This post is from staff writer Suba Iyer.
Money and its effect on happiness is one of those topics that has been discussed over and over again. Yet, the topic fascinates the academic community and the research continues — with contradicting results every few months. The latest finding in this genre of research comes from two economists at the University of Michigan, Betsey Stevenson and Justin Wolfers. Their new study, published in the May edition of American Economic Review, argues that more money does buy more happiness.
The study looked at “satiation” with respect to income. In other words, they questioned whether there is a saturation point, where you earned “enough” to be happy, beyond which you are not happier with the increased income. In previous studies, this saturation point has been anywhere from $50, 000 to $75, 000. This study argues that there is no such point where happiness starts to slope down while income increases.
(click to view larger image) Image source: The Economist
I am not entirely convinced by these studies. I feel any hypothesis can be proved right with the relevant subset of data. And it is almost impossible to account for every single variable like gender, age, cost of living, race, education level, location, confidence level, expenses and personal savings rate. Despite these weaknesses as a pure scientific experiment, these types of studies always make me stop and think about how I perceive money affecting happiness.
In my opinion, money does buy happiness. I honestly cannot see why it wouldn’t. Yes, that is a bold statement but I stand by it.
Money does buy happiness
Money cultivates goodness: If you have more money than you need, you can give it away and make someone else’s day. There are too many people in this world that can use the help. Feed a starving child and the content smile on its face will fill you with happiness. What stops anyone from donating their excess to a cause they relate to? Use the money to make the world a better place. Compassion makes humans happy and that is experimentally proven.
Money buys security: With money to take care of your survival, you can think about other things, things that you really want to do with your life. You do not have to worry about whether you will ever be able to retire. You do not have to lose sleep worrying about how you are going to pay for your food and shelter tomorrow.
Money buys freedom: Money buys choices. People with money do have more choices than without. Many dream about early retirement. Most people who think about early retirement don’t really mean they want to quit doing everything and spend their entire day either in front of a TV or on a beach sipping margaritas. What they are really after is financial independence — the freedom to not depend on a paycheck, the freedom to not let anyone dictate what you can do with your day. Money buys this freedom.
Money buys time: How many of us want to spend more time with our spouse/parents/friends/kids but have to go to work to make ends meet? Don’t we wish we had more time to do everything we want to do? Take more vacations, go to the museum in the middle of the weekday with your kid or simply relax and read a book. When we have a job, we pay for money with our time. Why not use the money to buy us time to use it as we see fit?
Money buys experiences: There is a multitude of research that says people value experiences over stuff. Most of us remember a great vacation much more than an expensive toy. Why not use the money to travel the world, taste different cuisines, learn new languages, get immersed in different culture and learn new things every day? Do whatever makes you happy.
Money is a tool. As with any tool, it can only be as useful as we make it out to be. If we are spending it wrong, get obsessed about the tool itself instead of using the tool, compare our material possessions with others and get stuck in the over consumption cycle, yes, I can see money making people miserable. If you always judge someone based on how much money they make instead of what good they are doing with their lives, yes, money absolutely doesn’t bring happiness. If the only aim in life is to hoard money instead of doing good with it, yes, money starts to take control of your life. If money is spent in right ways, I do not see how it cannot increase happiness. The richer I get, the happier I am about it.
Do you disagree? How does money affect your happiness? If you feel money doesn’t buy happiness, why? What’s your take?