Money and Happiness

Does more money result in more happiness?

As my wife and I lazily follow American Idol, we’ve noticed a common statement of hope uttered by many of the contestants, “American Idol is the best thing that has ever happened to me, it’s gonna change everything!”

The contestants are not alone in their zeal to believe that happiness is a direct result of more money, fame, and/or success. Still… Every time I hear those words I cannot help but wonder if these changes will be for the better.

Setting aside fame and success, let’s hone in on the presumption that more money leads to more happiness.

Money and happiness – the wrong way

Whether we’re willing to admit it or not, many of us believe that if we just had more money, things would be better. But would they really? I mean, think about it… What have you done with the money you’ve earned up to this point? Were you responsible with it, or did you spend with disregard and without a plan?

If you’ve failed to responsibly manage little then it’s rational to assume you will do the same with more, only on a much larger scale.

We need only examine the life of the late Michael Jackson to see the possibility of earning untold millions yet departing awash in debt and scandal. Irresponsible money management is not cured by more money, and happiness is not achieved as a direct result of attaining more money.

I believe the “troubled rich” are troubled simply because they place an inordinate amount of attention on the money itself. When we improperly equate money with happiness, we set ourselves up for disappointment and possibly heartache.

Money and happiness – the right way

When kept in the proper perspective, it is possible to achieve an improved state of happiness through the wise use of money.

At this point in my life I can honestly say that more money would increase my happiness, but that statement hinges on my understanding the following two points:

  1. Have a specific goal for using the money. It’s important to have an explicit goal in mind to buffer the risk of tying happiness to the money itself rather than to the achievement of the goal.
  2. Define a specific amount and do not covet more. If we don’t cap the amount necessary to reach our goal, the fine line between need and want is too easily crossed. Defining amounts protects against temptation.

My goal is to be debt free. I need a specific amount of money to meet that goal. My happiness is tied to the goal, not the money. Ultimately, my happiness lies in the freedom and flexibility that accompany the absence of owing others.

In conclusion…

More money can afford us the ability to reduce or eliminate debt, thus increasing our financial freedom and free time. At the same time, more money can lead to corruption, stress, and burden of possession.

Just as personal finance is personal, the link between money and happiness can only be determined at the individual level. Based on my needs and intents for using the money I believe more money could very easily increase my level of happiness.

As Dave Ramsey is quick to point out, money is amoral. Our use of it can be moral or immoral, but money itself is neither. The link between money and happiness is much the same… It’s not the money itself that influences our happiness, but rather how we view the money and how we choose to use it.

Would more money make you happy?

What do you think of money as an amoral entity, attributing the relative good or evil to the person and their use of it rather than to the money itself? What about your particular situation – would more money bring you more happiness? If so, why?

17 Responses to “Money and Happiness”

  1. Anonymous

    I have to admit, I’ve been wise with money all my life – beginning at 16 when I talked a bank manager into giving me a Visa card with a $300 limit.

    So with nearly 30 years personal financial management experience, I wholeheartedly believe that it’s not the amount of money that affords one’s happiness; it’s the freedom of having control over what money one does have. For example, if an extra $500 were to come my way, I wouldn’t have to pay off a debt because I don’t have one. I would have the freedom to say, spend $300 on something frivolous and put $200 in savings. This, in my opinion, is where money, freedom, and happiness create the perfect storm.

  2. Anonymous

    I will say that money is a resource, a means, a way to obtain what we need to survive, not necessarily to achieve happiness. Personally, my happiness is not dependent on money, but on who I am… someone who is able to manage my life well enough to be happy.

  3. Anonymous

    I have to have the money, and it has to be a lot of money for me to be comfortable. I’ve done the figure, and I won’t be comfortable until I have at least $10 million sitting in a bank account.

    Why so much? Money may not equate to happiness for most people, but it does equate to security, which means you have a better chance to be happy. I always want to say to a rich person who’s not happy to give up their money for a year, then come back to me and whine about it. When everyone wants your money and you don’t have it, that’s true depression and worry.

  4. Anonymous

    Add me to the list of those who used to be foolish but have wisened up.

    I would like to be debt-free, and I would like to have enough money to do all the things I want to do (as opposed to buying stuff I want to buy). There are lessons, classes, and vacations I’d like to take that require more money for two reasons: 1-because they cost money in and of themselves; 2-because I need to keep a full-time job with benefits (which I wouldn’t need to do if I had enough money).

    Would I well-handle a windfall? Maybe not. But if my bi-weekly doubled (or tripled, or…), I think I could manage that fairly wisely.

  5. Anonymous

    Hi, Interesting thoughts! I personally believe that it’s not possible to make a general statement on whether money makes people more or less happy. Money comes with a whole set of new elements that may have good or bad impact on our happiness, and depending on how susceptible we are to every one of them, the conclusion will go one way or the other (i.e. different from person to person). I recently made an effort to provide a more comprehensive picture of what these ad- and disadvantages are. I invite you to have a look at

    Money and Happiness

    and tell me what you think!

    Thank you, Nick

  6. Anonymous

    I agree with the above posts. Although money cannot happiness, it certainly can bring stability and freedom. In some sense, those can lead to more happiness, but I really believe that true happiness is a state of being that people choose to be, regardless of their situation.

  7. Anonymous

    I know for myself that being debt free would not necessarily make me a happier person, but it would remove the stress of knowing that if my 8-5 employment ended today, I would be okay. The removal of the stress that debt brings me would probably cause the happiness but not necessarily the money I earned to become debt free.

    Great post! It really got me to thinking about my real goals with money.

  8. Anonymous

    I’m confused by the posts that say money can buy freedom and freedom can bring happiness but money can’t buy happiness.

    Sure money can buy happiness, that’s just not what most people choose to spend it on….

  9. Anonymous

    @Patrick: I think the only way people would get that impression is if they didn’t read the article… since using money as a tool to increase debt repayment and freedom is one of the main points.

    @Ted: Ditto, $ in my youth was handled much less responsibly than $ now.

  10. Anonymous

    If I was given a ton of cash just out of college- I would have spent it unwisely.

    Now- I think I could be rich and not spend my way into unhappiness. I would live off a much smaller amount, invest, give, and enjoy a few finer things in life (like early retirement).

  11. Anonymous

    I agree that money won’t buy happiness and that the goal of many people, myself included, is freedom, having control over my time. The specific goal is a debt-free retirement. I know the amount required based on a set of assumptions, namely a mortgage amortization schedule nad inflation’s impact on my retirement goal. I would add to this that there’s nothing wrong, and it’s actually encouraged, to use money to accellerate your achievement of these goals. I do not think it is greedy or covetous to want to retire early or pay off a house faster and hope that folks don’t read your article to imply that. I have a plan to gets me to retirement a few years before 60. I hope it’s sooner still. And I especially hope that when I have more control over my time, when I don’t HAVE TO come to work, but work when and where I want or have time for hobbies and the like that I will be much happier.

  12. Anonymous

    Those who think money can buy happiness will be sorely disappointed! My husband and I BOTH work in ‘jobs’ that way underpay what we could make elsewhere. But we do it b/c these jobs provide other benefits that greatly reduce our stress and improve our happiness. Benefits like flexibility of schedule and lots of time off to spend with the kids. Those things make us happier than any large paycheck (and we know this from experience – We both gave up higher paying jobs for our current ones). We have made it work on a lower income, and still think putting family first (over a paycheck) is the best move we ever made!

    BTW – I totally agree on your irresponsible money management bit. We may not make much now, but we manage it well. The unexpected $1000 plumber bill we had to pay this week was a bummer, but we could pay it easily. I know of couples earning twice what we earn who wouldn’t be able to pay a $1000 unexpected bill like that, and thus may become terribly depressed or stressed over it. So maybe these folks think more money will make them happy…when in reality, they may find themselves a lot happier if they simply learned to better manage what they have!

    Would I like more money? SURE! Who wouldn’t?!?! I would love to pay off the house before I’m 40 (currently on track to pay it off at 41). I would love to be able to give more away. But I don’t need money for happiness. And there are certain things I will not sacrifice (again) in the pursuit of money.

  13. Anonymous

    I equate money with freedom: If I had enough money to cover my current and future (with inflation) yearly expenses based on my current financial situation, I could quit my “have to wake up and go in” job and either not go in or find something that I “want to wake up and do” whether it provided income or not. Am I deceiving myself ? ? ?

  14. Anonymous

    I wholeheartedly believe that there is such thing as “enough” money. What that number is for me, though, I don’t know. After a five-year hiatus, I returned to the area where I went to college, more than doubling my earnings. When I lived in the area back then, all I really could afford was renting a bedroom from an individual. These days, I can comfortably afford a one-bedroom apartment.

    I live in a high cost of living area — one of the wealthiest in the nation. Asking me how much I “need” to be happy is a hard question to answer. My wife and I talk about moving out of our apartment, but it won’t happen for quite awhile. The logical thing for us to buy is a townhouse — single family homes in this county generally sell for north of $500,000. Do I need enough money to buy that kind of house to be happy? I don’t know. Townhouses are still running about $350k.

    At the same time, there is such thing as “too much.” I read on the ‘net not too long ago that a former client of mine is selling his house — it’s a $38 million mansion (or shall we say estate). I don’t need something that big to be happy.

    But quite honestly, I make enough money now where I can live in a decent apartment, eat well, save, and take a really nice vacation. While I could find more ways to spend more if I had more, I can’t say that I would wake up that day feeling much happier than I am today.

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