of it. So, let’s dive in and see how:
1. Stop buying things and buy experiences instead. This is a pretty well-known piece of advice based on the research. The Minimalists do a fantastic job of explaining why we don’t need more stuff and how to get out of our consumerism rut. But why experiences? The research suggests we get used to that new Rolex pretty quickly and it loses its charm, but the memory of indoor skydiving with 80-year-old Aunt Tootsie keeps delivering a happiness rush over the long term. We look forward to and remember experiences more often than things, and if we have experiences with others we can improve our connections with them as well, which leads to even more happiness. So, get out there and do!
2. Give to others. Whether you like it or not, Scrooge, humans are social creatures, and we are built to connect with each other. Just as experiences with others builds connection and thus happiness, so do gifts and charity. Within reason.
3. Buy a bunch of smaller pleasures instead of a few large ones. I said it above: we quickly habituate to the happiness we get from an expensive thing. But if we mix it up with small purchases (and experiences over things), we’re less likely to adapt to this whole series of small pleasures. So, get that spa pedicure every once in a while, or treat yourself to the fancy charcuterie plate at Chez Tourbière.
4. Don’t bother with that extended warranty. In general, this type of insurance is a bad bet for you and a good bet for the insurance company. But why does this advice even make the list? Because even if something DOES go wrong with our fancy stove or Herman Miller sofa, chances are we won’t even feel that bad. Isn’t that something? Don’t bother insuring against a small to moderate downside, because our brains tend to rationalize any regret we might experience in the unlikely event of a loss.
5. Delay consumption of what we buy. It turns out all the instant gratification that’s part of our modern world is really bad for us. First of all, “buy now, pay later” leads to short-term focus, impatience, and debt. Second of all, if we buy now and pay later, we don’t get the added happiness boost of anticipation. If we wait, we get pleasure from the object or experience, and even more pleasure from looking forward to it. So, hold your horses.
6. Consider the nitty gritty details of purchases before you make them. This is about how our imagination works: when an event or experience is further out in time, we think about it more abstractly. This means we can miss key details which might make us reconsider that future purchase. For example, if I dream of buying a vacation home in Zihuatanejo, I might envision beautiful beaches, warm weather, and fun visits with friends and family. I might miss the details of mosquitos and yellowjackets, power outages, high humidity, long flights, and the cost and effort of maintaining the home. Our happiness depends on these details, according to the research, so it’s important to consider them before making a big decision.
7. Be wary of comparison shopping. It’s so easy to do comparison shopping online, isn’t it? But shopping in this way focuses our attention on what distinguishes the assorted options, like price and features. It can draw our attention away from the characteristics of a product which might actually make us happy. For example, house shopping by features like size and number of bidets can shift attention away from what makes us happy with a home, like a feeling of community or a place to create memories with family. This tendency to focus on features can lead us to buy a home that’s too expensive or impractical, when we would have been just as happy (or even happier) in a smaller, more modest home.
8. Consider the happiness of other people who bought the same item or experience. Interestingly, the best predictor for how much we will enjoy something is how much other people enjoyed it. For example, if I’m trying to decide which portable walrus polishing kit to buy, I should just look at customer ratings instead of bothering to read about the features and options. So, the next time we are considering a movie, car, Lego set, or piece of cake, we should ask around to see how much other people enjoyed it and skip the details.
Wow, some of those findings really surprised me, and that’s a good thing. It turns out money can buy happiness if we spend carefully, so this holiday season I’m going to stop obsessing about the features of that fancy frying pan and take my husband out for afternoon tea.
Peace on earth and good will toward all. My very best wishes to you for a happy and prosperous new year!
